Candover investment Trust Plc: sensible risk reward. Upside 30%.
Seth Klarman, founder of Baupost Group and dedicated value investor, is one of the best investors at understanding duration. Duration is more of a fixed income concept but I will take it to mean the time taken to get your money back. It's important because in the fixed income world you get paid regular interest payments called coupons and then at the end of the bond's term you typically get the principal back as well. This return of principal (for plain 'vanilla' bonds) is at a fixed date in the future, of the company's choosing. On the other hand with equities from most companies, investors receive a regular dividend but equities themselves are perpetual, that's to say there is usually no date at which you get your principal back, unless you choose to sell the shares. You are probably wondering how on earth this relates to an investment in Candover Investment Trust. Read on.
What is Candover?
From the company website www.candoverinvestments.com : 'Candover Investments plc is a private equity investment trust listed on the London Stock Exchange. Candover does not make new investments; our focus is on realising value.'
What investments does it own in the trust?
"Our portfolio currently comprises investments in 4 privately owned European businesses, acquired by investing alongside funds managed by Arle Capital Partners, an independent private equity partnership. Arle is the investment manager of the Candover 2001, 2005 and 2008 Funds."
When looking at the recent annual results the remaining 4 assets have a net asset value of £53m.
They are
1. Parques Reunidos : a theme park operator Mainly in Western Europe.
2. Technogym : a leading designer / manufacturer of gym equipment
3. Hilding Anders : Europes largest bed / mattress manufacturer
4. Expro: oilfield services provider - written down to zero.
And what is the Trust's objective?
"Our sole objective is to optimise the long term value of that portfolio for our shareholders. This will be achieved via a progressive return of cash over time as the portfolio businesses are sold by Arle."
My view: Effectively the trust is in wind-up mode, and has been since March 2009 when the investment objectives were changed and new investments were stopped. This means the remaining investments are being sold via trade sales or IPOs and the…
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