Investing During the Pandemic

Financial Samurai's blogpost got me wondering how much I had taken advantage of the decline in asset prices earlier this year to add to my investments. So, I put together a table of all my exchange traded investments that aren't bonds plus the APSEC fund I recently invested in.  Not included are bonds, other unlisted funds such as Winton Global Alpha,  Aura Venture Capital, our Colonial First State Funds, the Everest Fund that recently wound up, and all our superannuation funds. The idea is to capture where I have made deliberate rather than automatic investments. 

The table presents snapshots on 1 February, before the pandemic had effects in Western countries, and today. The number of shares held is self-explanatory. Investment is the net cash invested in that investment. So, making an investment increases the number and withdrawal reduces it, but dividends and distributions that aren't re-invested also reduce it. All the numbers are in Australian Dollars and so the numbers also declined for 3i, Boulder, China Fund, and Pershing as the Australian Dollar rose. Investment per share is the investment number divided by the number of shares.

In total, I added $334k to these investments over this period. Most of this money came from maturing bonds. There are a lot of different patterns though. I might have made a mistake in investing the most in funds that were trading at the biggest discount to net asset value rather than what turned out to be the strongest funds. I didn't invest anything in Hearts and Minds and not much in Regal. I got a lot of extra shares in Cadence and Tribeca, which is a bet that they'll do better in the future. I increased my Pengana investment mostly because I thought I needed to invest more in private equity and because the fund had been trading at a big premium to net asset value. It's partly a bet that the premium will come back.

In general though, I have been cautious investing during this period because I invested a lot in early 2008 after the initial fall in the market, only to lose big later in the year. 

Some Updates

Today I met on Zoom the accountant who has agreed to certify me as a wholesale investor. There are two reasons I want this certification. First, Interactive Brokers will only lend me AUD 25k as a retail investor. Second, I want to invest in a new Aura Venture Fund. The accounting firm is Nexia.

Before the Great Financial Crisis I invested in the ill-fated Everest Babcock and Brown fund of hedge funds. We finally got the final payout from this fund last week. In the end we lost AUD 12,348 from this and related investments.

Employees at my university narrowly voted in favor of freezing pay, which was scheduled to rise 2% next month. I won't be surprised if they soon try to get me to retire, though at this stage we don't have a good idea of what will happen to student demand going forward. Clearly, fewer people will want to study abroad for a long time. But one hypothesis is that Australia will rise in preference relative to the US and UK as a destination. Moominmama decided to not go back to work for another 3 months. On the spending side we decided to send Moomin to a private school. He has been going 2 days a week to their pre-school this year (and 2.5 days to the local public school). So, spending on childcare and  education is only going to ramp up....

June 2016 Report

After hitting a new net worth high in Australian Dollar terms last month, net worth fell back a bit in this month's market turmoil. Here are our monthly accounts (in AUD):

Spending was very high at $12k but one of the two computers I bought was reimbursed by my employer, which is one reason why current other income (salary, refunds etc.) is also higher than in recent months. The other reason is that there were three biweekly salary payments this month.  There was also an accident with a computer that required an expensive repair and Snork Maiden bought a treadmill. Minus the reimbursed expense, spending was $8.7k. Minus the other items I just mentioned it would have been $4.8k, which is in line with our typical spending.

After taking into account the mortgage payment of $5,188 - there were three mortgage payments this month (and which includes implicit interest saving due to our offset account - the actual mortgage payment was about $420 less than this) - which shows up as a transfer to the housing account, we dissaved $1.2k on the current account. We made $4.1k of retirement contributions (again three payments this month), and saved a net $3.0k in added housing equity. Net saving was, therefore, $5.8k across the board.

The Australian Dollar rose from USD 0.7241 to USD 0.7433. The ASX 200 fell 2.45%, the MSCI World Index 0.55%, and the S&P 500 rose 0.26%. We lost 3.30% in Australian Dollar terms and -0.74% in US Dollar terms. So we underperformed both Australian and international markets. The best performing investment (in total dollars not RoR) was Winton Global Alpha Fund with a gain of $2.5k. Not surprisingly, the worst performer was the Colonial First State Geared Share Fund, which lost $25k. All asset classes apart from commodities and real estate lost this month.

As a result of all this, net worth fell AUD 36k to $1.529 million but rose USD 3k to $US 1.136 million.

Two investments ended their life in the last couple of months. Legend International declared bankruptcy in May and the Everest Direct Investments Fund made its final distribution in June. The carrying value of each investment was less than $100 and so there isn't much impact on this month's accounts. But this means I can write off the losses on these investments in this year's taxes. The loss on Legend was almost USD 4,000. On EDIF about AUD 1,000. As I have a large carried over capital loss, of more than AUD 60k, the net effect will be to make the accumulated capital loss decline a little less. I think it still will be many years until I pay any capital gains tax.

EAIT Terminated

Everest Financial is winding up. I should get a payout of $A800 next month as part of the run-down. Now I got a letter from One Managed Investments who took over the EAIT fund from Everest that they terminated the fund on 11 February and are now managing just to pay out the investors. We should get a return of capital of 88.2 cents per share (i.e. about $A7,500 for me) on 1 March and the rest over the next four years. The delay is because the underlying hedge funds have "lock-up" periods.

The question is whether I should look to reinvest my capital in other hedge fund opportunities. If all goes to plan I did actually make some money on the EAIT fund (about $A3,000). I lost a lot investing in Everest Financial, the management company. Logically, the latter shouldn't deter me from investing in hedge funds. But the drawn out saga of EAIT has certainly made me more wary.

Moominvalley July 2010 Report

Everest Financial still hasn't reported fund results for May let alone June so the numbers are getting fuzzier... As usual everything is in US Dollars unless otherwise stated. This was a good month overall. The Australian Dollar rose around 6 US cents and the Pound and Euro also gained. Global stock markets rose sharply by 8.17% (MSCI World Index) and US markets 7.01% (S&P 500). In currency neutral terms we gained 5.70% and in Australian Dollar terms 3.89% in terms of investment returns, whereas investment gains in USD terms amounted to 10.94%.



Expenditure was a normal. Our car depreciated by $A600. Without that cost we spent near baseline levels. We spent more than $A500 on travel and so were otherwise really frugal. Net worth rose by $US40k to $US404k (or by $A17k to $A446k). The allocation to Australian large cap stocks rose by 2.1% of assets due to the strong market. All asset classes saw gains with the strongest gains in private equity, Australian large cap and US stocks. Total portfolio borrowing (including geared/leveraged funds) is 40 cents for each dollar of equity. Beta is around 1.2. Based on a rolling three year regression, alpha is just about zero against the MSCI World Index. Long-term I want to bring down the allocation to Australian large cap stocks and leverage to the market.

June 2010 Report

The true numbers for this month will be slower to arrive than ever. Everest Financial still hasn't reported fund results for May. So I might as well go ahead with the numbers as they stand at the moment. As usual everything is in US Dollars unless otherwise stated:



Non-investment income was fairly good this month as I earned a chunk of consulting income. This month exchange rates were relatively stable. Global stock markets were down another 2.95% (MSCI World Index) and US markets 5.23% (S&P 500). In currency neutral terms we lost 5.24% and in Australian Dollar terms 5.25% in terms of investment returns, whereas investment losses in USD terms amounted to 4.53%. So exchange rate movements improved USD returns relative to AUD returns. A loss of $17-20k either way you look at it though.

Expenditure was a little high as we continued with some travel expenses. But nothing like the massive spending of last month.

Net worth fell by $US13k to $US364k (or by $A18k to $A429k). The allocation to Australian large cap stocks fell by 1.5% of assets due to the bad market. Our "private equity" investments were also badly hit. A -22% rate of return. The only positive area was real estate, finally showing some gains.

Everest Financial to Wind Up Business

Following a strategic review, Everest Financial Group is to wind up the business, return capital to shareholders and transfer the funds under management to other firms. I have units in the EAIT and EDIF funds and am a shareholder in Everest Financial. This once seemed to be a successful business but the GFC hit it hard. Particularly damaging were the actions of activist hedge funds that resulted in reducing funds under management to far too small a scale for the company to go on. The book value of the shares exceeds the market value so hopefully we'll get something decent back and hopefully a decent manager will take over EAIT and EDIF.

Australian "Hedge Fund" Investment Opportunities

I have a couple of prospectuses here for investments in Australian "hedge funds" but I think I will skip both:

Platinum Capital Share Purchase Plan: Existing shareholders can buy up to $A15,000 of shares in this listed hedge fund. The shares will be priced at a 5% discount to the average price over some period in February. However, the shares have been trading recently at a fairly high premium to net asset value (including an estimate of franking credits) of around 13%. The premium has been higher in the past - up to 30%. In October 2008 there was a negative premium of -24%. Over the last few years the premium has averaged 6%. Of course we have no way to know what the stock price will be in February. There is a risk that the premium could be even higher. So I prefer to skip this offer.

Everest Credit Opportunities Fund: This is a new offering from Everest Financial to invest in a fund of funds of credit strategies hedge funds. There is no closing date to the offer. Minimum investment is $A10k. As I have been reporting some credit strategies, and in particular convertible arbitrage, have been performing extremely well this year. This fund smacks of chasing high performers. The prospectus says that they expect these credit strategies to continue to perform well in coming years but I doubt the performance will be as good as this year. The initial fund allocation is as follows:



The long-term returns on these funds are fine. Management Expense Ratio at the fund of funds level is around 2.5% with no performance fees. So based on the long-term returns of the individual funds I think we could expect about an 8% return on the fund of funds. There is a 12 month initial lockup period after which funds can be redeemed quarterly with 120 days notice. Given these facts, the relatively large initial investment, and my existing exposure to these kind of strategies via the Everest Alternative Investment Trust, I think I will give this one a miss too.

EAIT Withdrawal Offer

In the ongoing Everest Financial Saga the next event is the EAIT withdrawal offer. Everest will allow investors to withdraw part of their investment in the EAIT fund of hedge funds that was once listed on the ASX. Like many unlisted hedge funds you cannot redeem units any time you like from the fund but only at specific windows and only then in specified amounts. This is due to lock-ups in the underlying funds. This is an additional early withdrawal offer in addition to the previously announced December 2009 withdrawal. However, any withdrawal you make now in September will be deducted from your December 2009 maximum withdrawal allocation. The maximum number of units you can withdraw is 22% of your holding. A decision must be made by 7 September. The September offer is at a 5% discount to NTA while the December offer is at a 7.5% discount.

EAIT is currently our biggest hedge fund holding as shown in this table of shares of gross assets:



Any fund that engages in hedging exposure to the stock market is classified as a hedge fund here whether the manager classifies it as such and whether the manager receives performance incentives or not. Our total hedge fund allocation is below our 14% target. Whereas TFS, Hussman, and Platinum are all single manager funds, EAIT is a fund of hedge funds invested in a variety of strategies. Our biggest exposure to a single manager is Platinum. Given that the stock market is beginning to recover and we don't have a need for cash I'm inclined to at least wait till December and probably longer. I don't see why we should redeem units below NTA. Offers in coming years will be at NTA.

There is also a 7.6 cent a share income distribution to be paid in September. I'm really not going to be able to do my 2008-9 taxes until the last minute I think.

P.S.
EAIT has reduced there leverage to 31% and so our exposure is lower than in the above table and our total hedge fund exposure is down to 12.6%. It's time to look for new hedge fund investments :)

EDIF

In the ongoing Everest Financial saga, the "direct investments" in the EAIT fund of hedge funds is being separated out into a standalone fund as of 31 July. 62% of this new fund is invested in Babcock and Brown European Ports Investments and the other investments are also in infrastructure or real estate. Therefore, I'm classifying this as a real estate investment as well as a "passive alpha investment" and as the investment is in my understanding hedged I'm going to continue to count it as an Australian Dollar investment.

MSCI World Index Up 11.9% for the Month

In USD terms. Currently I have us up 12.65% in USD terms and 6.62% in AUD terms - likely that the final numbers could be slightly higher - Snork Maiden's retirement account has a scheduled outage till Monday morning... Of course we won't have a real final number for April till the end of May when Everest and Man get around to reporting their unit prices for April...

The MSCI is up just 0.07% YTD. Been a bumpy path.

Commonwealth Securities Service Deteriorating

After ranting yesterday about Ford, today it's Commonwealth Securities turn. I don't like putting down companies but I feel that criticizing companies on blogs is one way consumers can pressure them to perform better. CommSec's service has shown a very sudden deterioration since the beginning of this calendar year. It's almost as bad as Citibank now:

1. I sent in a request to buy units in a Colonial First State fund (another subsidiary of the Commonwealth Bank) through CommSec. Nothing happened. I contacted CommSec and was told to contact CFS. I contacted CFS and was told to contact CommSec. They told me they had no record of my application and instructed me to send in a new application. Which I did. Two weeks later, I get a call from CommSec: "Mr Moom - the form you sent in to buy CFS funds had a different account number than that of the funds which are on your margin loan". "Um, yes, that was on purpose, I sent the application to you to avoid the 4% load I'd have to pay if I sent the form direct to CFS. But as I've already sent in another application please just cancel this one...".

2. Still nothing has happened with my second application I sent in around 2 weeks ago...

3. I requested to withdraw x thousand units of my total shareholding of y thousand EBI.AX to the new unlisted EAIT. I see online that all y thousand of my units have disappeared from my CommSec account. I phone them up and am reassured that that is just a formality and the y-x thousand units will appear back in my account after the deal closes. I just opened the letter from Everest Financial welcoming me as a new unitholder of y thousand shares in EAIT... I guess not such a big deal, except all that money is now locked up for one year...

December 2008 Report

Finally an up month, and a market beating one at that, in US Dollar terms at least. However, due to the rise in the Australian Dollar this month we lost in AUD terms and AUD net worth also declined.

Income and Expenditure



Expenditure was $5,181 ($A7,420). We bought a TV (Samsung 32", Full HD (1080), LCD, about $A,1400), some furniture (about $A400), a bike for Snork Maiden ($A750), and health insurance for her stepfather who will be visiting Australia (about $A350). Non-investment income of $6,465 due to the refund of Snork Maiden's China trip costs. Retirement contributions were $684. Before taking into account foreign exchange movements non-retirement accounts gained and retirement accounts lost money. They both gained in USD terms after taking into account the change in exchange rates.

Net Worth

Net worth rose by $10,158 to $205,660 or in Australian Dollar terms fell by $A4,202 to $294,558.

Investment Performance

USD returns were 4.12% vs. 3.67% or 1.06% for the MSCI and SPX respectively. In AUD terms we returned -2.41%.Using my preferred time series method, portfolio beta to the MSCI index was 1.36 with an annual alpha of 1.4%. Other methods now give a negative alpha. Individual investments made the following contributions to the result:



International and small cap Australian stocks made positive contributions. The top performer was the Challenger Infrastructure Fund which made an asset sale at carrying value during the month boosting confidence in its valuations. The fund is still trading at a massive discount to NAV. A similar positive valuation effect was seen for NDS following the European Union approving the buyout by News Corp and Permira. However, private equity funds MVC, 3i, and IPE all fell as did the TIAA Real Estate Fund and Everest Brown and Babcock despite the seeming resolution of the negative issues surrounding the fund.

Asset Allocation

At the end of October the allocation was 46% in "passive alpha", 60% in "beta", 1% was allocated to trading, 3% to industrial stocks, 5% to liquidity, 5% to other assets, and we were borrowing 20%. Due to the use of leveraged funds, our actual exposure to stocks was 104% of net worth. We regeared slightly. In November we were borrowing 17 cents for each dollar in equity; we are now borrowing 20 cents. When we take into borrowing by the leveraged funds we are invested in, borrowing per dollar of equity rose from 63 cents to 65 cents. Looking at asset classes:



Exposure to non-US foreign stocks rose due to market gains and purchases and exposure to hedge funds fell mainly due to the poor performance of EBI. We moved slightly towards our long-term asset allocation. The story of total assets (includes assets owned by leveraged funds) over the last few months is shown in this chart:



Our ownership of US stocks was particularly badly hit (13% of gross assets in August 4% now) due to market declines and subsequent margin calls.

Man Investments Exposure to Madoff

A lot of visitors to this blog have been searching for various combinations of Madoff and Man Investments and its products. It turns out there is a connection between the two. Man's RMF division had 1.5% of assets invested with Madoff. 40% of our investment in the Man OM-IP 3Eclipse Fund is invested in the RMF Dynamic Program. So we lost about $A50 in the Madoff debacle.

AS is typical of Australian PDS's (prospectuses), all that is stated in the document is that the fund invests in 40 hedge funds. There is a description of the types of funds but nowhere the names of the actual managers. Australian managed funds invested in shares never tell you what they are invested in either. Colonial First State does give the ten largest positions in its quarterly performance reports. But that's it. U.S. prospectuses and fund reports give very detailed information of this type.



Moominmama seems to have zero exposure, as she is invested in the Man-AHL program but not the RMF program. It doesn't look like her UBS hedge funds had any exposure either.

Everest Brown and Babcock have clarified that they have no exposure either.

EBI's Performance

As I've reported, Everest Brown and Babcock Alternative Investment Trust (EBI.AX) has been in a lot of strife with investors. The main issue has been the discount of the stock price to NAV. The company proposed to delist the fund as a solution to that problem. But some large investors wanted to appoint a new manager or wind up the fund instead. Just how bad is the underlying investment performance of the fund?

Using the U.S. risk free rate, the beta and annual alpha of EBI's NAV relative to the Credit Suisse Tremont Hedge Fund Index were 1.68 and -4.32% for the life of the fund. Results for the HFRI index are almost identical. Using the RBA's cash rate instead the statistics are 1.66 and -2.72%. The high beta is expected due to the fund being leveraged into a portfolio of hedge funds via a swap facility provided by Macquarie Bank. I think that the correct risk free rate to use is the U.S. risk free rate. This is as the underlying funds are denominated in US Dollars and I assume Macquarie's swap is in terms of USD. Assuming fees of 1% + a 2% annual performance fee (20% annual performance * the 10% incentive rate) over the first two years of the fund when gains were positive means an average fee of 2.33%. On the face of it this indicates about 1.5% a year of negative skill. I wouldn't call this a disastrous situation though it's clearly not good that they don't at least earn their fees.

A complication arises though because the fund is supposedly hedged into Australian Dollars so that the returns reported in Australian Dollars are the same (or close to the same numbers) as the underlying funds report in U.S. dollars. To do this we could short the US Dollar and go long the Australian Dollar which can be accomplished by buying Australian Dollar futures contracts (for example the contract traded on the CME). Apart from the change in the exchange rate this contract earns the difference between the Australian Dollar and U.S. Dollar risk free rate.* An average of 2.63% over the life of EBI. And then this needs to be mulitiplied by the leverage ratio which is roughly equal to the beta. Assuming a perfect hedge we would need to deduct this earning of 4.3% per annum from the estimate of alpha!

But looking at the annual report, EBI never had a full hedge (in forwards) and by December 2007 only had a very small hedge in place. So at this point I got really confused and thought up various scenarios none of which I'm clear about. Perhaps Macquarie is doing the hedge and pocketing the interest differential while charging Everest the Australian rate for the leverage in the swap. So Macquarie takes Everest's money adds a loan to it and invests it in US hedge funds then sets up a hedge to remove the currency risk, earns the interest differential on the hedge and pays back Everest the USD percent returns earned by the hedge funds but in Australian Dollars?

Maybe someone can help me out. I think the only real way to know is to see the agreement between Macquarie and Everest and that's not in the annual report. The annual report doesn't even say that the counterparty is Macquarie.

Here is how the fund's NAV stacks up against the index in USD:



* This is why the Australian Dollar contract normally has a price below the spot price and the two prices converge towards expiry.

Everest Babcock and Brown Alternative Investment Trust Changes Course Again

Everest Babcock and Brown Alternative Investment Trust (EBI.AX) changed course again, rendering my post from just a couple of days ago out of date. The fund has settled the legal dispute with Laxey Partners and will now follow two distinct tracks. Shareholders will be able to decide between swapping their units for units in an unlisted trust to be managed along the same lines as EBI by Everest Financial or to remain in the listed EBI which will be managed by a new manager and is likely to be wound up over time as hedge fund redemptions allow. All this is supposed to happen before the 30th of January. The main potential obstacle is Macquarie Group who are the provider of the swap that is used to leverage the underlying investments. NAV for November was also announced at $2.58 down 7.86% on the month. The stock currently trades for 80-90 cents.

As the 10% redemption offer has now been withdrawn, we will have $A7,000 less to pay off debt or make new investments.

Australian Fund Updates

Allco Equity Partners (AEP.AX): The Liberman family got a margin call and now ANZ owns the 25% of the company that they used to own and which had hoped they could sell to the now bankrupt Allco Finance Group for net asset value (about three times the current share price). Steve Eckowitz at EBB also got a margin call a while back. These wealthy families don't seem to be any smarter than me :) In the meantime, the company was trying to terminate its management agreement with Allco and rebrand. The courts just ruled against it. They're looking to appeal of course. They have also hired UBS to look at ways of reducing the discount in the share price.

Platinum Capital (PMC.AX): The very bold attempt to raise more capital with a 1:1 rights issue only raised a small fraction of the planned amount. Only 13,436,583 of the possible 127,163,967 shares were taken up but some shareholders asked for additional allotments of 2,878,901 shares. So they raised 12% of what they hoped for. They also raised a bit more with dividend reinvestment and a "share purchase plan".

Everest Brown and Babcock Alternative Investment Trust (EBI.AX): The fund is embroiled in legal proceedings over the planned delisting and the postponed shareholder meeting. I'm still hoping to get my redemption money on 19th December (the period was extended from 12th December). The stock is trading at about 1/3 of NAV. The AFR reported that there are rumors that the fund that is bringing proceedings (Laxey Partners) is being forced to sell units in the market due to margin calls.

Everest Brown and Babcock (EBB.AX): Not a fund, but a fund manager. Babcock and Brown (BNB.AX, which is close to bankruptcy) sold a 20% holding in EBB.AX to the Wingate Group which apparently is backed by the Smorgon family of Melbourne. One wealthy investor who didn't get a margin call or go bankrupt apparently :) This is good news I think because the company's share price of 4-5 cents (Smorgon bought at 4 cents and have already made 25% on their investment notionally!) looked like the market thought they were heading for bankruptcy too. Given the apparent smarts of this investor that would appear to not be the case. But $A2 million is peanuts for them so who knows.

Career Update

I met with the guy who might have some research funding and was trying to hire my student who got the job in Perth. He'll look at whether the funder would be interested in using the money for someone with my skills or whether they want their money back. We also discussed a bunch of topics he's interested in researching. They're all pretty fluffy as he admitted and I'm not sure how I can match them to my skills and come up with a proposal. We also talked about who else I should meet with. I went through a bunch of iterations of my job application with Snork Maiden and now I sent it out to our friend/colleague for some comments and also to one of my references, who I met this afternoon when I was on campus. Thursday is going to be my next chance to meet a bunch of relevant people at the open day I mentioned before.

On the investment front, Everest Babcock and Brown (EBB.AX) is proposing to change it's name to Everest Financial following the virtual collapse of Babcock and Brown. Also it will write off all it's intangible capital. At the still listed investment trust (EBI.AX) a major shareholder has decided to switch ranks and support removing EBB as manager. This might now delay the delisting and partial redemption of units in the trust. I was looking forward to getting some money out and reducing my margin loan. Maybe we'll have to wait longer for that. Platinum Capital (PMC.AX) only sold a small fraction of the shares it wanted to issue in a 1:1 rights issue. At least I sold my rights.

Everest Babcock and Brown and Platinum Capital

Received the offer document for Platinum Capital's (PMC.AX) rights issue and Everest Babcock and Brown Investment Trust's (EBI.AX) withdrawal offer. Platinum granted shareholders the right to buy one new share for each share they own at a discounted price (well it was discounted at the time of the offer). I already sold my rights, which are essentially call options, on the stock market. Even if I had the money I wouldn't want to increase my position and currently the market price is equal to the exercise price.

EBI, which is planning to delist from the stock market is offering investors an opportunity to redeem some of their shares prior to delisting at a 7.5% discount to Net Asset Value. In total, up to 10% of all shares can be redeemed so if the offer is oversubscribed requests may be scaled back. I'm planning to redeem 31% of my shares. Despite the discount this price is much better than the current market price and it'll will be a year before another redemption is allowed. Still, I'll probably wait until October's NAV is published mid-month, before sending the form in.

EBI's management company is also in the news today with rumours of a takeover or some other transaction. The stock price of this firm has completely collapsed. It would be strange for the major stockholders to sell out at anywhere near this price - the P/E ratio is 1.6 based on last year's earnings and analyst's forecast a forward P/E of 3.8. But they probably need the money. A big one of course is Babcock and Brown.

I'd be happy with a price of 50 cents a share rather than the current 10 cents (or less). I'm ashamed to say that my net cost/breakeven point is 71 cents a share.

EBI Proposes to Delist from the ASX

The Everest Brown and Babcock listed fund of hedge funds, EBI, proposed today to delist from the ASX. This is the same fund whose downgrading by CommSec triggered my margin call. BTW, the redemption of Colonial First State Funds seems to have gone through OK. Now you can see why I just didn't sell the downgraded stocks! The proposal is a little complicated and has some similarities to the recent delisting proposal of Ellerston GEMS:

Prior to delisting (expected to occur in December 2008): A “Withdrawal Offer” of 10% of units on issue at a fixed price equal to a 7.5% discount to EBI’s then stated NTA per Unit.

At 31 December 2009: A one–off redemption facility for 25% of remaining units on issue at a 7.5% discount to EBI’s then stated NTA per Unit.

From 31 December 2010: On-going semi-annual redemption facilities at EBI’s then stated NTA per Unit.

Large shareholders will be able to be paid their investment in specie into a separately managed account.

I'll probably look to decrease my holding on market or at the first "withdrawal offer" and then participating with 2-3% of net worth in the unlisted fund. Currently EBI is about 5% of my net worth and at the 7.5% discount to NTA would be about 6.5% of net worth.

Carrousel Capital and Babcock and Brown who are both major shareholders are supporting the proposal but Laxey Partners is calling for an EGM to wind up the trust. Shareholders are still squabbling over the Ellerston GEMS delisting.