What: The ongoing saga which surrounds a fund managed by a division of AMP Limited (ASX: AMP) is back in the headlines with the ABC's website reporting that a major shareholder of the fund in question – the listed investment company (LIC) Trustee for AMP Capital China Grwth Fund (ASX: AGF) is calling for action to narrow the persistent discount that the LIC trades at.
So What: With a market capitalisation of $460 million, the AMP Capital China Growth Fund offers shareholders exposure to China A shares.
However with the stock currently trading at $1.22 compared with its most recently reported net asset value estimate of $1.54, many shareholders want action to reduce the 21% discount.
Now What: According to the ABC's report the unhappy substantial shareholder could be headed for a showdown with AMP in the form of an extraordinary general meeting in an attempt to force further action to reduce the discount.
It claims that the measures currently undertaken in response to a strategic review of the fund have failed to result in a meaningful closing of the gap.
A persistent discount to net asset backing is a potential issue which investors in LICs do need to be aware of.
While a persistent discount can be a problem, a temporary one can create a wonderful buying opportunity. Currently, some of the most enticing discounts in the LIC sector (based on data published for August) include Acorn Capital Investment Fund Ltd (ASX: ACQ), which had a discount of around 20%, Contango Microcap Ltd (ASX: CTN) with a discount of approximately 15% and PM Capital Asian Opportunities Fund Ltd (ASX: PAF) which was trading at a discount of over 20%.
