Activist investor becomes Pacific Horizon’s largest shareholder
The £133 million trust which has experienced poor performance recently has appointed a new deputy manager Roderick Snell. City of London Group, a specialist asset manager and lender to small businesses that tried to force the wind up of Advanced Developing Markets trust earlier this year has been revealed as the trusts largest shareholder.
Pacific Horizon (LON:PHI) has been managed by Mike Gush since February 2009, though he has worked for Baillie Gifford since 2003, and been a member of the emerging markets team since 2005. The trust has been at or near the bottom of the performance tables since then and indeed in the later part of the era of his predecessor Gerald Smith.
City of London Group has emerged as the trusts biggest shareholder. Although they are yet to confirm their intentions they have a past record of agitating for change.
In the annual report released last week the board of Pacific Horizon commented “The performance of the Company over the year was unsatisfactory when compared to that of our competitors and against our chosen comparative index”.
They also introduced a bi-annual buyback policy for up to 5% of its shares, which will enable investors to tender their holding to the trust if the discount averages more than 9% during the six month periods to 31 July and 31 January of each year. The move will however continue to be at the discretion of the board.
During the year the Company bought back 1.4% of its shares as at 31 July 2012, at a cost of £1,753,000.
Sector peer JP Morgan Asian introduced a similar mechanism in 2011 which has had little impact on its discount.
The board has negotiated a cut in the management fee from 1% to 0.95% on the first £50 million of assets and of 0.65% on the remainder.
Commenting on the performance the manager Mike Gush said: “We recognise that recent performance has been unsatisfactory. We are nonetheless convinced that our philosophy, process and investment style constitute the correct strategic approach to deliver strong performance in the future. We strongly believe that changing investment style is one of the most dangerous traps to fall into when performance has been disappointing and we do not want to make this mistake. The portfolio is invested in a group of attractive businesses that we believe will generate superior returns over the long term. Good operational performance at a number of our holdings has yet to be rewarded in share price terms and the market’s dislike of uncertainty has resulted in a number of our holdings appearing severely underpriced. We are confident that our long term, fundamental approach to investing will yield very acceptable results for shareholders”.
Sector broker JP Morgan Cazenove said “only a sustained recovery in Pacific Horizon’s NAV performance is likely to impact its rating, and until we see further evidence of this occurring, we remain Underweight its shares”.