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#Bull Case
Added 4 months ago

In my opinion a clear majority of investors (perhaps with exception to those sharing in funds management or director’s fees) want this wound up and to receive back close to NTA.

In order for the board to retain some credibility they need to listen to shareholders. Keeping this listed at a huge discount would otherwise just damage their reputation. Whether that be a reputation for continuing with the unlisted Watermark business, or other LICs they are involved with. I don’t think such reputational risk is worth keeping ALF listed for.

There even seems to be doubt as to whether ALF have acted within their mandate. Did investors get consulted and get a say on their unsuccessful foray with international investing? Were they consulted about running the fund with a market neutral position for 5 years, after a long history of always being at least 50% invested? That in itself may arguably warrant the fund being wound up.

Therefore I think there is a high chance investors can receive close to NTA at some point over the next year or two. If that is the case then it means a tailwind to the investment of perhaps 10-20% per annum, aside from what the fund’s NTA may produce. That sounds attractive to me in the current environment. The fund has been market neutral for quite some time now.

In this volatile market I won’t be surprised if the discount edges to greater than 20% (that is after even taking away the deferred tax assets). In that case I would be ok to keep accumulating some more. The on market buyback has been strong and might have to slow down soon. That could create even better entry points in the short term.

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