Hong Kong-based LIM Advisors reportedly crucified Sydney-based AMP Capital for not doing anything to fix one of its investment’s deep discounts, according to The Australian Financial Review.
The AMP Capital China Growth fund – in which LIM is the second-largest shareholder – currently trades at a 26% discount to its net asset value, up from 24% in 2011 when LIM originally wrote to complain.
“We wrote to them in 2011 to complain about the discount and we got an unsatisfactory reply. The discount then was 24 per cent, now it’s greater than 26 per cent and there’s been no action to improve it in that time,” Mr Paris said.
Nick Paris, a director and portfolio manager at LIM, recently met with AMP Capital CEO Stephen Dunne and suggested a few things that could help AMP tighten the spread between the fund’s price and its asset value. His main purpose there however, was to outline his firm’s activist intentions:
“LIM’s portfolio manager and director Nick Paris told The Australian Financial Review he was not satisfied with the year-end time frame that AMP Capital set itself to consider options to improve the fund’s share price, after appointing an investment bank to conduct a review.
He said LIM planned to force a meeting of unit holders in the AMP Capital China Growth fund and propose a prescriptive “discount target” if the Australian investment firm could not come up with a reasonable plan by August 31.”
Apparently, LIM isn’t the first investor to have complained about AMP’s China fund. Back in May, London-based Metage Capital published an open letter to AMP citing the “unacceptable discount” its China fund has and suggested share buybacks or tender offers in order to shrink the gap.
AMP however, does have its reasons for keeping things as they are. One of which, is that smaller funds mean smaller fees.
Photo credit: Gary via Flickr