Chinese fund targets AGF unitholders

The unitholders in the AMP China Growth Fund (AGF), which was voted in July to be wound-up due to the concerns over its responsible entity (RE), AMP Capital, have been now offered an opportunity to retain the exposure to the Chinese equity market via a fund managed by China Asset Management (ChinaAMC), a subsidiary of a Chinese mutual fund manager.

Under the terms of a deal, AGF unitholders would be offered A class units in the ChinaAMC China Opportunities Fund (COF) in return for their AGF units, a move known as an Off Market Offer facilitated by a number of brokers.

According to a Chinese fund, the class units have been created specifically for the purpose of making the offer.

Although AMP earlier announced it intended to pay a distribution of 55 cents by 30 September, the company also made it clear that the repatriation of the associated profits on the underlying portfolio which constituted around 25 per cent of the value of the AGF might take between nine and 18 months.

Therefore COF has announced that it plans to borrow this amount under a debt facility equal to undistributed proceeds and invest those loan funds using ChinaAMC's investment strategy in order to ensure that investors in COF could maintain their exposure to Chinese equities.

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According to ChinaAMC's Australian representative, Antony Blazey, this debt facility would help address the delay in the full repatriation of funds and, in that way, would enable AGF unitholders who would accept the offer to be invested without waiting for the final distribution.

"The offer will allow AGF holders to maintain their exposure to China, with an established, Chinese fund manager that has a proven track record, at a time when key services sectors in China are growing at [above] five per cent as a result of the rapidly expanding Chinese middle class," he said.

COF is an Australian Unit Trust, which was launched in 2015, to enable Australian investors access to the Chinese equity markets and it mirrors the Luxembourg UCITS ChinaAMC China Opportunities Fund which provides access to Chinese companies listed primarily in Hong Kong as well as China A-shares, China B-shares, fixed income and overseas markets, mostly in the United States.

ChinaAMC was first set up in 1998 as a fund management firm approved by the China Securities Regulatory Commission (CSRC), with total asset under management of around US$144 billion, as of June 2016, with around 40 million retail investors

The Off Market offer is being led by Taylor Collison, on behalf of ChinaAMC Australian representatives, and it is expected to close when AGF is delisted.

In June, an investment management firm based in Hong Kong, LIM Advisors, which owned more than five per cent of the outstanding units of AGF, proposed to wind up AGF and enabled all unitholders to exit at net asset value (NAV) per unit less costs due to concerns over the fund's RE which, according to LIM, had "failed to take action to reduce the fund's problems, in particular, an excessive discount to NAV".

In August, the RE announced it had selected a strategy to wind-up the fund, with plans to return the proceeds to investors ‘as soon as practicable' and that a first tranche of around $40 million was expected to be transferred no later than 30 September.