By: Our Correspondent

The dishonesty of fund management companies with their inflated fees and grossly overpaid managers seems to know no bounds despite the efforts of a few regulators.

One of the ways of moving equity capital around the world and into lesser known markets than New York, London, Tokyo, Frankfurt etc has been the development of single-country funds traded on the major exchanges These can be either closed-end – ie of fixed size – and may be traded at a premium or discount to net asset value – or open, with their size determined by demand and price reflecting the underlying asset value.

Specifically they enable investors to focus on one country rather than a rag bag group such as Asia-Pacific or Asia-ex Japan or, worst of all Emerging Markets, a now-absurd concept when the likes of Korea, Pakistan and Chile, plus a dozen others, are bundled up.

So what are investors in Singapore, Greater China (whatever that means), Asian Tigers (a 1980s species?), Indonesia and Chile now to make of the fact that these places, and Israel, no longer exist? That’s is, at least in the books of Aberdeen Asset Management, a company with a long history of investing in Asian markets.

These investors have just learned that from April 30, they have all been told that their supposedly well-focused investment has been merged into the Chile Fund and its name changed to Emerging Markets Equity Income Fund.

Doubtless this was all approved by the votes of those on the inside track. Doubtless there is plenty of tiny print in the articles which allows blue to be the new pink. Doubtless it is “justified” by claims that the discount to net asset value will be reduced and thus of benefit to the holders. They also promise a cap on fees. But all this is simply a reminder that the funds were dishonestly marketed in the first instance and the discounts to net asset value were at least in part a reflection of bad and high cost management.

Investors who presumably chose focused funds deliberately now have the Hobson’s Choice of sticking with a fund which is not invested as they had been promised, or going to the expense of liquidating their investment at whatever the discount to NAV it may be.

Either way, they lose and the snake oil-selling fund managers carry on collecting fees. And the vast regulatory bureaucracy shuffles paper.