Tribeca Investment Partners talks Covid-19 opportunities

Funds Management

by Katrina Bullock

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Tribeca Investment Partners Managing Director and CEO David Aylward talks about the recently launched Tribeca Partners Fund and its focus on investing in companies that have undertaken capital raisings to repair balance sheets in response to the Covid-19 crisis.

Katrina Bullock: Hello. Katrina Bullock for the Finance News Network. And joining me today from the Tribeca Partners Fund is Portfolio Manager David Aylward. David, welcome to FNN.

David Aylward: Thank you.

Katrina Bullock: Now, first up, could we start with an introduction to the fund?

David Aylward: The fund's set up in a very opportunistic way to exploit the round of recapitalisations that are taking place at the moment that have really floated off the back of the Covid crisis that we're going through.

And so it's an Aussie unlisted fund that we've established with a long-short structure to really hone in on the very stock-specific nature of those transactions, rather than necessarily carrying much equity risk.

And so it's necessarily a very capacity-constrained fund. We've said that we're only raising $20 million for this fund, and we're a fair way towards that at the moment.

So the investment approach looks to exploit the fact that Tribeca has been a business operating in the market here in Australia for 22 years. We have deep relationships with the corporates, with the investment banks. And so, to that end, we can get pretty good access to deals as they come through.

So, what we've decided with this fund is that we'll take a very deal-by-deal approach. So we look at the deal say, well, what's the narrative around that deal? What was the problem that you're going to fix with this capital raise? Does that narrative hang together?

And with that, basically we construct a forecast internal rate of return out of the transaction, get to work on accessing as much of it as we can and exploit it. And take a view that is, going in, we've pretty much got our exit focus, which is different to what we do across most of our business, where we're far more strategic in our investing. And that's one of the reasons why this fund can only be very small, is that we want that to remain our focus. But in this particular instance, we're taking that far more sort of tactical approach.

Katrina Bullock: And what are some of the fund's key holdings, and how are you choosing them?

David Aylward: Some of the trades that have been big in the portfolio over the last two months... Uniti Wireless (ASX:UWL) was one where they executed on acquisition of OptiComm. And we have known that company for a long time. We took the opportunity there to go into placement. We're a substantial sub-underwriter of the deal there. And that one's thankfully worked really well for us.

The Qantas (ASX:QAN) trade was an interesting one for us. I mean, again, sort of looking at the way these trades come together. What's the identified problem? What's the narrative around the solution. And how quickly does that play out?

So, Qantas clearly has got some real challenges to face through no fault of their own, but sort of with that, and I think with their placement, I felt like they did a very good job of bringing forward some sort of regeneration of their business model and the narrative around that, around this kind of once-in-a-generation opportunity to make changes to their business. That seemed very appealing to us.

Then the other one that springs to mind was Super Retail Group (ASX:SUL). So that was one where, as we identified that stock, we liked the company a lot, liked their platform of businesses, we liked the team there. Probably we identified that as being at the higher end relative to its peers in terms of its leverage.

So that's sort of an example of... They're all very stock-specific. They're all very much focused on, what's the opportunity here around? What's the problem you've identified? What's the solution? And to what extent does that equity raise make that problem? Then there lies your return.

Katrina Bullock: And what about the performance of the fund?

David Aylward: In June, I think we did net, we did just under 10 per cent, I think about 9.9 per cent. I know gross this month, we're up about sort of 6.5 per cent. So gross we've done about 19 per cent, I think, over the last month, almost two months now. So off to a good start, and that's across... We've done about sort of 20 individual transactions.

Katrina Bullock: So, these capital raisings, these discounts obviously represent a large market opportunity. How long do you expect that market opportunity to last, and what will happen to the fund as it dries up?

David Aylward: The fund is purely there for this purpose. We've got other funds in our business that have other more strategic views around how to make money through cycles and the like. This one is purely about this cycle.

And so, I think, as a best guess, we've sort of factored on the view that it'll be about a 12-month cycle. I think if it extends a lot more than that, it will probably mean that we've sort of gone into the second round of raisings, which is kind of going to be a bit of a disappointment in a way, in that that'll mean that equity markets are still pretty challenged, and that probably that Covid is continuing to play havoc with people's business models.

So I kind of hope that that's not the outcome actually. I'd rather that within that sort of 12, 18 months timeframe, deals dry up, we'll just wrap up the fund. And a lot of the purpose about this fund to us is frankly to write to all those clients who have hopefully had a great experience and say, why don't you stick with us in this capacity, or whatever, but essentially we'll give the money back.

Katrina Bullock: And David, before we let you go, what's the key message you want to leave investors with, and how can they find out more about the fund?

David Aylward: I guess the key messages are, I think there is an opportunity that's going to persist here for a while on the back of the events that are around the world, and that recapitalisation cycle.In terms of getting involved, I think our website's probably the best place to go to. And I guess talk to your advisor or whatever, who can probably put you in touch with us as well.

Katrina Bullock: David Aylward, thank you so much for your time today and for the introduction to the fund, and good luck.

David Aylward: Thank you very much.


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