Shane Oliver fund burnt by Boe Pahari fallout

He was demoted shortly after The Australian Financial Review revealed the company had settled a sexual harassment complaint against the executive in 2018 and resigned from AMP last week as it prepared to spin off the infrastructure and property funds business within AMP Capital.

“AMP Group has experienced frequent restructuring and culture issues in recent years and faces increased regulatory risk to its vertically-integrated business model. As a result, AMP Capital has experienced ongoing staff turnover and has seen a loss of funds under management,” the Lonsec analyst concluded following his review.

‘Period of stability’

Mr Lander also said the fund had struggled to achieve its investment objectives and had recorded “disappointing performance”, while acknowledging its “experienced and well-credentialed” co-managers.

Dr Oliver, AMP Capital’s chief economist and head of investment strategy, is arguably the company’s most high-profile figure as a regular finance commentator in print and broadcast media. His market musings enjoy a cult following among self-funded retirees and professional investment advisers.

But the product’s assets under management had shrunk to $180 million from $600 million in just a few years, plagued by poor performance and fees geared to run significantly higher in periods of strong asset growth.

“Lonsec would also like to see a period of stability within the AMP Group, noting the detrimental impacts from recent high profile corporate issues,” the report continued.

A spokeswoman for the $186 billion fund manager said AMP Capital acknowledged the opinions of market analysts and observers.

“We continue to engage and listen to the feedback from our clients and ratings agencies and communicated the actions we are taking, including leadership changes in 2020, culture progress, the portfolio review, the appointment of David Atkin as AMP Capital deputy CEO and most recently the intention to demerge AMP Capital’s private markets businesses,” the spokeswoman said.

In August, former AMP chairman David Murray and AMP Capital chairman John Fraser resigned and Boe Pahari was demoted.  

She added that while Dr Oliver provides insights to the managers of all AMP Capital’s multi-asset funds, he has not had “portfolio responsibilities for the Dynamic Markets Fund for the past five years or so”.

However, the chief economist was the public face of the fund when it launched in 2011 and his involvement in the strategy is listed as a strength of the product by Lonsec.

It is understood AMP Capital is assessing the future viability of the Dynamic Markets Fund.

The Financial Review on Monday reported concerns that frosty relationships with financial advisers – who make up the bulk of Lonsec’s subscriber base – would be a critical factor in the success of a spun-off AMP Capital private markets division.

Incentive payments revamp

It also reported that Mr Pahari could earn a $50 million carried interest payment as part of an agreed separation between the London-based infrastructure equity boss and the 172-year-old company as it looks to carve off AMP Capital for an ASX float.

Dozens of senior AMP Capital employees have left the group in recent months, and the company this month announced plans to overhaul incentive payments to retain and attract talent.

Although Mr Pahari was paid a $6.5 million bonus in calendar 2020, AMP Capital’s funds were hammered by investor redemptions amid the sexual harassment scandal, with assets under management falling $6 billion over the last 12 months, before the additional loss of the $5 billion property fund to Dexus on Tuesday.

The focus on Mr Pahari’s exit package comes ahead of AMP’s annual general meeting this week, where it faces a possible second strike on its remuneration report following a 67 per cent protest vote at last year’s AGM.

Another fund linked to Mr Pahari, the $900 million AMP Capital Core Infrastructure Fund, was also downgraded recently due to the fund’s high exposure to travel and hospitality-related assets and investments linked to GDP growth, such as airports and rail, which Lonsec said would “be more affected by the COVID-19 pandemic for the foreseeable future”.

Lonsec said the infrastructure fund had “materially higher” fees than peers and was vulnerable to redemptions because of the vehicle’s daily redemption terms and the portfolio’s unlisted assets.

It had performed strongly until the coronavirus pandemic, but the return for investors now is largely in line with the more meagre government-bond yield over the last three years.

Amid the raft of downgrades from “recommended” to “investment grade” status, Lonsec in February placed a bottom-grade “redeem” status on the AMP Capital Ethical Leaders Balanced Fund, meaning it was “no longer considered worthy of investment”.

While Lonsec viewed the $130 million fund’s portfolio managers, Darren Beesley and Fiona Manning, in “high regard”, the ratings house was concerned by the “material loss of staff in the ESG & investment stewardship team” and governance issues at AMP Capital.

“While there are stated expansion plans, Lonsec believes the current corporate issues will mean the hire of additional staff within this team will take an extended period of time,” Lonsec said.

Ming Long. Michele Mossop

“The fund’s size has been depleted from 12 months ago and while the manager has acted to manage these significant redemptions to date, in Lonsec’s opinion the fund may become subject to forced selling of assets and potential further changes to the underlying make-up of the fund.”

Dr Oliver is not the only high-profile employee to have been singed by the fallout over the sexual harassment scandal.

Ming Long, chairman of AMP Capital Funds Management and a regular participant on ABC talk shows, this month revealed clients were pulling their funds on the advice of consultants “citing their concerns in relation to perceptions about AMP’s culture and corporate governance” following the promotion of Mr Pahari.

Discussions with Ares were troubled by a spat between investors in AMP Capital’s Diversified Property Fund, the fund’s independent board, and rival property group Dexus, which lodged a takeover offer for the fund. On Tuesday, 92.94 per cent of investors voted to join Dexus.

Investors have already hit the $5 billion fund with $2 billion worth of redemption requests.