AMP Capital’s China Growth Fund has once again come under fire from hedge fund and major stakeholder LIM Advisors after the fund's discount to net tangible assets (NTA) blew out to 20 per cent.
In a statement released yesterday, LIM Advisors described the current discount to net tangible assets on the units of the AMP Capital China Growth Fund (AGF) as "unacceptable".
In May 2016, AMP Capital announced the results of its review of the enhancements and the effectiveness of the fund, stating that it was fit for purpose but adding a number of proposed enhancements to the fund and changes to management arrangements.
AMP Capital’s proposed enhancements have, however, failed to reduce the discount, prompting LIM Advisors portfolio manager Nick Paris to argue the fund is not fit for purpose.
"[The fund] has underperformed its benchmark index since launch and because the average discount on AGF units since launch has been an unacceptable 20 per cent," Mr Paris said.
LIM Advisors disagrees with AMP Capital’s assessment of the fund and wants a resolution to wind up the fund to be added to the AGF extraordinary general meeting at the end of July, he added.
“The discount during the recent six-month review period has been 20 per cent too, and it is therefore unchanged and significantly above AMP’s 15 per cent target and LIM’s 10 per cent ceiling” said Mr Paris.
LIM Advisors owns close to 10 per cent of AGF units, making it the second largest stakeholder in the fund. The firm has been pushing for the responsible entity to close the discount between unit price and net tangible assets since July 2015.
Update: In response to the announcement by LIM Advisors, AMP Capital Funds Management chairman Adam Tindall said AMP Capital has "always acted and will continue to act in the best interest of all unitholders in the fund, not just those of a single investor regardless of its size".
"During our exhaustive consultation with more than 700 unitholders earlier in the year, the majority were in favour of keeping the fund in its present form; they like the exposure it gives them to China, one of the world’s most dynamic economies.
"The responsible entity, with the assistance of the fund’s independent Advisory Committee, separately analysed whether AGF meets its original purpose: to provide Australian retail investors with access to the China A-share market to generate long-term capital growth.
"The results of this analysis determined that it does remain fit for purpose.
"In fact, AGF remains one of the very few ways that Australian retail investors can gain actively-managed exposure to China’s growth story.
"We have presented to unitholders a package of enhancements that we believe are in their best interests and will help to further improve the performance of the fund.
"We considered more than 40 options – including a wind up – and concluded with the benefit of broad investor input that the enhancements recommended are in unitholders’ best interests, and we stand by that decision," Mr Tindall said.