Gresham House Strategic sacks Gresham House following strategic review – Gresham House Strategic (GHS) has revealed the results of its strategic review, which it started in May 2021, to determine the best course of action to provide growth in value for all shareholders.
The company also served 12 months’ protective notice of termination on Gresham House Asset Management and evaluated strategic options against its objectives from lowering its cost base to increasing the scale of its NAV terms.
New manager
As a result and after an extensive process, the company has terminated with immediate effect its investment management agreement with GHAM and appointed Harwood Capital as its new investment manager. The companies will work together to ensure a smooth transition.
The appointment is subject to FCA approval but is expected shortly and Richard Staveley will be made lead fund manager following expiry of any contractual restrictions from GHAM on 1 December 2021 at the latest.
GHS believes hiring Harwood as new investment manager is in the best interests of GHS shareholders as it has an outstanding investment track record in small cap equities, including through investment companies North Atlantic Smaller Companies and Odyssean.
Fee changes
The appointment will also mean a significant reduction in management fees. Under the agreement with Harwood, management fees will reduce from the current level of 1.5% of NAV per annum to 1.25% of NAV up to £25m and 1% of NAV thereafter per annum. This represents an annualised cost reduction of approximately £270,000 based on the NAV published on 4 October 2021.
The performance fee will also be revised to equal to 10% of outperformance over the higher of a 6% total return hurdle and the high watermark. Meanwhile, if the NAV of GHS exceeds £100m, Harwood has agreed to cap aggregate performance fees and management fees at 3% of NAV.
There will be no period in which management fees or performance fees will be paid to both GHAM and Harwood.
Other points
Harwood has undertaken to offer to Gresham House to purchase up to its entire holding of GHS shares at a price equal to the latest published NAV per share, as part of a proposal to facilitate a smooth transition in the interests of all shareholders. Harwood’s investment in GHS will be financed from its existing cash resources.
Meanwhile Harwood and GHS have entered into a conditional subscription letter pursuant to which, subject to a total investment cap of £18m, when aggregated with any investment acquiring GHS shares from Gresham House, Harwood will subscribe for up to 348,088 new GHS shares at a price equal to the latest published NAV per share.
The company name will also change from Gresham House Strategic to Rockwood Strategic conditional on the appointment of Harwood as AIFM becoming effective. A further announcement will be made in due course to confirm when this will take place.
Statement from the board:
Helen Sinclair, Interim Chair of GHS, said: “We, as the Independent Directors, firmly believe that Harwood has demonstrated exceptional expertise over the long-term as a specialist investor in public and private equity. Harwood intends to commit capital to investing in the team and marketing the Company. The Independent Directors believe that this, coupled with continued strong investment performance, will help achieve appropriate scale and close the discount over the medium term. All these initiatives are in the long-term interests and benefit to shareholders. The management fees are competitive, saving shareholders approximately £270,000 on an annualised basis based on the NAV published on 4 October 2021. The reduction in performance fees should be even more material for shareholders. We would like to thank GHAM for their role as investment manager and the delivery of shareholder value during their tenure.”
Statement from the new manager:
Christopher Mills, Chief Executive Officer of HCMG, said: “In taking over the investment management of GHS, we firmly believe we can enhance value for the benefit of all shareholders. We are providing continuity of fund management by bringing in Richard Staveley to manage the Company, a role he previously undertook, during which time he drove the Company’s investment strategy and oversaw excellent performance, as recognised by the Independent Directors.
“We are reducing the performance fee significantly to bring it more into line with standard industry practice. Furthermore, through an investment of Harwood’s owners’ capital, we are contributing to greater scale, and becoming a genuine long-term partner that should help GHS unlock further value over time.
“We believe the opportunity for experienced investors in UK small companies is significant. We see the market as often highly inefficient, with a lack of research coverage providing the conditions for a focused approach to select the very best opportunities for strategic investments to drive strong returns for shareholders. We have led the market in this engaged manner for many years, demonstrating excellent outcomes in both public and private equities, and we look forward to welcoming Richard, shortly, when he can continue his excellent work for the Company.”
GHS : Gresham House Strategic sacks Gresham House following strategic review