“The unit trust has been marginalised since day one in some respects. The experience has been quite poor for unitholders all the way through,” senior Harbour Asset Management research analyst Oyvinn Rimer says.

He doesn’t think there are many investors in the fund left to care.

“We own a very small number in our passive fund, which is an index-tracking fund that has to own them, but in an active sense, we don’t,” he says.

“In hindsight, it probably should have been wound up shortly after listing.”

The rewards haven’t been great.

The units were first sold at $5.50 in 2012, when Fonterra raised $525 million from their sale, and last traded at $3.73. The fund is currently trading but Fonterra put a temporary freeze when it announced the proposal. The units have fallen from $4.56 just before the proposal was announced.

Since its launch, it has paid roughly 30 cents a year in dividends, including two lean years where Fonterra’s debt repayments were the priority.

In May, Fonterra’s board kicked off consultation on a new proposed capital structure that would see the fund capped or killed as it looks to protect itself from flat or declining milk supply and to ensure farmer ownership.

Fonterra recently unveiled some possible changes but there was no further clarity on the future of the fund.

“We still have not made a decision or landed in terms of the future of the fund,” chairperson Peter McBride told reporters at a briefing. The future of the cooperative “is the priority at the moment,” he said.

However, Rimer says any buyback – which would have to be approved by at least 75% of unitholders entitled to vote – may not be stellar.

The current market capitalisation of the fund is $401.6m.

Fonterra has argued keeping the fund operating as is could potentially cost billions as it may be forced into repeatedly buying back shares if certain levels are breached.

“It doesn’t sound like there is any willingness to pay a premium to unitholders to close it down,” Rimer said.

While there’s no final decision , he says “the writing is on the wall”.

NZ Shareholders’ Association chief executive Oliver Mander says the association hasn’t yet formed a view on the proposal given that the proposal itself hasn’t been finalised.

However, he says there had always been an inherent conflict of interest between the unitholders and the supplier shareholders, he said.

Jarden’s head of research Arie Dekker says “it was very clear at inception that there would be limitations associated with investing in an FSF unit – particularly there was no voting interest in Fonterra’s governance while the fund was also set up with a number of protections around controlling the fund size”.

Data from the annual reports show Fonterra spent about $1.7 million on directors’ fees for the fund’s manager in the nine years to June 30, 2020. It also paid the fund’s running costs.

The FSF Management Company, the manager of the Fonterra Shareholders’ Fund, hasn’t responded aggressively to the idea that the fund might be wound up.

It says its capital review subcommittee, which comprises its independent directors, will continue to discuss the capital structure proposals in confidence with Fonterra and with advisers.

It also reiterated “it is not able to provide unitholders with any assurance about the price or liquidity of trading in the fund as these are matters the manager does not control or influence.”

Mander says removing the fund will limit investment options in the dairy sector.

Fonterra argued that the milk supply issue is now a bigger risk and investors can turn to the bonds for exposure.

However, Mander says bonds are “a totally different investment profile and not what investors are looking for”.