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Acencia - Good yield from liquidation of distressed debt portfolio (ACD)

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Creator SKYSHIP Created 10 Feb 2012 Posts 609 Last Post 6 days ago

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Principal Activity

AcenciA Debt Strategies Limited ("ACD") is an authorised closed-ended investment scheme domiciled in Guernsey. The Company has a full listing on the LSE & can be held in an ISA.

Investment Objective and Policy

The Company's investment objective is to produce annual returns in excess of 3-month Sterling LIBOR plus 5% over a rolling 3-year period, with annual standard deviation of under 5%. Doesn’t sound very exciting; however the current investment case is due to the fact that they trade at an 18% NAV discount and the company is to be wound-up in 3 years time – see more below.

The Company's investment policy is to invest in an actively managed portfolio of predominantly debt-oriented hedge funds, ie they predominantly manage a Fund-of-Funds portfolio

Analysis of Significant Investments

The investment portfolio as at 31 Dec’10 is detailed in the Mar’11 Finals (see link below). A high %age are Fund-of-Fund vehicles managed by Sandalwood Securities, Inc., the Company's Investment Adviser.


Performance Review

ACD delivered a robust performance during 2010. The NAV increased by 9.3% to 99.11p and the share price increased 14.5% as a result of the NAV discount narrowing from 21.2% to 18.3%. This made ACD the best performing listed fund of credit hedge funds for the second year running, as well as the best performing of all listed fund of funds over the two years period on both an absolute and risk-adjusted basis (source: Datastream). This relative out-performance continued in H1'11; but they under-performed in H2'11. UPDATE: They closed out 2011 up just 1.7%; but were back on form in 2012, clocking a gain of 9.9%.

Monthly Factsheet - see foot of Header

Winding-up & Continuation Proposals (Sept’11)


The background to where we are is that when ACD listed back in Nov’05, it did so with stringent Discount limiting strategies in place. These weren’t called upon in the early years when ACD traded at a premium; however since 2008; and in spite of excellent portfolio performance, ACD has had to pass through tender offer and buyback hoops to sustain the sp at not too great a NAV discount. The Board’s commitment to providing shareholder value has resulted in no less than 40% of the Company’s initial capital being returned to shareholders over recent years.

In Feb’09, it was agreed that the Company would go into voluntary liquidation in Aug’11 – so providing yet another support to the sp.

Ahead of that liquidation the Board conducted a consultation exercise with the Company's major Shareholders, representing approximately 70% of the issued share capital. In view of the Company's strong investment performance; and the fact that liquidation would in any event take quite some time, both shareholders and the Board agreed to defer the liquidation until Dec’14, with the plan that most of the realised assets would be repaid in Qtr1’15.

Earlier payments to shareholders will be made under an agreement that if during the 6 month period to 30 Jun’13 the shares have persistently traded at a discount of more than 10%, then the Board will seek to return capital in respect of up to 20% as at 30 Jun’13.

The annual upside over the next 3 years will obviously depend upon portfolio performance; but assuming the current yield of c4.5% and adding in the 6% of annual growth to take us up to the 98p NAV, then the minimum is likely to be in the order of 10%pa. Portfolio growth as debt redeems may add something in the order of 3%-5%pa; though income would likely fall as the portfolio raises cash levels.

I’m sure we will all play with the figures as we progress over the next 3 years…

Use this link for the Prelims to 31/12/12:

REGULAR MONTHLY FACTSHEET UPDATEs are available from the company website:


Useful piece of research - especially the link there to the review of Jun’13: “Performance continues, discount persists”


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