Shoe on other foot for finger-wagging TD as directors review ailing fund

Shane Ross has made a name for himself as a pugnacious and unforgiving critic of poor business performance, feeble investment returns and cosy relations between the professional and political classes. Be it in Leinster House, the pages of the Sunday Independent or on the broadcast media, the Independent TD for Dublin South seems to relish attacking those who fall short of his own high standards or fall prey to the perils of incompetence.

Known as “Lord Ross” in political circles, he was in the news this week for sponsoring a Dáil motion calling on the Government to default on the next Anglo Irish Bank promissory note payment.

As only he could put it, the motion was called for “in view of the imminent danger of Ireland’s humiliation in the negotiations with the European Central Bank”.

Ailing business

If the economic earthquake which struck Ireland in 2008 provided an abundance of targets for Ross’s wagging finger, his own expertise as a stockbroker provides a certain heft when it comes to pointing out the frailties of ailing businesses and those who run them.

He also deploys these skills in his capacity as non-executive chairman of the SVM Global investment trust, which is listed on the London stock exchange and based in Edinburgh.

In addition, he is non-executive director of the Luxembourg-based Baring Russia Fund and the Cayman Islands-based Baring Hedge Fund.

Mr Ross’s register of interests in the Dáil says he holds shares in SVM Global but does not say how many.

SVM Global is essentially a fund of funds, meaning it invests in an assortment of funds with a view to maximising profit. That’s the basic idea.

Although the fund has performed well in the past, past performance is not a reliable guide for the future.

SVM Global’s problem right now is that it has been haemorrhaging value, with its net assets down almost one-third in the five years to September.

Executive’s departure

A significant factor was a big reduction in net asset value last year. This came after the departure of one of two executives with SVM Asset Management, who managed the fund.

“Immediately following this, a review – initiated by SVM – led to a writedown on the less liquid assets where realisation of the underlying value was deemed to be delayed or uncertain,” Mr Ross said in his shareholder’s statement in December.

“As a result of this review the net asset value of the fund fell by 13 per cent, reflecting a reduction in the adjudged value of specific investments (6.5 per cent), currency adjustments (2 per cent) and an overstatement of the value of the portfolio due to an accounting error (4.5 per cent) which arose subsequent to the last external audit.”

In-depth investigation

It was then that the fund’s independent directors launched an in-depth investigation into the executive’s departure and the fall in net asset value.

“We engaged independent accountants PwC to report to us specifically on the valuation process, the associated control environment and to analyse the writedown in the net asset value.

“Following a review of the process used by management, their conclusions corroborate the integrity of the September 30th valuation, but also raised a number of rectifiable control, process and accounting issues.”

It was after this unhappy affair that SVM Global decided to review the management, a process which culminated on Wednesday with the selection of Henderson Global Investors for the job.

Winning candidate

“All directors were present at all the interviews. The standard of applications was outstanding,” Mr Ross said in a stock market filing.

“We chose Henderson as the winning candidate, based on a combination of an excellent investment performance record, its ability to market the fund and a convincing commitment to the special characteristics of this trust.

“We are confident that in due course the fund will again outperform its peers.”