Specialist alternative asset manager Gresham House Plc (LON: GHE) today announced that it has entered into an agreement with global asset manager Aberdeen Standard Investments which proposes the formation of a 50:50 joint venture relating to Gresham House’s top performing1 Strategic Public Equity strategy. The joint venture will establish a fund and seek to grow funds under management over time.
The Strategic Public Equity team of Gresham House was selected by ASI as a joint venture partner on the basis of its long, successful track record investing in the strategic public equity space and the opportunity that this represents for clients and prospects. For Gresham House, the joint venture represents an opportunity to focus on its core investment process while benefiting from ASI’s global distribution capabilities to substantially increase assets under management.
The Parties believe that regulatory changes, such as MiFID II, have created a substantial investment opportunity at the smaller end of the quoted market where market inefficiencies and valuation dislocations exist, notably in companies with market capitalisations under £300 million.
The Parties also believe that an actively engaged investment approach, using the principles and practices of private equity, can achieve enhanced financial returns for investors. Gresham House’s SPE team has substantial experience in identifying undervalued smaller companies and it is this expertise that has driven ASI’s desire to form the joint venture.
In addition to the joint venture’s formation, ASI has also agreed to subscribe for 1,309,598 new Ordinary Shares in Gresham House plc at 496p per Ordinary Share, which rank equally with all other shares (the “Subscription”), representing 5.0% of Gresham House’s enlarged share capital as a result of the Subscription. The Subscription will be conditional on Gresham House obtaining standard shareholder authorities to issue the new Ordinary Shares at the Company’s 2019 AGM, scheduled for 16 May 2019. The Directors unanimously recommend that shareholders support the joint venture by voting in favour of the standard shareholder authorities at the AGM.
The Directors believe that enabling ASI to become a significant shareholder in the Company will increasingly align the interests of both Parties in the joint venture.
Commenting on the joint venture, Chief Executive of Gresham House, Tony Dalwood said:
“Like us, ASI understands the importance of specialist alternative investment strategies. The joint venture offers Gresham House access to a powerful distribution network and an industry-leading product development capability. The Strategic Public Equity investment approach is something I have been involved with since 2003 and we are delighted to have ASI as a shareholder in the process.”
Peter McKellar, Global Head of Private Markets at Aberdeen Standard Investments, commented:
“The structural changes, liquidity issues and declining research coverage amongst smaller companies provides a long-term opportunity to generate significant investment returns for our clients.
“The establishment of this joint venture is in reaction to client demand for exposure to the increasing opportunities in strategic public equity. We identified Gresham House as a compelling joint venture partner based on a belief that working with a team with their experience, depth of resource and strong track record can deliver a compelling investment opportunity for clients.”
Conditional novation of Investment Management Agreement with Gresham House Asset Management
Gresham House plc has this morning announced that it has entered into an agreement which proposes the formation of a 50:50 joint venture with Aberdeen Standard Investments (“ASI”) relating to its Strategic Public Equity (“SPE”) strategy. The formation of the joint venture is subject to a number of conditions. It is expected that the joint venture will establish a new fund, grow funds under management that employ the SPE approach and accelerate the growth of Gresham House’s existing SPE strategy led by Graham Bird and Tony Dalwood.
As part of the arrangements, GHS has signed a novation agreement under which the existing Investment Management Agreement between GHS and Gresham House Asset Management will move to the joint venture once it is established.
There will be no changes to the terms of the investment management agreement. GHS will also continue to be managed by the same investment team using the same policies and processes. Consequently, the novation is not expected to have any impact on GHS.
GHS celebrated its third anniversary under Gresham House management in 2018. GHS’s NAV per share total return from inception to 15th March 2019 was 30.8%, growing 12.5% ahead of the total return of its benchmark the FTSE Small Cap (ex-investment trusts). GHS was also the top-performing fund in its segment in 2018, and this strong performance has continued into 2019 with the NAV +5.1% YTD 2019. GHS continues to review opportunities to scale the vehicle and promote this top-performing fund on a larger platform and the joint venture with ASI is expected to assist in that development.
Commenting on the developments, David Potter, Chairman of GHS said:
“The announcement by Gresham House and Aberdeen Standard Investments is an encouraging and positive endorsement of the Strategic Public Equity Strategy and one which we welcome. We believe GHS will benefit in future from the growing profile this investment strategy is enjoying as a result of the proposed joint venture, from increased resources that the joint venture is expected to provide, and from the broad distribution capabilities of ASI.”