Rattling the cages at Allco in 2007
January 14, 2008
This Stuart Washington story appeared in The SMH on October 26, 2007, after the Allco Finance Group AGM in Sydney.
Restoring dented investor confidence was a critical challenge facing Allco Finance Group, executive chairman David Coe said yesterday.
He admitted to an annual meeting of shareholders: "We goofed a couple of times."
He said chief executive David Clarke's main responsibility was improving the performance of its satellite funds and addressing investor unrest in those funds, after receiving weekly complaints.
At a meeting that bordered on a mea culpa, Mr Coe admitted past errors in Allco's selling of complex funds to retail investors and acknowledged their poor performance was damaging to Allco's business model.
"Clearly [we] can't have a lack of investor confidence . . . without impacting on our ability to raise future capital," Mr Coe said.
Mr Clarke, who was appointed in April after a career with Westpac and the funds manager BT, recognised there had been a lack of investor understanding about what Allco was paid as manager of the funds and why.
He said raising four new funds in shipping, infrastructure, transport and investments in Singapore had been slower than he would have liked.
Despite the challenges, Allco's assets under management have grown from about $3 billion in December 2005 to $18 billion, including a $5.6 billion contribution from real estate business Rubicon.
This week Allco, formed in 2006 from a merger of Mr Coe's private company with the listed Record Investments, announced a $277 million deal to buy Allco executive director Gordon Fell's stake in his Rubicon businesses.
The problem facing Allco is shown by the unit price of its real estate fund Record Realty, trading at a discount of 24 per cent to its net tangible assets, and the shares of its private equity fund Allco Equity Partners, at a discount of 29 per cent to net asset value.
Moves to address performance included last week's announcement of a review of Record, including cutting upfront fees to Allco, and taking over management control of Allco Equity Partners. It has also also launched reviews of its listed Allco Max debt securities and its unlisted mortgage lending business Mobius.
During the meeting, the shareholder activist Stephen Mayne questioned the scale of a series of payments from its related funds to Allco, prompting Mr Coe to deny there was any gouging of fees by Allco.
The independent director Bob Mansfield agreed with another question from Mr Mayne that the three-member remuneration committee should be reconstituted so that it was no longer dominated by Mr Coe and Mr Fell.
The rescue job on the funds is a step in Allco Finance positioning itself as a global buyer of alternative assets which it then packages and sells to investors.
But there are signs that its task of selling itself to the market in what Mr Clarke portrays as a clear, simple business model have a way to go. As a sign of shareholder unrest, about 7.5 million votes, or 10 per cent of the overall vote, were cast against Mr Fell's re-appointment as a director.
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