It is all but certain the AMP Capital China Growth fund will be wound up, with early voting intentions signalling the plan to liquidate the fund will receive the backing of most shareholders.
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AMP Capital, which manages the $500 million fund, said that based on proxy votes it has received, the proposal put forward by a Hong Kong investor to have the fund would up would be backed by more than 50 per cent of the shares on issue.
A meeting of shareholders is to be held on Thursday to consider two proposals, firstly to support initiatives aimed at improving the fund, with a second proposal for it to be wound up, which was put forward by LIM Advisors. It has been critical of the continued discount the fund trades to the worth of its investments, but it has been rebuffed in efforts to prompt the manager of the fund to work to try to close that gap.
"I bought the shares at a discount," LIM Advisors fund manager Nick Paris said. "But I thought that when China had one of its periodic runs, as it does, I thought we'd see the discount close. But it didn't."
And when efforts to engage with the fund manager, AMP Capital, failed, it then decided to seek a wind-up of the fund.
Mr Paris was wary of declaring victory ahead of the meeting on Thursday, preferring to wait to see the number of shares voted at the meeting since the outcome could still support maintaining the status quo.
"I am disappointed with the forecast outcome," Geoff Wilson of Wilson Asset Management said. "I am disappointed with both proposals. A proposal where all shareholders can exit at a fair price and the listed investment trust investing in China continues is the ideal proposal."
AMP Capital has warned it may take as long as 18 months to finalise the wind-up, although Mr Paris said the bulk of the funds should be raised within three to six months. In its communication with shareholders, AMP Capital said 6 per cent of the fund's money was tied up in suspended securities, although it is believed this has now halved following the recent relisting of China Vanke, a large holding of the fund.
A regular survey of listed investment companies by researchers at Bell Securities shows that the AMP China Growth fund has traded at a 20 per cent discount to the worth of its net assets, over one-year, three-year and five-year time horizons. Similarly, the more recently launched PM Capital Asia has traded at a 14 per cent discount over a 12-month period. It is only a recent entrant to the sector, having listed two years ago.
Other ASX-listed international funds with a broader investment remit such as the Hunter Hall Global Value fund, the Templeton Growth fund and PM Capital Opportunities all trade at a persistent discount of up to 14 per cent of their asset backing. Other funds such as the Magellan Flagship fund and Platinum Capital have narrowed their discount to trade at a premium.
