LONDON Oct 16 As a traumatic break-up of Bumi Plc edges nearer, co-founder and recently estranged director Nat Rothschild is embarking on a challenge bigger than any he took on while on the board of the troubled Indonesian miner.
The saga that on Monday triggered his resignation from a fractious Bumi board has hurt London's proud reputation as a portal by which pension funds can access racy emerging market returns at a fraction of the risk.
Fund managers have learnt an expensive lesson that a coveted London listing championed by some of the biggest names in finance is no guarantee of protection from dominant, local investors who claim the right to dictate strategy.
None of the investors who agreed to talk to Reuters about the increasingly contentious case have blamed Rothschild for the promising but ultimately unsatisfying foray into one of the world's most strategically important mining sectors.
But the responsibility of ensuring they exit on the best possible terms remains squarely on his shoulders.
"He saw the same opportunity we did. His main charge is one of naivety," one top 10-investor said of Rothschild, speaking, like others who agreed to talk for this report, on condition of anonymity while the outcome of the affair remains uncertain.
"Yes, this is a story about Bumi but it is also turning into a story about governance and the point of a London listing."
Bumi is the product of a reverse takeover of Indonesian coal assets by Vallar, a London-listed cash shell led by the 41-year-old hedge fund veteran.
The union of the Rothschild name to the Bakrie brothers, one of Indonesia's most powerful business families, was irresistible to the likes of Schroders and Standard Life Investments, who spotted huge potential in the country's under-invested coastal mines, right on the doorstep of resource-hungry China.
When it rejoined the market in 2011, Bumi was the world's biggest thermal coal company and one of the largest listed groups on the UK bourse. But the marriage soon came under strain, dogged by power struggles and allegations of impropriety that climaxed with the Bakries' request for a formal split last week.
The Bakries $1.38 billion buyout proposal, valuing shares at an estimated 500 pence, spells huge losses for those who bought into Vallar at its relisting for double that price.
Rather than counting the riches from a long and fruitful investment in Indonesia, investors have little choice but to hope that Rothschild can do a better job of fighting their corner from outside Bumi than from its boardroom.
Rothschild said it would be "a disgrace to proceed with or even to entertain" the attempt by the Bakries to unravel the Indonesian venture.
A second top 10 shareholder said he didn't feel let down by the financier's decision to exit Bumi, as its shellshocked board grapples with a probe into potential financial irregularities at some subsidiaries, including PT Bumi Resources.
With no sign of a quick conclusion to the infighting, insitutional investors who have given up on some kind of reconciliation at Bumi are rethinking their appetite for risk in shell companies with tiny freefloats or majority backers.
"This is a case that shows you can't necessarily pre-programme corporate governance to work," said the head of corporate governance at a large UK investment manager, asking not to be named when discussing a specific company.
"The concerns, particularly related to controlling shareholders and how they relate to minority shareholders, are something difficult."
Chief among investors' frustrations is the prospect of being frozen out of what they had hoped was a trouble free way to harness a booming emerging economy with even brighter prospects.
In a research note, Barings said the weighting of south east Asian nations in the ASEAN block in the MSCI AC World Index is 1.9 per cent, while their share of world GDP is more than 3 percent, "underlining the growth potential in the region and the opportunities for astute investors."
Others are thanking their lucky stars for steering clear of a corporate structure brimming with egos and vested interests.
"We didn't really understand it at the beginning and we sure as hell don't understand it now," said the head of equities at a large British investment manager.
"Thank God I spurned it at the IPO", another fund manager said.
But some of those that did invest appreciate how their Indonesian gamble could have turned out worse. Some are still hopeful Rothschild can deliver better value for them now, as he fights to restore his own repuation on the way.
The first top 10 investor told Reuters the Bakries' plan leaving them with about 5 pounds per share was an improvement on a low close to 1.5 pounds in September.
It is still far short of a potential valuation for the assets of up to 20 pounds some investors had hoped for, however.
"From out point of view, that is a disappointing outcome but it is not as catastrophic as it was," the investor said.