Sunday, August 5, 2012

iCapital. Deja Vu?

As of Aug 4, 2012, iCapital closed end fund was selling for RM 2.30 but NAV was RM 3.01, represents a discount of almost 24%. As of May 30, 2012, iCapital has net asset of RM 400 million and almost RM 133 millions are in cash. Investors may be sceptical that it can maintain its high elevated level.

The fund has never declare any dividend since it was launch in October 2005. In a few months time, the fund will be getting almost 7years. Using the market price around first week of October of every calender since it was listed we all can see that all the capital gain was in the first 2 years and return was practically non existent since 2008.

There are some interesting developments since last year with emergence of two foreign funds. One of them is  City of London Investment Management Company LTD with initial interest of 5.26% in November 2011 and increased their holding to almost 6.2% as of July 31, 2012. The other fund is Lexey Partners Limited with initial interest of 5.92%. They started buying some time April 2012. 

What Lexey Partners did reminded me of of a closed-end fund Amanah Millenia fund. That fund was forced to closed in 2007 after in existence of 10 years. Lexey Partners bought an initial interests of 5.05% with almost 29% discount to its NAV. After the initial interest, they kept buying until it reached 16.2% and forced it to close.

Amanah Millenia was way under-performing at that time in terms of NAV with 21.9% gains only over a period of 10 years while iCapital managed to improve its NAV over time of almost 3 times.

The question is will iCapital face a similar fate? Will this time be different with City of London Investment and Lexey Partners already accumulated combined interests of 12.7%.

Many of closed end funds in listed in NYSE actually paying dividend regularly. Many of closed end funds sweetened their investors with generous dividend to compensate for the discount to NAV.

Having foreign funds buying is a good news to current holders and certainly adding pressures to its fund manager. The mentality of foreign funds are very different from small holders will just wait patiently hoping something will happen. They will make things happen and it will be a big dent to TTB's pride if his fund get liquidated!


Value Investor said...

As ICAP is structured as a Closed End Fund, you can only wind-up or liquidate the fund by way of a Special Resolution at an EGM with at least three fourth (3/4) of the shareowners present voting in favour. Looking at the list of the Top 30 largest shareowners of ICAP, it is unlikely that 3/4 of them would want to liquidate the Fund as most of the are already long-term investors of ICapital Asset Management.

In fact, it is good for foreign funds to invest more into ICAP as it will then enable the market price to get closer to the NAV.

Most initial shareholders like myself who have invested from day one, has no complaints as we already got 229% returns (32% per annum for the last 7 years). Unless of course, ICAP does not perform continuously for a few years or TTB stops managing the fund.

As ICAP is trading at a 23% discount to its NAV, the any new investors are in fact buying shares in F&N, PETDAG, PADINI, PARKSON at 23% discount to the market. It is only in countries like Malaysia that such a investing opportunity exists but not taken advantage of and that speaks a lot about the maturity of our investors.

Value Investor said...

Correction in paragraph 3.

The returns should be 129% (based on closing price of RM2.29 on 6 Aug 2012) instead of of 229%.

The per annum returns since 2005 should be 18.4% per year.

PEGGY Method said...

May i repost your article in my blog?

Turtleinvestor said...


You may re-post any articles from this blog. It is free for all. Thanks.