Lim Advisors and Metage Capital are seeking the addition of three directors at Macquarie International Infrastructure Fund (MIIF) to bolster the existing board, says one of the proposed nominees put forward by the hedge fund managers.
“We don’t seek to change any of the board [members], but we think they need additional people who’ve got more ideas,” says Nicholas Paris, managing partner of UK-based fund advisory firm Purbeck Advisers, which advises Lim on Asian closed-end funds.
Paris is one of three nominees jointly put forward by Lim and Metage as additions to MIIF's board. Christopher Brader, who is a director at an existing Lim fund, and Miles Staude, an investment manager at Metage, are the other two.
The two hedge funds, which own just over 10% of the Singapore-listed infrastructure fund, are urging shareholders to attend a MIIF special general meeting on December 5 to change the composition of the board.
“What we’re seeking to do is to improve the focus on shareholder value and bolster the board’s experience,” Paris tells AsianInvestor during a visit to Hong Kong.
“We still believe that Macquarie are the right people to run these assets. Our issue is that the assets are good, but they trade at a discount” relative to net asset value.
The addition of the nominees would only comprise three of eight of MIIF’s directors, “so we wouldn’t have a majority”, he notes.
“Our view is new directors, fresh thinking, people who are focused on the share price and we can all participate in the strategic review and get the right price for shareholders.”
CIMB Bank was recently appointed as an independent financial adviser to conduct a strategic review of the fund, which will focus on generating value for shareholders. Paris says the move came as the result of a suggestion put forward to the board by himself and Staude.
Half of MIIF is owned by institutions – including parent Macquarie Group – while the other half comprises 7,000 retail investors.
While Paris acknowledges that some of the retail investors may be satisfied with the 10% annual dividend that MIIF has been paying to shareholders – and less interested in changing the board composition – he points out that some have been invested in the fund since launch in 2005 and that the fund has had a capital loss of 40%.
About 200 attended MIIF’s annual general meeting in April and there were some questions as to why the stock value of the fund had dropped, says Paris. He expects an even larger turnout at next week’s special general meeting.
“Broadly speaking there’s S$830 million worth of assets that are trading at S$660 million of market capitalisation, so shareholders are missing all that value,” he notes.
In the past two years, Lim has had three meetings with MIIF chairman Heng Chiang Meng. Additionally, six “collaborative” letters have been sent to the board with suggestions to help improve the share price.
Heng, in a letter to shareholders issued on Monday, reiterated MIIF's stance that they vote against the hedge funds' proposed resolutions that would instate the three proposed board nominees.
Should next week’s shareholder vote result in the rejection of the resolutions, Lim will retain its shares in MIIF, says Paris.
“We’ve been long-term, patient shareholders for two-and-a-half years,” he notes. However, as Lim is the third-largest shareholder in MIIF, the firm would take a careful assessment on the continued retention of its stake. “MIIF is good investment,” says Paris, “[but] it should be a better investment.”
On the other hand, should Paris and the two other proposed directors be appointed via investor vote, “I expect we’ll be invested for multiple years, because the shareholder returns should improve, and it will be worth us staying invested.”