Investors in AMP’s $7bn office fund raise governance concerns

Beleaguered wealth group AMP is facing fresh ructions in its $7bn office fund with unhappy investors raising concerns with the trustee board.

A change in manager could have triggered pre-emptive rights on major properties such as ­Sydney’s Quay Quarter.

Beleaguered wealth group AMP is facing fresh ructions in its $7bn office fund with unhappy investors writing to the trustee board raising concerns about a controversial process which recommended it stay in charge.

A group of some of the largest superannuation funds in the country wrote to the trustee board of the AMP Capital Wholesale Office Fund complaining about conflicts of interest in the process.

The stoush has blown open as AMP readies to reveal new details of its real estate and infrastructure spin-off, which will be called Collimate Capital Funds Management.

The unhappiness with the manager could prompt fresh challenges to its grip on the office fund as proposed changes to its constitution may make switching managers easier.

The investor concerns reflect issues about the fund’s corporate governance and conflicts of interest but have been renewed by the group hiring law firm Allens to write to the board to formalise their problems.

Funds players said more than half of investors were not supportive of AMP remaining as manager when the process was underway last year, although clear consensus for a new manager did not emerge despite GPT and Mirvac being short-listed as prospects.

The search was rocked last September when the initial advisory committee – comprising three real estate and corporate figures, former Future Fund property head Barry Brakey, Wesfarmers director Sharon Warburton and property veteran Paul Say – resigned suddenly without explanation.

The trustee board drafted in two other independent directors – corporate veterans Ming Long and Bob McKinnon – both of whom hold non-executive roles elsewhere in the AMP empire.

But the change in approach was viewed as a watershed moment with the trio of heavyweight independent advisers resigning as the process shifted away from a search for the best manager and hurdles were put in place to make it harder for outside contenders, sources said.

One senior property executive, who participated in the process, said it had been a “disaster”, saying the AMP trustee board had done a “complete about face” halfway through when it had shifted from wanting to find the best manager to assessing whether the incumbent had done an “appropriate” job.

The executive dubbed the governance of the fund as “appalling”. “This is the worst corporate governance I’ve seen in my career,” the veteran said. “If I was a unit holder I would be furious.”

The process was marred by allegations that the trustee did not share crucial information with bidders, particularly about the triggering of pre-emptives on major assets like Sydney’s Quay Quarter Tower, upon a change of manager.

Investors in the fund have now effectively put AMP on notice and options include lodging significant redemption requests, which may force a strategy shift by the fund to meet them, or even calling a meeting to remove the manager.

The disquiet may prompt a rethink on the strategy for AMP’s private markets unit, with sales becoming an option for parts of the operation, rather than losing control of the vehicles.

The trustee board is comprised of AMP executives and the fund investors warned in their letter that they could pull their investments if they lost confidence in the management.

They wrote about the prospect of redemption requests, short-term instability and the potential for wealth destruction in the fund, and expressed concerns the trustee had prioritised the interests of its shareholders above the unlisted investors.

The senior ranks at AMP’s private markets unit are in line for incentives as the business separates from the broader business.

The investors also wrote about their discomfort over the appointment of Ms Long and Mr McKinnon, who replaced the original independent advisory committee.

In a statement the trustee board said. “The trustee is respectful of and empathetic to the fact that some AWOF investors have outstanding questions and concerns in relation to the process. The trustee will continue to engage with investors.”