Blue Capital Alternative projects 10%-15% returns in 2018 – after taking a big hit to NAV from this year’s disasters, including, most recently, the Californian wildfires that engulfed large areas of northern California and sadly took 43 lives, Blue Capital Alternative Income has been talking about its discount and its plans for next year.
Discount Management Policy
The fund’s shares traded at an average discount of more than 5 per cent over the three month period ending on 31 August 2017. As result, in accordance with the discount management policy implemented at inception, the directors considered various options available to it, including offering the shareholders the opportunity to tender shares.
The Board says that “having received views from certain major shareholders and in light of the expected improvement in market conditions” it does not believe it is the right time to shrink the company. The Board also cited the reduction in liquidity that a buy back would entail and the problem of fixed costs being borne by a smaller net asset base. The Board has decided not to implement a tender offer at this time.
The Chairman stated, “The negative financial impact to the insurance industry from the third quarter catastrophe events is estimated to collectively be above $100 billion. Looking forward, we think it is prudent to retain our full capacity as we expect market pricing to improve during upcoming renewals and we will position the company appropriately in recognition of changing market conditions.”
The Board “continues to consider strategic opportunities available to the company, including options for increasing the attractiveness of the company to investors.”
Projected returns
At the same time, Blue Capital Alternative Income announced projections for returns in 2018. On their models, the mean loss scenario would result in returns of 10% and the median loss scenario would result in returns of 15%.
BCAI : Blue Capital Alternative projects 10%-15% returns in 2018