On 16 January 2020 we noted that Henderson Alternative Strategies (HAST) would be seeking approval for a realisation process after little appetite shown for greater illiquid exposure (click here to read more). The company has this published a circular this morning, including a notice of general meeting (to be held on 25 March 2020), setting out details of recommended proposals for:
- the modification of the company’s investment objective and policy with a view to realising the company’s assets in an orderly manner that achieves a balance between returning cash to shareholders promptly and maximising value; and
- the amendment of the terms of the management agreement between the company and the manager in order to reduce the management fee payable during the realisation process.
HAST’s board considers that the proposals and the resolution to be proposed at the general meeting are in the best interests of the company and its shareholders.
Proposed change to HAST’s investment objective
The board is proposing that the investment objective be restated as follows:
“To conduct an orderly realisation of the assets of the company, to be effected in a manner that seeks to achieve a balance between returning cash to shareholders promptly and maximising value.”
Regarding management fees, HAST says that the current management fee is 0.60 per cent. per annum of NAV for assets up to £250m and 0.55 per cent. per annum of NAV for assets in excess of £250m. This is paid quarterly in arrear based on the level of net chargeable assets at the relevant quarter end.
The company and the manager have entered into a side letter to the pursuant to which, conditional on and with effect from the passing of the resolution, during the realisation process but prior to liquidation of the company, cash and cash-equivalent securities shall be excluded from the calculation of NAV for the purposes of determining the management fee of 0.60 per cent. per annum of NAV. An additional lower management fee of 0.10 per cent. per annum will be charged on the value of the assets that are cash-equivalent securities.
Background to the Proposals
The company provided the following background:
“The company reported in its half-year results to 30 September 2019 that the senior portfolio manager, Alex Barr, had undertaken a comprehensive review of the company’s competitive positioning and of its portfolio. In addition, he had been meeting Shareholders and listening to their views.
As announced on 16 January 2020, following that review, the board and the manager engaged in discussions to review the options available for the future of the company. This review concluded that the best way to improve performance, and therefore to reduce the persistent discount to NAV per share, would be to change the company’s investment policy to enable the company to own more illiquid alternative investment strategies not readily available for direct investment, and which would reward skilled selection and demand enhanced due diligence. However, the review also concluded that there was little appetite from larger shareholders for any increase in the illiquidity of the portfolio and, for many, a preference for realising their investment in an orderly fashion.
Accordingly, the Board is proposing a change to the company’s investment policy to enable the company to undertake an orderly realisation of its assets. If the proposals are approved by shareholders, the board will write to shareholders again in due course regarding proposals to return capital to shareholders. It is the current intention of the board that the company should maintain its listing and investment trust status while a substantial proportion of the portfolio is realised and before the company enters into voluntary liquidation. Depending on the rate and amount of realisation and the anticipated cost savings as between any return of capital while listed and a return of capital during a liquidation process, the board may consider proposing that the company enter earlier into voluntary liquidation.
The proposed modification of the investment policy to enable the company to undertake an orderly realisation of assets is considered a material change which requires the consent of shareholders in accordance with the listing rules.”
HAST: Henderson Alternative Strategies updates on its future as it seeks approval for realisation process