Denison Funds Management (‘Denison’) today said that advisers pay a crucial role in holding in fund managers accountable to their investors.
While many investors may be unhappy with poorly performing investment managers, without the guidance oftheir advisers, many will not know how they can make a difference to the way the fund is managed.
Denison was recently been approached by a group of investors, representing 9.2% of issued capital in the 360 Capital Industrial Fund, to take control of the Fund and eject the existing management team and Responsible Entity.
To hear the views of investors and discuss how it would manage the Fund, Denison recently a country-wide roadshow where they met with approximately 300 investors.
Denison Funds Management CEO, Matthew Burrows, said that while the vast majority of those present at the roadshows wanted a change in management, many were unsure of how they should vote and what their rights were as investors.
“Most investors were concerned with the recent move by 360 to change the constitution of the Fund, which has been ruled as in breach of the Corporations Act. They are also concerned that listing the fund at this time will have a serious, negative impact on the value of the Fund. However, many investors said the information sent by 360 was confusing. In particular, the proxy voting form is ambiguous in terms of the treatment of votes from abstaining investors.”
Mr Burrows said dialogue with advisers was crucial at times like this to ensure investors’ interests were protected.
“Advisers need to speak with their clients to help them decide what is the best course of action for their circumstances. Too often in the finance industry we assume a level of engagement or knowledge from investors that they simply don’t have. Most investors simply want a good return and their advisers can help them set the course to achieving that.”
According to a letter from the group of investors requesting the change, unitholders listed the dilution of their investments, changes to the constitution and 360 Capital’s plan to list the Fund on the ASX as their major concerns.
Legal proceedings undertaken in the Supreme Court of Victoria and resulting orders made on 31 July 2012, found constitutional changes made on 31 May 2012 and 5 July 2012 contravened investors’ rights and were ordered to be ineffective by The Honorable Justice Sifris. Additionally, the order restrained 360 Capital RE Limited from putting the special resolution to investors of 360 Capital Industrial Fund, as proposed in the Notice of Meeting dated 12 July2012.
Mr Burrows said should Denison be appointed managers of the Fund, they would:
- Immediately reduce management fees from 6% to 5.5% of the Fund’s gross rent and permanently remove the special exit mechanism fee.
- Reduce fund management and operational costs by leveraging existing operational efficiencies to improve net asset cash flows.
- Defer any capital raising to avoid heavy dilution of Members’ interests.
- Establish a liquidity facility specifically for those Members who require special consideration due to a valid, urgent need for liquidity by using our global relationships including Forum and its networks
- Seek Members’ approval for an extension of the Fund’s investment-term for three years.
Mr Burrows said this would allow Denison to execute a strategy aimed to stabilise and enhance the portfolio value.
“This will pave the way for the opportunity for liquidity in the future. By being measured in our process, we believe that we can retain and improve on Member value, which would be preferable to listing on the ASX in current market conditions.”
The unitholder meeting to vote on the proposed change of Responsible Entity will be held at 10.00am (AEST) on 17th September 2012 at Oaks on Collins, 480 Collins Street, Melbourne.
