Monash Absolute Investment Company Limited (ASX:MA1) Executive Director & Portfolio Manager, Simon Shields discusses the company's ongoing simultaneous equal access buy back and share purchase plan structured to reduce the LIC's discount to net tangible assets (NTA) and increase liquidity.
Jessica Amir: Hello I’m Jessica Amir for the Finance News Network. Joining me now from Australian equity LIC is Monash Absolute Investment Company, Executive Director and Portfolio Manager, Simon Shields. Simon welcome to FNN.
Simon Shields: Hi Jessica, pleased to be here.
Jessica Amir: First up, for those who aren’t familiar. Can you just give us an introduction to your LIC?
Simon Shields: The Monash Absolute Investment Company is an equity fund that invests on an absolute basis, in Aussie shares, mostly listed. We can invest long, but we can also short sell stocks, we only invest in compelling opportunities. We can gear the fund, if it’s on needs basis and we can also invest in pre-IPO stocks. We’ve been managing money now for about six years, although the listed investment company (LIC) has only been floated, for the last two years.
The background of the fund managers was in mainstream long only, relative benchmark institutional investment.
I was head of Aussie equities at UBS for five years and prior to that, head of Aussie equities at Colonial First State, where I was for almost 10 years. I’m joined with Shane Fitzgerald, my partner in the business. And he’s come from JP Morgan originally, where he was there for almost 15 years and at UBS also, for about four years.
Jessica Amir: Now to the LIC offering, just tell us about it. And also tell us why investors should get behind it and add it to their portfolio?
Simon Shields: The Monash Absolute Investment Company LIC is very different from the other LICs that on the market. We have an absolute focus on return and because of that, we have a very flexible mandate. We can invest in a wide array of company types, without regard to the index, we go short, we can go long. And the idea is to develop a return to the investor that’s double-digit, over the medium to longer term, while preserving capital over the medium term.
Our LIC is an Australian equity hedge fund, it’s got an absolute focus. And that compares to most of the ETFs and LICs around that are relative to the stock market, trying to provide long only returns. They can’t short, they can’t gear, they can’t invest in pre-IPO stocks. We can do all those things.
Jessica Amir: Now to the buy-back and share purchase plan. Just start off with the rationale behind the buy-back?
Simon Shields: The Company’s been trading at a discount to NTA over the last six months, of around about 15 to 17 per cent. We’re not happy with that, because it means shareholders that have to sell, have to sell at quite a discount to what the stock is actually worth. So we turned our minds as to how we could make it easier for them to be able to get liquidity, and to get new investors in the fund as well. And we’ve come up with the idea of a buy-back, a share purchase plan and a placement facility.
Jessica Amir: Can you give us more detail about the buy-back?
Simon Shields: It’s an off-market buy-back and we’re buying up to 10 per cent of the company, on a pro-rata basis for people who apply. And it’s at a five per cent discount to NTA. So if the NTA’s at a dollar, which is thereabouts where it is at the moment, we’ve been buying back at somewhere around about 95 cents. That compares to the price today of about 84 cents. The date of record is the 3rd of August. So shareholders, or potential shareholders, have up until that time to buy the shares and they can still access the buy-back.
Jessica Amir:Now to the share purchase plan?
Simon Shields: The share purchase plan is being brought in so that people can also buy shares at that five per cent discount, which is a discount to NTA. Also to allow us to have a liquidity facility, to allow larger shareholders to come in through a placement, so that they can also buy shares at that five per cent NTA. The beauty of this is that we won’t be diluting the shareholders overall. At the same time, we won’t be shrinking the company to the extent that we can get people to buy the shares, at a five per cent discount as well.
Jessica Amir:I understand that you’re doing them both on an ongoing basis. What’s the rationale behind that?
Simon Shields: The idea that it’s ongoing is very important, because we see buy-backs done from time to time and they’re one-offs. The share prices respond and then they fall back. What we’re doing by having an ongoing facility, every six months or so we’ll do one of these, is that people know that there will be a liquidity opportunity to buy and to sell. And that means there’s a second opportunity, not just doing it on market, but you can do it in one hit every six months or so.
Jessica Amir: Lastly Simon. What’s the key message that you’d like to leave with investors?
Simon Shields: There’s a great opportunity right now to invest in an Aussie equity hedge fund, at a big discount to its NTA. We’ve got a buy-back on and by the 3rd of August is the record date. If you buy before then, then you get the opportunity to arbitrage it up to a five per cent discount of the NTA price. The ticker code is MA1 and refer to the ASX announcements for the details of the buy-back, the share purchase plan and the placement.
Jessica Amir: Simon Shields, thank you so much for the update and good luck with the initiative.
Simon Shields: Thanks Jessica.