Here is an extract of a letter I sent last July to AMP about the...

Here is an extract of a letter I sent last July to AMP about the extent of their true underperformance in the Fund. Needless to say i never received a reply....

Dear Mark,

Thanks for getting back to me, I really appreciate you taking the time of writing and considering my points. It does show more thought about the specifics of the fund / investors and market than the rather bland letter that went to shareholders and the ASX.

There are a couple of responses I feel i need to make in terms of making the issues clearer from my perspective as a shareholder;

1. Investment performance relative to benchmark
"The quarterly report (released 30 June 2015) notes the performance of the fund against the benchmark. Since inception, AGF has performed slightly under benchmark."

I have posted the table here, just to help to clarify my point.

From an investors perspective (net returns) the manager is under-performing by 5.03%, 3.03%, 4.20% and 15.8% on the 1 month to 1 year time horizons. As someone who has spent 25 years working in investment management, I would say these numbers are deeply troubling as an active manager and I would not for a second try to dismiss as "slightly under"  

Returns 1 mth% 3 mth%   6 mth % 1 yr % 3 yr % pa 5 yr % pa Since inception*
Net fund returns** -12.66 7.9 32.4   137.7 35.5 19.4 13.1
Gross fund returns# - 12.46 8.9 33.5   141.9 38.1 21.4 15.0
Benchmark returns   -7.63    11.2 36.6   153.5 39.0 18.4 14.0
Source: AMP Capital.

More importantly, these are notional shareholder returns, as the shares do not trade at NAV, but are traded on ASX. So you have to adjust performance for the changes to the discount to NAV. Because I will mention it later, I will use this weeks discount to Monday's NAV. The NAV on Monday was 1.90, while the closing price on ASX was 1.32, a discount of 30.5%. The discount at June 2014 was closer to 20%, do this differential needs to be added to 1 year performance, another negative 10%. Finally, although the longer tail performance is better, initial shareholders subscribed at NAV, so the full discount has to be added to their under performance. Over the life of the fund this would probably detract 3-4% per annum from inception performance.

In summary Mark, I think you should look again at this and see if you want to qualify your remark as regards performance being slightly under, on a 1 year basis it is actually in the order of 25% below the benchmark (15.8 plus 10) and even at the longer end is in the region of 4%-5% per annum below the benchmark.