LIM Advisors, a Hong Kong-based hedge-fund firm overseeing about $2 billion of assets, is stepping up activism against Sydney-listed AMP Capital China Growth Fund.
LIM would call an extraordinary general meeting, taking matters directly to fellow unitholders, should AMP Capital fail to take action by Aug. 31 to narrow the discount the China growth fund is trading to its net asset value, it said in an e-mailed statement Monday. It has been approached by a number of other unitholders sharing its concerns, it added.
LIM has been a unitholder in the fund since 2010 and its current 12 percent ranks it the largest behind AMP Life Ltd., according to the statement. It initially wrote to the fund’s manager in August 2011 to urge actions be taken to reduce the trading discount.
The fund, with a market value of A$518 million ($381 million), invests in yuan-denominated class-A shares traded in China, home to the world’s best-performing stock index in the past year even after the recent correction.
Fund units have been trading cheaper than its net asset value since 2007, with the discount averaging 20 percent over the years, according to data compiled by Bloomberg. They are currently about 24 percent below the net asset value. The fund returned 13 percent from 2007 to June this year, trailing the 14 percent gain of its benchmark, the S&P/CITIC 300 Total Return Index, according to its latest quarterly report.
“This discount has seriously reduced the investment returns that the initial unitholders have received,” LIM said in the statement. “The discount continues to be highly detrimental to the interests of all unitholders and must be taken as a priority issue.”
AMP Capital announced on July 13 that it is evaluating options to narrow the discount and hired an investment bank to help. It came after a second letter LIM sent to its manager at the end of June, according to the hedge fund’s statement.
LIM is no stranger to such campaigns. In December 2012, it won a vote to add directors to a Singapore-listed infrastructure fund managed by another Australian financial firm, Macquarie Group Ltd., in a similar attempt to narrow the trading discount. Sydney-based Macquarie later shut the fund.
AMP Capital oversees about A$160.5 billion of assets, according to its website.