Hedge Fund LIM Wins Vote to Shut Aussie Manager’s China Fund

  • AMP Capital will use KPMG to help formulate wind-up strategy
  • LIM has been pushing to narrow the China fund’s discount

Hedge fund LIM Advisors succeeded in its yearlong push to force AMP Capital Investors Ltd., one of Australia’s largest money managers, to shutter its China fund that has been trading at a steep discount.

LIM, which owns 10 percent of the AMP Capital China Growth Fund, received the support of 54.5 percent of eligible voters at an extraordinary general meeting Thursday to wind up the fund, the Hong Kong-based firm said in an-emailed statement. The China fund has a market value of A$434 million ($326 million) and manages A$471 million in assets.

AMP Capital will focus on “implementing the decision” to shut the fund, Adam Tindall, chairman of AMP Capital Funds Management, which is responsible for the fund, said by phone Thursday.

The vote to shut the fund draws to a close a year of agitation by LIM, the third-largest shareholder. The hedge fund firm has been calling since July last year to narrow the discount the China fund is trading to its net asset value and called off an investor meeting last year after AMP proposed operational and governance changes.

AMP’s China fund, which invests in companies listed on the Shanghai or Shenzhen stock exchanges, has traded at an average discount of 19 percent to its net asset value since inception in 2006, according to data compiled by Bloomberg. By comparison, Morgan Stanley China A Share Fund has traded at a 7 percent discount in the same period, while HSBC China Dragon Fund has traded 17.5 percent below its net asset value since inception in 2007.

Listed investment companies can trade at a discount or premium to their net asset values depending on their investment performance, market conditions, dividend policies, reputation of management and liquidity. Their share prices can be "subject to the vagaries of supply and demand,” said Melbourne-based Bell Potter Securities Ltd. analyst Nathan Umapathy.

The most likely wind up plan would be to sell the China A-Shares and distribute the net proceeds off in tranches, as and when necessary Chinese tax and regulatory approvals are received, AMP Capital said. It estimates that it may take nine months to 18 months to complete the process.

AMP Life Ltd., the largest shareholder in the China fund with a 32.7 percent stake, according to Bloomberg data, was barred from voting at the investor meeting by an Australian court.

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