Why HM1 shareholders should vote to convert it to an Open End fund

See: > Captive Capital: Why HM1 shareholders should vote to convert it to an Open End fund

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It's been more than 5 years since listing and HM1 has significantly underperformed its benchmark the MSCI World Index (AUD) by 3% annualised since inception and over 14% annualised in the last 3 years. The 3yr cumulative underperformance is over 48%!

As a result, HM1 trades at 15-20% discounts to Pre-tax NTA and 25%+ discounts to NTA adjusted for franking credits and tax assets (due to losses). Yet, this is a large fund not a minnow. On $600 million in net assets, the discount represents $110 million in value that shareholders can recapture if they vote to simply convert it to an Open End fund trading at NAV.

While shareholders own the fund and decisions should be taken in their interests, currently the Directors, founders and fund managers appear to think they can continue to run the fund for their interests (reputational benefits, status, self-promotion, benefiting their own positions/funds). Given the appalling performance, and a string of failings of managers and directors, they are well aware many investors would exit at NAV as soon as that was possible.

In this post, I will summarise the case for converting HM1 to an Open End fund. If it did, investors happy to continue can do so with no detriment, but those who wish to exit can do so without sacrificing 25% of their assets. Actions for interested shareholders include: sharing this post with other investors, coordinating via this site and Hotcopper to bring on a conversion vote, and voting against the remuneration report (only 25% is needed at two annual meetings and the board will be spilled).
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