Conversus Capital, the Euronext-listed fund of funds, saw a significant increase in activity amongst its general partners focusing on debt during 2008. At least 29 percent – or $77 million – of capital calls met by the fund were invested in distressed or performing debt.
“Over the last three quarters, general partners with diversified investment platforms have been quite active in purchasing performing debt that is priced and financed to create private equity returns,” the firm said today in its annual results statement.
The firm added that it was seeing increasing calls for portfolio bolt-on acquisitions and smaller buyouts.
Conversus also reported a “growing pipeline” of annex funds, or similar structures, whose capital is designated supporting general partners’ existing portfolio companies, in which the investor said it may invest selectively.
Conversus’ annual results statement, which revealed a year-on-year drop in the fund of funds’ net asset value of 28 percent, follows the revelation earlier this week that the fund would be halting new commitments and pursuing a “realisation strategy”.
The strategy is a response to the fund’s depressed share price, which has recently been trading at a discount to the fund’s net asset value of around 70 percent. Conversus hopes it will increase investor confidence that the underlying value of the fund’s portfolio will ultimately be delivered to unit holders via either share price growth or cash flow.
The firm will continue with its realisation strategy until its shares “fairly reflect” the net asset value and has not yet decided whether it will subsequently return to a growth strategy.
Earlier this year Mithras Investment Trust, a London-listed fund of funds, opted to pursue a similar strategy of ceasing new investments and returning capital to shareholders.
At the beginning of 2009 shares in Conversus were trading at around $10.50. Having hit a low of $5.65 last week, shares were $6.80 at press time.