THE move by listed infrastructure fund Duet Group to flag the internalisation of the fund's management is likely to be followed by a takeover bid for the $2.3 billion fund.
Externally managed funds by their very nature are difficult to take over due to the various conditions and poison pills often embedded in their management agreements.
In Duet's case it will be one of the last remaining listed infrastructure funds left to bring their management in-house after Macquarie raised more than $400 million in 2009 internalising a suite of managed listed funds.
The tide has well and truly turned against externally managed funds on the basis that most charged excessively high fees and had interests that where not necessarily aligned to those of investors. The internalisation of Duet's management if approved will be a nice one-off payment for its joint external managers AMP and Macquarie Group.
Between them, they will get an estimated $98 million in cash and securities, which is a pretty rich compensation package, albeit not the most generous that has been received to ditch external managers in the past.
It comes at a time when Macquarie is grappling with life as an investment bank during tough times and AMP is digesting its AXA acquisition.
Duet was established in June 2003 as wholesale unit trusts. A year later it listed on the ASX and AMP established a joint venture by selling to Macquarie 50 per cent of the entities that held the Duet management rights. Duet's portfolio of assets includes investments in the Dampier Bunbury Pipeline, United Energy Distribution and Multinet Gas.
There is a lot of activity going on in the listed infrastructure space at the moment with Australian Infrastructure Fund and Hastings Funds Management announcing in June that the board was in talks about the internalisation of management.
Meanwhile, Hastings and Hastings Diversified Utilities Fund are at the centre of competing bids from Pipeline Partners and APT Pipelines, and received a decision by the Takeovers Panel yesterday that it had declined to conduct proceedings on an application from an investor, AFIC, into the affairs of Hastings. The application concerned the provision of a proper and full independent evaluation of the internalisation of management of Hastings Diversified in the context of a takeover bid for Hastings by Pipeline Partners. The takeover battle ensues.