View the article online at http://citywire.co.uk/money/article/a885007
Hedge fund fights £50m dividend demand from rival
Hostilities have broken out in the hedge fund world with Altin AG accusing rival Alpine Select of attempting to 'asset strip' the company.
Altin (ALTN), a fund of hedge funds listed in London and Geneva, has accused its largest shareholder, Alpine Select, of attempting to ‘asset strip’ the investment company with demands for £50 million dividend and to seize control of its board.
Earlier this month, Alpine Select, a hedge fund based in Zug, Switzerland, called an extraordinary general meeting of shareholders in the £150 million company to vote on its proposals.
Alpine Select has built a 32.4% stake in Altin over the past two years and wants it to pay a special dividend of CHF20 (£15) a share from retained earnings and to replace three of its directors with three of its own candidates.
Yesterday Altin urged shareholders to reject Alpine’s proposals, although it agreed to back the election of one of its nominees, Thomas Amstutz.
It condemned the proposed dividend as a ‘irresponsible’ and ‘short-term’ move that would expose other shareholders to 35% with holding tax, a liability it said Alpine could avoid as a corporate investor.
Tony Morrongiello, chief executive of Altin, said the income payment made no sense. ‘This [Switzerland] is in a country where there’s no capital gains tax! There are plenty of gains to be had tax free if you sell some shares.’
He also said the dividend would shrink the company by a third and force a damaging fire-sale of assets by its manager, Alternative Asset Advisors, part of the SYZ banking group.
Alpine Select has a history of acquiring hedge funds, taking over rival Absolute Invest in 2013. Morrongiello believed the dividend demand was aimed at making a takeover of Altin easier. ‘They want to asset strip the company down to a size that can fit their size,’ he claimed.
Altin is one of a dwindling band of fund of hedge funds in London, following an exodus after the 2008 financial crisis when performance suffered and in some cases never recovered.
Key to its survival has been an innovative commitment it made three years ago to improve shareholder returns at a point when the shares were trading 30% below net asset value.
Under manager Michael Malquarti the dollar-denominated portfolio invests in a diverse range of 40 hedge funds and has delivered an annual return of 6% over its 20-year history, according to the company. It is an absolute return fund seeking to deliver positive returns as much as possible with reduced stock market volatility.
In 2013 the company promised to deliver annual shareholder returns of 10%, arguing that investors should expect to benefit from a narrowing in the discount as well as the underlying investment growth.
Under the policy, whenever annual growth falls below 10%, the company buys back sufficient shares to raise returns above the hurdle. In the past three years this approach has generated a 19% return compared to 12.2% from the HFR FoF index and the company has bought back 20% of its shares.
Last year Altin hired broker Cantor Fitzgerald to help raise its profile in the UK, where it has been busy meeting wealth managers and stockbrokers.
The EGM is set for 18 March in Zug, Switzerland. There has been public statement from Alpine Select regarding its proposals.
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by Gavin Lumsden on Oct 23, 2016 at 00:01