London-based hedge fund advisor Audley Capital Advisors was established in 2005 by activist investor Julian Treger and private equity investor Michael Treichl. Launched that year, the Audley European Opportunities Fund generates alpha by making opportunistic investments in distressed situations, creating value through financial and/or operational restructurings.

Because Audley orchestrates its own exit strategies, it considers itself to be more an “event-driver” than an event-driven manager. The firm currently advises on some USD900m in assets under management within Audley’s own funds and affiliated funds. Audley is regulated by the FSA, while the fund is regulated by the Guernsey Financial Services Commission.

The team consists of eight investment and three operations professionals, with Treger and Treichl at the helm. Prior to establishing Audley, the pair had advised on some 46 investments worth more than USD3.7bn.

Between 1992 and 2004 Treger headed Active Value Advisors, the UK’s first activist fund manager, and he has more than 20 years’ experience in shareholder activism and distressed investing, including the restructuring of companies such as Saatchi & Saatchi and Signet.

Treichl has more than 25 years’ experience in M&A advisory, private equity and distressed investing. He earlier co-founded Bessemer Vogel & Treichl, and his achievements include co-leading the acquisition and restructuring of Head-Tyrolia-Mares to prevent it going into bankruptcy.

Asked what sets Audley apart from its competitors, Treger says: “What defines us is attention to detail, private equity-style due diligence, a deep value approach to investing, an understanding of macroeconomic trends and several decades of experience. Friendly activism is quite a skill. Hostile activism encourages you to follow your losers and cut your winners. We wanted to change that pattern.”

Central to the firm’s investment philosophy are fundamental analysis and due diligence. The team uses best practice from a number of different investment disciplines, including private equity, activism, distressed and deep value investing. Audley tends to look at companies listed in Europe with market capitalisation between EUR150m and EUR1.5bn that are either having financing difficulties, going through restructuring, or are potential buyout or M&A targets. Various valuation metrics are applied during this screening process.

The investment phase involves rigorous fundamental research, due diligence and meeting the management teams in person, as well as identifying suitable targets for the exit stage. Executing the strategy is then achieved by working with the chosen company’s management team to bring about the ‘event’, after which Audley exits the firm once its shares have reached fair value.

Market sectors in the fund’s portfolio include mining, technology, infrastructure and energy services, with European companies focused on emerging markets a particular preference. Audley ensures that no more than 20 per cent of the fund’s gross assets are locked up in any one company.

Following the financial crisis, relatively few event-driven funds remain, according to Treichl, who argues that in relatively flat markets, creating events to drive performance is more valuable than ever. “Everyone expected a wave of distressed restructuring which didn’t materialise,” he says. “We think it’s likely that default rates will rise as we get closer to the 2012-14 bulge in repayments on leveraged loans, which could create interesting opportunities for funds like Audley.”

Treger adds: “We feel gratified and thankful to have won this award. We see this as a vindication of our view that friendly activism creates superior returns.”

Please click here to download a copy of the Hedgeweek special report Hedgeweek Awards 2011


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