Marshall Wace listed fund offers investors opportunity to exit at NAV
MW Tops, the Guernsey-domiciled closed-ended fund of hedge funds that epitomised the boom in listed hedge fund products when it raised EUR1.5bn at its listing on Euronext Amsterdam in December 2006, is offering investors a cash exit at a price equivalent to net asset value per share less costs.
The initiative reflects the liquidity problems faced by investors in permanent capital alternative investment vehicles, even before the onset of the credit crunch and the increasing aversion to risk that is prompting capital to flee both listed and unlisted hedge funds.
In the case of MW Tops, which invests in a well-established strategy run by London-based hedge fund manager Marshall Wace, efforts to improve liquidity and reduce the discount of the share price to NAV, including a dual listing on the London Stock Exchange in June and a share buyback programme, have failed to yield satisfactory results.
The board of MW Tops says that following consultation with Marshall Wace, it has concluded that the current operation of the buyback programme 'is no longer an efficient means of creating liquidity in the company's shares, particularly in current market conditions.
'This would be better achieved by offering shareholders the opportunity of a cash exit. It is the board and Marshall Wace's belief that the proposals will provide a mechanism to create liquidity and provide a platform upon which the company can continue to operate.'
The board plans to offer holder of US dollar, euro and sterling classes who wish to exit the company the opportunity to realise all or part of their investment at a price equivalent to prevailing net asset value per share, less the costs of implementing the proposals. It says it expects to circulate details of the plan to shareholders next month.
An extraordinary general meeting of MW Tops will be called to seek shareholder approval for the proposals and to 'effect changes to the company's articles of association which the directors are currently considering for the efficient operation of the company in the future.'
'Since the launch of the company, MW Tops has worked actively to ensure optimum liquidity in the shares and to minimise the NAV tracking error,' says chairman Sir Andrew Large. 'Current market conditions are extremely challenging in this respect. The board and the manager are in complete agreement that the interests of shareholders can best be served by proceeding with a cash exit exercise of this nature.
'The exceptional liquidity of the underlying strategies gives us great flexibility to accommodate the needs of investors. For this reason we are proposing a cash exit option for those shareholders who wish to exit the strategy rather than relying on phased buybacks to accommodate the needs of those who require liquidity. This will provide the basis for a more stable and efficient operation of the company in the future.'
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