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Investment Trust Insider: Damille under the microscope
by David Campbell on Jul 17, 2012 at 00:01
Damille Investments and Damille Investments Two are in some ways quite similar to the two Doric Nimrod funds I talked about last week. They are all incorporated in Guernsey, listed on the SFM, share the same corporate adviser – Nimrod Capital – and the same administrator – Anson. The investment approach is very different however.
The first of these funds listed in March 2010. It was designed to profit by investing in funds at discounts to NAV and then trying to exit these investments closer to asset value. The fund has a fixed life of four years - two years to get the money invested and then a two year realisation period after which the fund would be wound up. Profits are distributed as they crystallise while loss making investments can be recycled.
The target investments were funds with market caps below £100 million. These would be encouraged to “optimise their balance sheets” and “align management and shareholder interests”. They gave themselves the flexibility to invest in any other company that could be valued on a NAV basis.
The plan was to make declarable holdings (above 3%) in these stocks and, differentiating themselves from similar funds, they could acquire controlling stakes – a benefit of listing on the SFM. This also allowed them boost their firepower by making investments through special purpose vehicles which could be up to 100% leveraged. The fund itself is permitted to gear up to 15%.
Damille was a partnership set up in 2008 by Rhys Davies and Brett Miller. It gets an advisory fee of 1.45% of NAV and a 20% performance fee which kicks in once subscribing shareholders have got their initial stake back plus an 8% compound return.
They raised the money on the back of their track record with a few funds that they bought in the aftermath of the credit crunch. A 10% stake in China Growth Opportunities Limited, 6% stakes in Off Plan Fund and Lonzim and a 2% stake in London Asia Capital had all generated significant profits. Market conditions then were not great however and they did not get as much money as they would have liked, raising £32.5 million.
They took a 17.6% stake in EIH, a fund of Indian private equity funds with a couple of direct private equity holdings. With some encouragement from Damille, the EIH Board stood down in May 2010 and Brett and Rhys were made directors.
An AGM that June, EIH resolved to stop making new investments and gradually realise its portfolio, returning the proceeds to shareholders. To date, EIH has announced returns of capital equivalent to 21 cents per share. With the shares still trading above Damille’s entry price, this has been a successful investment.
They also bought a 17.3% shareholding in Rapid Realisations Fund which had made a number of pre IPO investments but was not realising them as rapidly as shareholders would have liked. Again Rhys and Brett ended up on the Board and the fund agreed to shift into realisation mode. So far Damille has got more money back than it invested and there is more to come.
The other significant stakes they took were a 7.5% shareholding in Blackstar (South African based private equity), a 27.6% holding in Loudwater Trust (US and UK private equity – again Rhys and Brett went onto the board) and a 2.7% stake in Trinity Capital (Indian property company).
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