As the responsible entity for the AMP Capital China Growth Fund (AGF), we make a point of listening to and consulting with our unitholders, from large institutions and fund managers to retail investors looking for an opportunity to invest in the Chinese market. This is what we have been doing during the decade-long life of the fund. Since the beginning of this year, we have also held extensive consultation with more than 700 unitholders as part of a strategic review of the fund, which concluded that it remains fit for purpose. Unitholders have consistently told us they want the fund to continue because it gives them rare, actively-managed exposure to the China A-share market. They also said they wanted it to remain listed as they like the liquidity of AGF in its current structure. As part of our extensive review, we considered 40 options to further enhance the fund including winding it up.
However, we concluded that making additional enhancements to the fund – such as increasing the flexibility of the fund’s investment mandate, reducing the base management fee from 1.65 per cent to 1.35 per cent, and offering unitholders a capital management opportunity – would instead be in the best interests of all unitholders.
We determined that winding up the fund would have a serious negative impact on smaller retail investors in particular for whom the fund was originally set up. Independent tax advice from KPMG has also confirmed it may take between nine and 18 months for the proceeds of a wind up to be returned to unitholders.
AGF remains one of the very few ways Australian retail investors can gain actively-managed access to the China A-share market, allowing them to benefit from investing in China’s growth story.
There are only two directly comparable funds to AGF – the HSBC China Dragon Fund and the Morgan Stanley China Fund – and they are not listed on the ASX.
Based on the feedback we received from unitholders, we are recommending that unitholders who want the fund to continue vote in favour of the RE’s resolution, which is aimed at improving the performance of the fund and making it more cost effective.
If unitholders want the fund to continue, we strongly recommend they support the first resolution to keep the fund listed with some important enhancements and vote against the second resolution to wind up the fund.
If investors tell us they want to wind up the fund, however, we will do so and will continue to act in their best interests to get their funds back to them as quickly as possible. As independently verified, however, that may take some time.
In addition, winding up the fund will take away an opportunity for Australian retail investors to gain access to actively-managed China A-shares.
We run the fund for our unitholders first and foremost and we only do what is in the best interests of all of our unitholders, not just one or two, regardless of their size. We will continue to do so irrespective of the outcome of the EGM.
The fund has been managed responsibly and transparently since 2006 when it was established
In addition, during the last 12 months we have increased the frequency of reporting on the fund and made enhancements to our conflicts management and governance framework including the appointment of an independent advisory committee to ensure we are even more transparent.
Ultimately, the future of AGF is in our unitholders’ hands. We strongly urge them to carefully consider the two resolutions before them as set out in the explanatory memorandum and exercise their right to vote.
By: Adam Tindall, chairman, AMP Capital Funds Management
AMP Capital is one of the world's leading investment houses, with a 160-year pioneering heritage. Our enviable track record in real estate and infrastructure is coupled with deep expertise in fixed income, equities and multi-asset investments.