Brussels, 05/03/2007 (Agence Europe) - The targetting by The Children's Investment Fund (TCI) hedge fund of ABN Amro bank has met with a mixed response. Some parties back TCI's criticism of lack of profitability at the Netherlands' biggest bank while others reject TCI's comments as likely to disturb the financial markets (see EUROPE 9376). Paul Koster, a member of the Committee of European Securities Regulators (CESR), called last week for tougher transparency measures for hedge funds, according to reports in the Wall Street Journal on 2 March. While European Union law forces companies that intend to launch a takeover bid for another firm to publicly disclose detailed information, laws for investors not planning a takeover are not sufficient, he said.
Distinctly underwhelmed by ABN Amro's level of profitability for shareholders, TCI has published 'open letters to management' suggesting changes to corporate strategies which are aimed at boosting the stock price such as dropping takeover bids, selling off businesses or breaking itself up, ahead of the shareholders' AGM of 26 April 2007. Koster said that because the open letters can sometimes affect a company's stock much like a takeover situation, the EU needs a set of rules to cover that period. He argued that without new laws, regulators and companies don't know whether activist investors have a genuine interest in changing a company's strategy or whether they are just trying to profit from any movement in stocks, bonds and derivative prices that may follow their calls on the company to change tack. 'Once an open letter is sent, the investors who sent it should be forced to report any transactions in stocks and bonds that are linked to the letter,' he said. Koster also called for shareholders to disclose whether they have borrowed voting rights to shares in a target company.
Shares in ABN Amro have risen since the publication of TCI's open letters, jumping 6.1% on Wednesday 21 February. TCI holds a 1% stake in ABN Amro. Four other hedge funds each also hold a similar 1% stake in ABN Amro. Dutch pension fund PGGM has echoed TCI's criticisms of the Dutch bank's performance. (mb)