LIM Advisors response to Atlantis Japan Up-date
The up-date announcement does not however provide shareholders with any further comfort that the fundamental problems with the Fund will be addressed, namely: persistent discount to NAV, an extremely high total expense ratio ("TER") of 2.47% made up of an investment management fee of only 1%pa and 1.47%pa of other costs, an unviable size and a Board that has failed to address all these problems for several years.
The only new point in the up-date announcement is an intention to hold a continuation vote in October 2019. This fails to address the problems with the Fund that shareholders face now and is unlikely to impact the persistent discount that dogs this Fund until 2019.
This Fund had a market capitalization of over ?160m five years ago and US$610m (approximately ?335m) in 2006. This Fund now has a market capitalization of ?56m due to under-performance, a persistently wide discount and a share buy-back programme that has only managed to reduce the size of the Fund to render its existence meaningless. The Fund is also the smallest in its peer group, with total assets of ?69m vs. a sector average of ?146m.
The Board fails to mention the stark and concerning fact that, as per the AIC ranking of investment companies, the average TER for closed end-funds focused on Japan Smaller Companies, European Smaller Companies, North American Smaller Companies, and UK Smaller Companies are 1.50%, 0.91%, 1.12%, 1.20%, and 0.93% respectively.
Atlantis Japan has a TER of 2.47%.
Besides a handful of UK funds, none of the other funds included have a TER ratio higher than AJG's 2.47%. This is also the highest TER of all funds in the Japan Smaller Companies universe. Sadly the fund's TER will climb further this year as the Board is running up costs to defend the fund from one of its own long term shareholders.
The simple fundamental facts are that this Fund is far too small, far too expensive and should not exist in a closed-end structure.