TICKER: ALF
September 30, 2021
DESCRIPTION
Alternative Liquidity Fund Limited ("ALF" or the "Company") is a Guernsey-domiciled, London Stock Exchange (LSE) - traded closed ended investment company. ALF is listed on the Specialist Fund Segment of the LSE. ALF is a self-managed AIF and has appointed Hindsight Solutions Ltd. as Investment Adviser to assist the Board to realise ALF's investments and return cash to investors.
COMPANY INFORMATION
Investment | Hindsight | Subscriptions & | None, LSE Traded |
Adviser: | Solutions Ltd. | Redemptions: | |
Dollar Share | ORD | Bloomberg: | ALF.LN |
Domicile: | Guernsey | Reuters: | ALF.L |
SEDOL: | BYRGPD6 | ISIN: | GG00BYRGPD65 |
PORTFOLIO OVERVIEW (as at September 30, 2021):
SIGNIFICANT POSITIONS | Manager NAV | Provision | ALF NAV | % of Portfolio | ASSET CLASS EXPOSURE |
($M) | ($M) | ||||
Vision FCVS RJ Fund | $17.5 | -40% | $10.5 | 47.8% | Bonds/Credit |
% of ALF NAV
73%
Vision Special Credit Opp Eletrobras Fund | $7.8 | -45% | $4.3 | 19.5% |
Vision Invest RJ | $1.1 | 0% | $1.1 | 4.9% |
Growth Management Limited | $1.0 | -30% | $0.7 | 3.1% |
Warana 2018 Fund | $0.8 | -20% | $0.6 | 3.0% |
Autonomy Rochavera Fund | $0.4 | 0% | $0.4 | 1.9% |
Abax Arhat Funds | $4.1 | -90% | $0.4 | 1.9% |
Other Investments | $37.9 | -100% | $0.2 | 0.8% |
Cash | $1.2 | $1.2 | 5.5% | |
Fund Debtors | $2.7 | $2.7 | 12.1% |
Real Estate
Equity
Other
Cash (Includes cash at underlying fund level)
GEOGRAPHIC ALLOCATION
Americas
Brazil
North America
Other Latin America & Carribean
3%
6%
12%
5%
- of ALF NAV (ex cash)
93% 90% 3% 1%
Total | $74.3 | -70% | $22.0 | 100% |
Net Asset Value Per Share (Sep 30, 2021) | ||||
0.5067 | 0.1497 | |||
Net Asset Value Per Share (Jun 30, 2021) | 0.5604 | 0.1783 | ||
Change (%) in NAV Per Share | -9.58% | -16.04% |
FUND UPDATE
Europe | 4% |
Ukraine | 1% |
European Union & United Kingdom | 1% |
Other Europe | 2% |
Asia | 3% |
China | 2% |
Rest of World | 0% |
(Please note totals may not sum due to rounding)
ALF's Net Asset Value ("NAV") decreased by 16.04% during the third quarter of 2021. The main driver was a 37% mark down by the manager in the Vision Special Credit Opportunities Eletrobras Fund ( Vision ELT), and an increase in the ALF provision on the same position from 40% to 45%.
The Company received notification of a proposed distribution totaling $2.59 million from Vision ELT in September, a result of the successful novation and subsequent withdrawal of the Nestle claim. The funds were received by ALF on October 21 and are included as a Fund debtor in the Table above.
The Supreme Court in Brazil finally ruled on the 6% compensatory interest case between Eletrobras and claimholders. The Court found in favour of Eletrobras, which resulted in a 37% reduction to the Vision ELT manager-reported NAV. After further discussion and analysis jointly with Vision regarding recovery rates, we have increased our ALF provision on this position to 45% of manager NAV. On a positive note, Vision's management have been working with a small number of interested parties who have indicated their desire to purchase either LP interests in or the entire Vision ELT portfolio. In the interest of securing the highest possible bid, the shareholders and independent directors of the Vision ELT fund recently appointed a secondary broker to co-ordinate the bidding process. We expect to have pricing levels and indications of interest by the end of the year.
ALF announced a $2.2 million distribution via our customary B share issuance in November 2021; the payment date has been scheduled for December 3, 2021. This will be the eleventh distribution since listing and the Company will have returned over $36 million to shareholders, or $25c a share.
www.alternativeliquidityfund.com | Alternative Liquidity Fund Limited | 1 |
TICKER: ALF
September 30, 2021
ALF VALUATION METHODOLOGY
ALF is invested in approximately 24 illiquid third-party funds and companies*. The quality of assets and information provided by the managers of these funds varies greatly. While many funds provide regular net asset value estimates of their portfolio, the Board believes that these valuations can be optimistic in their inputs or assumptions and it is generally expected that these type of funds trade at a discount to these valuations in the secondary market (where observable). Some of the funds in the ALF portfolio are also delinquent in providing their valuation estimates and/or have not had their accounts audited in a regular timeframe. As such, the Board thinks it is appropriate to review the valuations provided by the underlying funds and apply provisions where appropriate. Unfortunately, the secondary market for fund interests is not deep, is characterized by many small transactions and pricing information is not transparent. Price points can also be skewed adversely through the activity of one-off, highly motivated sellers. As such, the Board cannot readily apply a 'mark to secondary bid' valuation approach.
As previously mentioned, the provisioning process takes into account the quality of the information received from the underlying funds, their valuation processes, geographical locations and risks associated with an underlying fund's assets. Where possible, this analysis is then checked against observable secondary market activity. Provisions are applied based on the following criteria:
1. Where a manager, liquidator or other authorized party has advised that they expect a recovery materially less than the stated net asset value, the conservative end of the recovery range is used.
Where no third-party guidance is received, the Board applies provisions of 10% - 50% across each of the following criteria cumulatively:
- If the net asset value is delinquent and/or not provided within the timeframe previously advised to investors, a provision is applied.
- If a third-party liquidator (or similar) has been appointed, an incremental discount is applied and if this party has not made progress on the fund in a reasonable time frame, this discount may be increased.
- The Board seeks to receive bottom-up information on the remaining assets in each of the underlying funds. Because these funds are run by third parties, it is not always possible to get the full amount of information desired. An incremental discount is applied if the additional asset level information desired has not been received.
- If fund audited financial statements are late or qualified, a discount is applied, which increases if an audit has not been completed for several years.
- It is expected that invested funds have third party administrators/valuation agents. Should the Board not be able to determine whether such a group is still involved, an incremental discount is applied.
- An additional discount is applied relating to the perceived incremental geographic, political or currency related risk of the fund or manager.
- It is not uncommon for legacy illiquid funds to be involved in some type of litigation or have issues with key regulators. An incremental discount is applied depending on the severity of the litigation or investigation.
- Should the fund or assets still have significant leverage, an incremental discount is applied.
The Board then gathers the cumulative discounts applied in steps 1 through 9 and seeks to compare the proposed provision against what is observable in the secondary market. The following incremental test is applied.
10. If the Board is aware of a reliable third party, completed secondary market price that is:
- Within the last 6 months: AND
- At a discount to the manager-provided net asset value of greater than 50% discount; AND
- The price is more than 25% different to the Board's price calculated by applying 1 through 9, then an extra provision is applied to equate the provision levels to the secondary market value. The Board will keep that provision in place until new and/or significant information emerges.
*Includes portfolio holdings with a positive NAV after provisions. | (Continued on the next page) |
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TICKER: ALF
September 30, 2021
ALF VALUATION METHODOLOGY (Continued)
The following table summarizes how each of the top 9 investments in ALF (by ALF NAV) measure against the valuation approach and the cumulative provision applied against each:
Valuation Guidelines | ||||||||||||
4. Unwillingness of | 5. AFS not | 7. Asset or | 8. Significant SEC | 10. Recent | ||||||||
1. Alternative | 2. Not Reporting | 3. Liquidator | Manager to | 6. No Third Party | ||||||||
Produced on | Manager Based in | Inquiry or | 9. Asset Levered | Secondary Market | Total ALF Provision | |||||||
Outcome Advised | NAV on Schedule | Appointed | Provide Asset | Administrator | ||||||||
Schedule | EM Country | Litigation | Trading Activity | |||||||||
Level Info | ||||||||||||
Fund Holdings | ||||||||||||
✓/- | /- | /- | /- | /- | /- | /- | /- | /- | ✓/- | % | ||
Vision Brazil FCVS RJ Fund | - | | - | - | | - | | | - | - | -40% | |
Vision Brazil Special Credit Opp Eletrobras Fund | - | | - | - | | - | | | - | - | -45% | |
Growth Management Limited | - | - | - | - | - | - | | - | - | - | -30% | |
Warana 2018 Fund | (1) | ✓ | - | - | - | - | - | - | - | - | - | -20% |
Vision RJ Cayman | - | - | - | - | - | - | - | - | - | - | 0% | |
Autonomy Rochavera Fund | ✓ | - | - | - | | - | | | - | - | 0% | |
Abax Arhat Funds | - | | - | | | | | | - | ✓ | -90% | |
Serengeti Opportunities Funds | - | - | - | - | - | - | - | - | - | - | 0% | |
Other Investments | -100% | |||||||||||
Galileo Capital Partners LLC | - | - | - | | | - | - | | - | - | -40% | |
Receivables/Other Assets | 0% | |||||||||||
Total | -73% |
BOARD OF DIRECTORS
The Board comprises three Directors, all of whom are non-executive and independent of the Investment Adviser. The Directors are responsible for the determination of the Company's investment policy and overall supervision. The Directors are as follows:
Quentin Spicer (Chairman):Mr Spicer is a resident of Guernsey. He qualified as a solicitor with Wedlake Bell in 1968 and became a partner in 1970 and head of the Property Department. He moved to Guernsey in 1996 to become senior partner in Wedlake Bell Guernsey, specialising in United Kingdom property transactions and secured lending for UK and non-UK tax resident entities. Mr Spicer retired from practice in 2013. He is former chairman of F&C UK Real Estate Investments Limited, Quintain Guernsey Limited, The Guernsey Housing Association LBG, and is a director of a number of Property Funds including Summit Properties Limited and Phoenix Spree Deutschland Limited. He is a member of the Institute of Directors.
Dr. Richard Berman:Dr Berman is a UK resident. He has been involved with the investment management sector since 1989. He was previously a Manager with Orion Bank Limited, Treasurer of Andrea Merzario SpA, Group Treasurer of Heron Corporation plc, joint Managing Director and co-founder of Pine Street Investments Limited, and CEO and co-founder of Sabrecorp Limited and Signet Capital Management Limited, respectively. His experience includes the establishment, regulation and management of funds and fund management companies in a range of jurisdictions. He has a PhD in History from the University of Exeter and an MA in Economics from the University of Cambridge. He is a Fellow of the Chartered Securities & Investment Institute, a Fellow of the Association of Corporate Treasurers, and a Visiting Research Fellow at Oxford Brookes University.
Anthony Pickford:Mr Pickford is a resident of Guernsey. He qualified as a Chartered Accountant in 1976. He moved to Guernsey in 1978 as an Audit Senior with Carnaby Harrower Barnham & Company (now Deloitte). In 1986 he joined Chandlers as a partner with a specialism in insolvency matters and advised a range of financial services companies and trading companies on insolvency matters as well as acting as financial adviser to local entities. He became Managing Director of the firm in 2000 and assumed the role of Chairman in 2004 until his retirement in 2008. He has previously been a non-executive Director of several listed companies.
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TICKER: ALF
September 30, 2021
SERVICE PROVIDERS
Custodian: | Citibank, N.A. | Guernsey Legal: | Carey Olsen |
Auditor: | Grant Thornton LLP | UK Legal: | Stephenson Harwood LLP |
Administrator: | Praxis Fund Services Ltd. | Registrar: | Link Asset Services |
RECENT DISTRIBUTIONS | ||||
Announcement Date | Ex Date | Record Date | Payment Date | Amount (per |
share) | ||||
August 31, 2016 | September 5, 2016 | September 6,2016 | September 15, 2016 | $0.020 |
November 28, 2016 | November 30, 2016 | December 1, 2016 | December 15, 2016 | $0.055 |
June 8, 2017 | June 20, 2017 | June 21, 2017 | June 30, 2017 | $0.025 |
October 30, 2017 | October 31, 2017 | November 1, 2017 | November 10, 2017 | $0.030 |
April 6, 2018 | April 9, 2018 | April 10, 2018 | April 19, 2018 | $0.030 |
November 22, 2018 | November 22, 2018 | November 23, 2018 | December 13, 2018 | $0.020 |
January 24, 2019 | January 25, 2019 | January 28, 2019 | February 15, 2019 | $0.020 |
December 5, 2019 | December 19, 2019 | December 20, 2019 | January 7, 2020 | $0.015 |
July 24, 2020 | July 28, 2020 | July 29, 2020 | August 18, 2020 | $0.010 |
March 25, 2021 | March 29, 2021 | March 30, 2021 | April 23, 2021 | $0.010 |
Total | $0.235 |
DISCLOSURES/ FOOTNOTES
There is no guarantee that any investment strategy will achieve its objectives, generate profits or avoid losses. Due to rounding, totals in tables may not add up to 100%. Fund holdings are subject to change and should not be considered investment advice.
Alternative Liquidity Fund Limited Disclaimer: Alternative Liquidity Fund Limited believes that the information displayed on this document is accurate as at the date of publication, but we do not guarantee the accuracy or currentness of any information and we disclaim all representations and warranties, whether express or implied, to the extent permitted by applicable law and regulation. Further, the information displayed may be amended by us at any time and without notice. By continuing to use this document, you agree to the exclusion by us, to the extent permitted by applicable law and regulation, of any and all liability for any direct, indirect, punitive, consequential, incidental, special or other damages, including, without limitation, loss of profits, revenue or data arising out of or relating to your use of and our provision of this document and its content. By proceeding, you are representing that you have understood and accepted the terms, conditions and restrictions noted herein. An investor should consider investment objectives, risks, charges and expenses of the Fund(s) carefully before investing. Please read the prospectus for complete information before investing. All trademarks, service marks, and logos appearing on this Site are the exclusive property of their respective owners. The information on this Website is not an offer to sell or solicitation of an offer to buy an interest in any investment fund or for the provision of any investment management or advisory services.
Link Asset Services, ALF's Registrar, is available to answer any queries in relation to your shareholding. In particular, please contact Link Customer Support to claim any distributions that may have been unpaid due to outdated shareholder information.
Phone: (UK) 0871 664 0300; (Overseas) +44 (0) 371 664 0300 calls cost 12p per minute plus your phone company's access charge. Calls outside the United Kingdom will be charged at the applicable international rate. Offices are open between 09:00 - 17:30, Monday to Friday excluding public holidays in England and Wales. Email: enquiries@linkgroup.co.uk
Post: Link Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU
Shareholders are reminded that distributions are dependent upon the liquidity of the portfolio, which is highly illiquid and the timing of underlying distributions is difficult to predict.
www.alternativeliquidityfund.com | Alternative Liquidity Fund Limited | 4 |
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Alternative Liquidity Fund Ltd. published this content on 01 December 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 December 2021 17:00:02 UTC.