On Page 53 of the EM, i think CD is still a limited partner.The...

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Schmucky

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10/10/22

10:35

Post #: 64114353
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Originally posted by Grumpy Bear: ↑

A beauty of there being 4 separate funds at different stages of maturity with different investment mixes is that we can pick the risk/return balance which best suits our individual circumstances/preferences. I have no interest in being exposed to the younger potentially higher returning assets of CD4 with their correspondingly higher risk.

Reading the Explanatory Memorandum has left me wondering what the benefits of the proposed merger really are. The redemption mechanism comes at a high price. In order to have 6 monthly opportunities to redeem at about NTA (limited to 5% of the outstanding units), we will need to forego cash distributions; and some 10% of the fund will held in cash (creating a drag on performance). As previously mentioned, I'm quite happy with gradually being paid out as and when the underlying investment realised. This is what I signed up for when I invested; and I have no interest in being in an "evergreen" fund where the proceeds of realisations are reinvested in new opportunities or used to fund redemptions.

I accept Schmucky's point that there may be some dud investments which will take a while to realise. The Explanatory Memorandum takes it a step further indicating at that at some point CD1 may become sub-scale and will need to be delisted in advance of all funds being returned. Unfortunately this is just stated as a conceptual possibility. No information is provided about the actual state of affairs with the remaining investments; let alone a timeline for their realisation.

In any case, the risk of waiting a while for some investments to be realised and not being able to sell on market for some of the time doesn't bother me. This is how private equity investment ordinarily plays out. The investment performance of CD1 to date has been very good. I will be surprised if the number of problematic underlying investments (if there are any) was out of line with the norms for a diversified portfolio of mid-market companies.

The outcome on costs is troubling. Not only are there instances of increases vis a vis the position of the existing separate funds, the Independent Expert doesn't consider any overall savings to be significant. It's not often that you see a merger without real synergies.

Perhaps even more troubling is the indication that Cordish will not be a limited partner in the proposed new partnership. It seems that the new vehicle will have the benefit of Cordish as a manager but not as a co-investor. Whatever the reason for this, it's not a good outcome.

I will be voting against the proposed merger.

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On Page 53 of the EM, i think CD is still a limited partner.

The redemption facility is a bit on the lighter side limiting to 5% every 6 months and the removal of dividends is a bit of a kicker to me as the payout to date with the CD1-3 has been very good. If everyone tries to exit i guess we will be stuck in it till the 7 years is up or will take 10 years to exit 100pc of holding

CD1 Price at posting: $1.02 Sentiment: Hold Disclosure: Held
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