Great Shorts For Bearish Hedge Funds- Austalia

///Great Shorts For Bearish Hedge Funds- Austalia

Great Shorts For Bearish Hedge Funds- Austalia

Many LICs and listed trusts had share prices more than 50 per cent lower than the net asset value of their own investments,  Australian fund managers should expect to be on the receiving end of aggressive moves by hedge funds to unseat them, warn advisory house Pottinger’s special advisor Nicholas Gold and joint CEO Nigel Lake.
The pair reckon that between 30 and 40 Australia-listed investment companies, or LICs, could be swallowed due to shareholder activism in the next five years.
A cormorant gulps down a mullet at Namdae Stream in the city of Gangneung on South Korea’s east coast. A typical way of fishing for the bird is to track its targets from the air, prior to making a swift dive to catch its prey.
Though hedge fund agitation in Australia has been relatively low compared to North America and Europe, Mr. Gold says “wonderful opportunities” await hedge funds, quantified by 20 billion Australian dollars (US$20.9 billion) in value waiting to be realized. This amount represents the discount to net tangible assets across an industry worth A$200 billion.
Mr. Gold, who makes a living advising LICs, trusts and funds on how to defend themselves against hedge fund attacks, reckons Australia’s listed investment companies and trusts are heavily undervalued, making them potential takeover targets.
“Dozens of LICs and listed trusts have share prices more than 50% below the net asset value of their investments and are attractive targets for hedge funds prepared to force restructuring or even gain control and sell off their investments,” Mr. Gold said.
Pottinger pointed out global hedge funds including Laxey Partners, Carrousel Capital and Boston-based Weiss Asset Management are among those who have made Australian LICs and trusts their prey in recent years.

“There have been enough opportunities in New York and London to satisfy their hunger, but we expect them to look to Australia,” Mr. Gold said, referring to global hedge funds in general.
Mr. Lake said factors that increase companies’ vulnerability to activism by hedge funds include stock liquidity and a market value of between A$200 million and A$500 million. Trusts built on a structure involving high management fees will likely also move into the cross hairs of predators.


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