Fund manager Metage Capital criticises underperforming AMP fund

Andrew Main – The Australian – May 14, 2015

A fund manager has taken aim at what it says is an underperforming listed AMP fund, criticising the “unacceptable’’ 25 per cent discount to net asset value suffered by the AMP Capital China Growth Fund.

The activist manager is Metage Capital, run out of London but listed in Australia and managed by Sydney-born Miles Staude.

Mr Staude sent a letter to the board of the AMP fund threatening to vote against the renewal of AMP Capital’s management mandate when it expires on November 9 next year unless the discount is reduced.

It is not clear what percentage of the fund Metage owns, but Mr Staude will shortly do a roadshow in Australia to retail and institutional investors extolling his Global Value Fund.

Mr Staude is highlighting the conflict, common to many managed funds, where the Responsible Entity whose job it to look after unitholders’ interests is closely related to the manager.

In this case, all the directors of the entity, AMP Capital Funds Management, are AMP employees.

AMP has a Qualified Foreign Institutional Investor quota allowing it to buy “A” shares in China, previously restricted to locals.

Mr Staude’s letter requested “that the board initiates a capital management initiative as soon as is practicable which ensures adherence to a target of reducing the discount to 10 per cent’’.

The AMP fund closed last night 2c higher at $1.535, against the most recent published NAV of $2.06.

The main reason for the discount appears to be the fact that AMP has only paid out dividends equivalent to 39 per cent of unitholders’ initial $1 outlay, choosing instead to reinvest the money. The fund has grown significantly to around $770 million in net asset value, if not capitalisation.

A statement from AMP Capital last night said: “We take the issue of the discount very seriously and as part of our fund governance have been continuing to investigate ways to sustainably close the discount.’’

AMP Capital is understood to have moved the management of the fund in-house, then outsourced it, and now manages it in-house again out of Hong Kong with more success.

Miles Staude of Staude Capital Limited in London is the Portfolio Manager at the Global Value Fund (ASX:GVF). This article is the opinion of the writer and does not consider the circumstances of any individual. Mirabella Financial Services LLP is the investment manager of the Global Value Fund and has seconded the investment team at Staude Capital to manage the Global Value Fund.