My involvement
A closed-ended, un-listed integrated finance fund under the de facto control of the dominant individual who owned the investment manager/promoter. The portfolio of primarily eastern European industrial, manufacturing and service businesses had been assembled but the anticipated returns were not being delivered and investors were concerned that the portfolio was suffering high management costs but not being actively managed in their interests.
I was approached by a former employee of the investment manager, put me in touch with an investment banker in London I had worked with for many years, who saw a commercial opportunity on the back of me by delivering better returns to the investors. Each of the investors represented too small a proportion of the fund for his own voice to have any effect, and for each of them its investment in the fund was too small a proportion of its total assets under management to merit significant time and attention. Investors needed someone in the middle to pull them together and make their combined voice have an effect. Along with my contact I analysed the investment portfolio and the shareholder base in detail to determine the extent of the problems, and to decide which investors to contact.
Relationships were then established through telephone calls and face-to-face meetings with investors in London, Switzerland, the USA and elsewhere. Each was initially reluctant for its identity as a supporter to become known to the others (for fear of its identity then becoming known to the dominant individual). That reluctance was eventually overcome so enabling conference calls with the entire investor group.
I established communication with the regulator, whom I then kept up to date. Eventually, when supporters controlling sufficient votes had been assembled to give the likelihood of a favourable outcome to an EGM to replace the board, I made contact with the incumbent board to invite them to co-opt me. Following this, I prepared an EGM requisition proposal and with the consent of the Regulator circulated the proposal so that as many investors as possible could be identified. The investment manager/promoter then fought a rear-guard action and eventually persuaded the two largest investors (whose inclusion in the investor group was essential to secure the voting outcome needed) to break ranks by convincing them he would deliver the outcome they sought, agreeing with them a specific time-scale, and agreeing to cut his costs significantly. The investor group then backed off.
Outcome
My determination and work over a period of nine months resulted in investors being given the outcome they desired. Investment management transparency was achieved, as well as a reduced cost and a commitment within an agreed timescale to complete the realisation of fund assets and the distribution of net proceeds. Regrettably for me, that was achieved by capitulation on the part of the investment manager and I did not end up with the active board role I had hoped for.
