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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: I had typed out a question a couple of days ago and then received an error message upon submission so I am sending it again- apologies if you receive it twice.

I have recently seen a news release from this company that indicates that the NAV is $32.92. While I recognize that as a closed end fund shares can trade at a premium or discount to the underlying value, the discount here at a share price of $23.00 imparts a "mis-pricing" of almost $210 million dollars given the approximately 21 million outstanding shares. The fund managers must be pulling their hair out. According to their website the fund has been around awhile and has a decent track record. Given your industry experience I was wondering if you could comment on this investment vehicle.

Thanks!
Read Answer Asked by Robert on February 06, 2019
Q: I understand you are not fans of Canoe, but in the Globe & Mail Gordon Pape recently put forward a persuasive case for income investors since the unit value has been trading
between $11 and $13 for the last several years. With the current price at the low end of the range, the yield is very attractive and the monthly payment of 10 cents/unit has remained stable since 2009. Any second thoughts?
Read Answer Asked by Jean on February 06, 2019
Q: This is following on my previous question, Here is the information regarding this new fund from Spartan.
I do value your opinion on this one and how it rates regarding risk factor. Thanks

LSQ – which has been quite successful in pursuing other market-neutral arbitrage opportunities – anticipates that its SPAC arbitrage strategy will achieve double-digit returns on a portfolio basis using modest leverage (3x) with a very low-to-negative correlation to other markets, and with low drawdowns. We intend to pause fundraising once the strategy reaches $100M.

SPACs and the SPAC Market

- For those unfamiliar with SPACs, they are publicly-traded shell corporations that raise capital with a view to acquiring an operating business. Once a SPAC is IPO’d in the public markets (at say $10/share), it typically has 18-24 months to find an acquisition (capital raised is held in short-term money market instruments until deployed).

- When the sponsors of a SPAC find an acquisition, the underlying investors can either (#1) vote against the transaction and redeem their shares at the SPAC’s original IPO price (in this case $10), or (#2) vote for the transaction and participate. In an increasing number of instances, SPACs are permitting investors to vote for the transaction and redeem their shares (again, at their original $10 IPO price, per our example).
- In addition, SPACs are usually issued with warrants entitling the holder to participate in the SPAC’s potentially-successful acquisition. These warrants can also have a tradable market value.
- While SPACs can vary greatly in terms of size, quality, experience of the underlying sponsor, etc., for a SPAC investor, the worst-case scenario is a guaranteed return of capital at the SPAC’s IPO price (again $10 per our example), plus the residual value of any warrants, while the best case is participating in a very successful transaction.
Since SPACs are plentiful (33 have been issued in 2018 so far), trade on the open market (usually Nasdaq), frequently at a premium or discount to their original IPO price, and have a known ‘worst-case scenario’ and ‘timing’ attributes, they present considerable investment opportunities for a hedge fund manager with a detailed knowledge of the sector.

Please see the attached materials for additional details.


Seed investors – i.e., the first $10M – are entitled to the 1.5% & 10% fee structure with the right of seed investors to double their investments at that same pricing level during the term of the fund. We are looking to launch early in Q1 – likely end of January 2019.
We are in the process of compiling our order book so please let me know if you are interested in having an intro call and potentially allocating.
Read Answer Asked by Saad on November 30, 2018
Q: Hi guys
I know that you are not a fan of split capital shares, but I have had some success with them. With the oil companies being beaten down so much, I am willing to take a position and wait for a recovery. Are the underling companies solid in this structure. Are there any other vehicles that have a basket of oil companies that you would recommend
Thanks
Read Answer Asked by auftar on November 21, 2018
Q: So, this is a what am I missing question, and I have missed a lot over 30 plus years of investing. I have held this for INCOME for over 2 years and at a 2.5% weighting and a cost base of $8.25. An average yld of 8% more then suits my requirements for income. A part of my thoughts were this fund should actually do OK in a raising interest rate situation, however it seems to be dropping recently. Is this a simple market reaction, a negative view on Manulife as a parent, or am I wrong on my views for stable value here? I am thinking of adding to 3% and seek your views. Again this is for a Yield play and stable cost base. Thanks
Read Answer Asked by James on November 02, 2018
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