Stressed QFII fund under fire

Added 14th June 2016

A QFII fund from Australia investing in A-shares might wind up as investors are fed up with heavy losses and discount to net asset value, according to reports.

Stressed QFII fund under fire

Hong Kong-based hedge fund LIM Advisors, which oversees $2bn, is one of the investors taking action against the AMP Capital China Growth Fund, a QFII fund, according to The Australian Business Review.

LIM holds a 12.64% stake in the AMP fund and is also the largest independent unitholder.

After stating that the fund manager and responsible entity, AMP Capital Funds Management, “failed to take decisive action” to address the “substantial discount” last September, it called for an extraordinary general meeting, to be held in July.

LIM Advisors also refused to meet with AMP in late May, which came up with eight enhancements to improve the situation.

If more than half of investors vote on the side with LIM Advisors at the shareholders meeting, the fund would be forced to liquidate and realise the cash value of the fund asset holdings to return to shareholders.

The fund was incepted in 2006 and currently listed on the Australian Securities Exchange with $470m in AUM. It suffered a 42% loss in the past 12 months with an average 20% discount to net asset value in the same period, according to data from Bloomberg.

AMP proposed last month to cut the base management fee, buy back shares in the secondary market, as well as a one-off redemption. It said that about 70% of the about 700 retail investors are willing to keep the fund, the report said.

AMP was the first Australian institutional investor to receive a Qualified Foreign Institutional Investor (QFII) quota back in 2006 to invest in China.

China A-shares have not been performing well. According to FE data, 90 mutual funds available in Hong Kong invest in China equities. They were down an average 34.2% over the past 12 months. The MSCI China A index dived 45% while another benchmark, the CSI 300, was down 43% during the same period.

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