Hedge fund managers Lim Advisors in Hong Kong and Metage Capital in London are taking an activist stance towards Macquarie International Infrastructure Fund (MIIF), which they contend is trading at a disproportionately low stock market valuation relative to its net asset value.

Lim and Metage, which own just over 10% of Singapore-listed MIIF, are urging shareholders to attend a MIIF special general meeting on December 5 to change the composition of the board.

They are proposing to increase the board to nine members from five, and to elect their three nominees: Christopher Brader and Nicholas Paris, who are involved with existing Lim Advisor funds, and Miles Staude, an investment manager at Metage.

Lim and Metage have made the appeal to shareholders – largely retail investors – through an open letter that was issued to media and printed as an advertisement in two Singaporean newspapers.  

The letter to shareholders notes that since the 2005 launch of the fund – which is primarily invested in telecom and transport assets in Taiwan and China – “directors' remuneration has increased by 45% despite the fact that the market capitalisation of the fund has fallen significantly over that period”.

MIIF shares were priced at S$1 when launched on the SGX and had a market cap of S$875 million. Market cap reached as high as S$1.4 billion in November 2007. But now the shares are trading at S$0.57 each – as at midday on Friday – with a market cap of S$652 million.

Metage’s Special Emerging Markets Fund holds a stake of about 5% in MIIF, while Lim’s stake in MIIF is held through its Asia Multi-Strategy and Special Situations Master funds.

Lim’s multi-strat vehicle has been increasing its stake in MIIF incrementally over the past year. Its latest transaction, in September, increased its shareholding from 4.9% to 5%, bringing it into the category of a substantial shareholder. Lim Advisors declined to comment on the matter.

Parent Macquarie Group is the biggest shareholder in MIIF, with about 11%. MIIF has undertaken a series of share buy-backs from March last year, a typically defensive move against board activist or attempted takeover actions.

The buy-backs were suspended in October pending a strategic review, for which MIIF has appointed CIMB Bank as independent adviser.

In a statement last month, MIIF says the review will focus on “generating value” for shareholders, which will consider a range of possible moves including revision of the company’s investment mandate, changing its structure and listing jurisdiction and the wind-up of MIIF.

Last week MIIF issued its own statement to shareholders, urging them to vote against a change to the board composition as it “will result in the interests of a minority of shareholders being disproportionately represented on the board”.

 MIIF had no comment on Lim and Metage’s letter to shareholders.