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By Ally Selby
Wilson Asset Management has made public its bid to manage listed investment company Contango Income Generator (ASX: CIE), after the investment manager failed to respond to WAM’s initial proposal.
It comes after the manager of the fund, Contango Asset Management, gave notice to shareholders that it was considering the fund shift from its Australian mid-cap equities strategy to instead be managed by a California-based global and emerging markets equities manager, WCM Investment Management.
Contango AM is run by Martin Switzer, the son of Australian financial commentator Peter Switzer. The fund has approximately 5000 total shareholders, the majority of which are retail investors. As of May 31, the fund had $78.71 million in assets under management.
In addition to the strategy shift, CIE opened a share purchase plan to retail investors in the hopes of raising $20 million. The shares were offered at 62.5 cents per share.
WAM chair and chief investment officer Geoff Wilson told Financial Standard the directors of the listed company had failed to do the right thing by investors.
“We believe in treating all shareholders fairly, which unfortunately the current Contango Income Generator board of directors has failed to do,” he said.
“The placement at a 14.9% discount to NTA destroys value for shareholders who do not participate.”
In the past year, the CIE has recorded a NTA return of -20.75% and a total return of -16.51% (as of 30 June 2020). Over a six month period, the fund has recorded a NTA return of -20.6 with a total return of -18.5%.
Long-term results for the fund don’t fare any better, with the fund reporting a NTA return of -10.57% and a total return of -4.44% on an annualised basis over the past three years. Since its inception on 13 August 2015, the fund has recorded an annualised NTA return of -5.99% and a total return of -0.27%.
“Our proposal is to reposition CIE following a history of poor performance for shareholders,” Wilson said.
“The current boards proposal to appointment an unproven manager of LICs is flawed and on unfavourable terms for the company.”
WAM has a 14.3% stake in CIE at present, with Wilson slamming its current board for the company’s poor performance and “their appalling decisions”.
“We believe our proposal to welcome CIE into the stable of Wilson Asset Management LICs, reposition its investment focus towards investing in the highest quality Australian companies, and offer more favourable terms, such as a significantly lower management fee and the requirement to recoup any prior underperformance before the payment of future performance fees, is superior than that endorsed by the CIE board of directors with the WCM proposal,” he said.
“We look forward to our fellow CIE shareholders having their say and voting for our proposal and changing the board.”