Australian Foundation Investment Company (AFI) is a criminal organization that depends on share price fixing and net investor inflows for its viability. The criminals responsible for 'managing' the share prices of AFI, DJW and MIR have manipulated the prices of these securities up to 30% higher than the assets purportedly backing these schemes. In the case of AFI, this securities fraud now exceeds $1.1bn. That AFI has managed to openly steal $1.1bn, without being challenged by a single person, is testament to the power of these criminals.
Even according to its fraudulent 2013 accounts, AFI only has assets per share of $4.46, yet its share price has now been ramped to $5.56. With over a billion shares outstanding, and with new shares issued continuously, the entire AFI scheme would immediately collapse if the criminals were no longer able to manipulate prices and issue shares.
If an analyst gives a HOLD recommendation on AFI, or if an adviser contributes to funds being placed in this scam, they are guilty of criminal negligence and should be held accountable. Anyone with a mandate of preserving a client's capital has a duty to advise exiting a blatantly overvalued investment. When the "intelligent investor" at Sydney Morning Herald advises clients to hold AFI, despite acknowledging it is catastrophically underfunded, this shill is not only committing an immoral act, it is committing a criminal act. Would it do the same for other investment types? So if a hypothetical ETF were to reveal that a third of the assets backing its issued units had disappeared, the "intelligent investor" would not regard that as problematic or relevant to pricing?
But let's say preservation of capital is of no interest to our "intelligent investor", let's say this gung-ho analyst focuses on greed rather than fear, then what of returns? The holder of AFI could create an immediate and assured 30% return on investment by selling AFI and immediately rebuying a portfolio approximating AFI's (easily accomplished by investing in blue chips). This hypothetical investor would be performing 100% risk-free arbitrage. This is only possible because AFI trades at a non-market and manipulated price, in an efficient market there are no such persisting arbitrage opportunities for a billion dollars.
As always, ASIC is happy to give its guarantee that AFI is actually not manipulated at all, that AFI/DJW/MIR are not underfunded fraud schemes, but actually trade at market prices. According to ASIC, it is one big $1.1bn market oddity, it is all just a marvelous mystery.