Alternative Liquidity Solutions (ALS), an investment company which hoovers up secondary hedge fund positions, has revealed a sharp drop in its net asset value (NAV) following a big adjustment for fair market and recovery values.
Even before the adjustments for fair market and recovery values, the NAV per share eased by 2.3% to 56.47p at the end of June from 57.80p at the end of 2011, despite the company buying back 58,526 shares for cancellation - about 0.16% of the company's total shares in issue - during the period
The net assets before adjustments stood at £15.4m; unfortunately for ALS, after it factored in its ability to get rid of its holdings on the open market, that figure fell to £11.3m, resulting in a NAV per share drop of 22.4% to 44.84p.
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This change was brought about because ALS bought in specialist advisers, who created a "revised valuation methodology", which the firm believes is more conservative than normal industry practice.
The company, formerly known as Saltus European Debt Strategies, recently got the go-ahead from shareholders at the firm's annual general meeting (AGM) to change its investment objective and policy to generate a gross internal rate of return on investments of at least 20% per annum by buying up secondary hedge fund positions at a discount to fair value, but the board admitted there is likely to be a limited window of opportunity for picking up post-credit crunch bombed out funds.
"For this reason we have committed to hold a continuation vote of the company at each annual general meeting, commencing in 2014 (allowing 50% of shareholders to require the company to enter a managed wind-down) and annually thereafter (in each case allowing 25% of shareholders to require the company to enter a managed wind-down)," said George Baird, Chairman of ALS.
"We were delighted to receive such strong support from our shareholders at last month's AGM, and believe ALS is now well positioned following the restructuring to acquire and actively manage illiquid secondary hedge fund positions," Baird said.
At 9:24 ALS's stock had dropped 14%.
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