Alternative Liqudity Fund – adding a touch

Added a touch to this at 17c last week…

It has done very nicely since I bought – returning 7.5c when I paid 13c for the shares to start with, hopefully the returns of cash will continue..

See original post for investment case…

https://deepvalueinvestments.wordpress.com/2016/08/21/alf-net-assets-6x-market-cap-cash-half-market-cap-potential-5-bag-opportunity/

Based on information from the latest fact sheet they say they have 4c in cash, the share price is now $0.18 to buy – so c20% backed by cash.  (Less 0.68c worth of payment for extra assets)

They also say Arbax Arhat Fund is 5.8% of NAV 0 or 4.4c  – they have been offered 20% of the book value with 50% of any recoveries.  This was refused by holders. I think therefore it’s safe to assume this holding is worth 50% of what was in the books – 2.2c.

Next they say GLG Emerging Market’s growth fund will pay out this year, this is worth 1.7c.

Total this up you get about 7.5c backing in cash or ‘hard’ assets -43% of the offer price.

Looking at this another way you are actually paying 10c for about 69c of non-hard assets.

That is if you believe the NAV.  I don’t believe the NAV so I actually think likely maximum recovery is about 50c of non cash assets…

They also say they have bought $3m of assets for $1m – this means the business is more sustainable than I thought – I had viewed this as pretty much a static pool of assets that would be liquidated.  This is actually more like a trading business which buys defunct assets and liquidates.  With lots of hedge fund failiures this is a touch more attractive.

12 thoughts on “Alternative Liqudity Fund – adding a touch”

  1. I also topped up since I read the last RNS as being positive. The published NAV is 76 cents but this only only needs to be half right for the shares to be worth buying IMO.

  2. How about the Vitorian liability on the loan funds, 65m BRL, it certainly should have effect on the future cashflows, and therefore NAV of the Vision 16m USD Value? Thank you

    1. That is only on one fund and it is included in the NAV already. I am not sure but I dont think we own the whole fund. On that one the concern is there is a 5% spread between the growth of the asset and liability. details here page 6https://www.morgancreekfunds.com/wp-content/uploads/sites/2/2016/07/ALF-Portfolio-Update-2016.11.pdf

    1. Yeah, thats true. Any idea what would be the amount of liability for unpaid management fees for which KPMG gave qualified report?

      1. I dont think they gave a qualified audit – what they said was:

        Net Asset Value-based fees
        The risk: The investment management fees, administration fees, and custodian fees are based on a
        percentage of the Net Asset Value of the Company for a particular period. Due to the stipulations on the
        agreements that fees are based on the Net Asset Value, the risk that Net Asset Value-based expenses
        were improperly calculated was considered a risk that required particular audit consideration.
        Our response: In order to assess the accuracy of the Net Asset Value-based expenses, we recalculated
        the expected expenses based on the terms of the agreements between the Investment Manager, Fund
        Administrator and Custodian, respectively and compared these to the amounts disclosed in Note 3. We
        also reviewed the adequacy of the related party transactions disclosures presented in Note 10.
        The Company’s accounting policy on expenses is shown in Notes 2(e) and related disclosures are
        included in Notes 3 and 10. ”

        Its hard to work out NAV – therefore its hard to work out fees. Thats all I interpret this as. (P21 2016 Annual Report) https://www.morgancreekfunds.com/wp-content/uploads/sites/2/2016/07/ALF-30-June-2016-Annual-Report-Financial-Statements-AGM-Notice.pdf

  3. Was revisiting this investment in line of the change of manager. I was comparing to GFIR LN which has been in a similar situation for years (liquidation). It is interesting how differently those two have played out with the latter being a money losing proposition for years. Maybe for ALF it is just a matter of luck (some holdings are common to the two funds and have been realized this year) but it seems also that one was more optimistic than the other with regard to book value and the discount of the latter has never been as high as for the former. Looking at both fund reports gives a better picture of expected cashflows.

    1. Yes I think luck plays a big part – I thought this would take years not months….

      GFIR vs ALF all depends on how you look at discount – I never believed ALF’s NAV. I was lucky to get in at pretty much the bottom – 1/10th of published NAV. I looked at GFIR before ALF but didn’t like the holdings as much, they are similar but there is enough difference it matters. I also thought it would take too long to pay out for my taste.

      I need to revisit this – danger is everything that will return cash has and you get left with the things that will pay out either very slowly or not at all….

      There were also indications that they are moving this from a realisation fund to a business that will buy these assets then realise them. This isnt to my taste but others prefer sustainable businesses rather than liquidation plays…

      Given similarities I will also take a look again at GFIR…

    2. I am not sure who you are Bobby but if you operate in closed end funds you might want to check out SIHL – I think there will be more returns of cash here…. Its not ALF exciting, only 35% discount to NAV but much lower risk….

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s