When Jim Mellon started the Hong-Kong based investment group Regent Pacific seven years ago, he decided to target closed-end funds whose shares were selling at a price below their net asset value and help shake up their performance. Fourteen funds later, he has a business that is expected to turn in profits this year of $100 million, compared with $31 million last time.
'In every case we've been active in calling for change,' he says. 'If we don't succeed in persuading management, we move to the public route by calling for an EGM. We've got to this size by being aggressive and have a messianic belief that shareholders - not customers, not staff - own companies.'
Latest victim to fall prey to the Mellon doctrine on shareholder value is Hambros, the British merchant bank whose shares have performed poorly at a time when banking stocks have soared.Using surplus cash generated by the fund management business, Mellon bought a 3.5% stake in Hambros last year. He talked to management in private about how it could improve performance but says he was stonewalled.
Since then Hambros' reputation has suffered a major blow through its part in Andrew Regan's aborted bid for the Co-op and Mellon now wants to see the business broken up - not least because he may want to get his hands on its fund management arm. He has garnered sufficient support from other disgruntled shareholders and plans to call an EGM as a first step towards break-up.
'If this was an American company, it would have been run out of business years ago. Shareholders have had sub-inflation returns on their investment.
Net return on equity is all that matters and whatever it takes to get that, we will do.'.
