Micro Multi Strategy Alternatives19 Apr 2017 13:24
I spent the weekend looking at CRV. I read most if not all of the public information and concluded that CRV is a tiny multi strategy alternatives investing platform. I went back and read all the company communication since it was AIM Investments. It operates as a blend between a hedge fund and a private equity fund. The strategies they employ presently are distressed debt, distressed real estate, convertible debt and unlevered private equity. These are very sophisticated and hard to implement strategies that are normally the domain of hedge funds and private equity shops. Some family offices also use these strategies and they can be very profitable. It is very unusual in a small public company but there have been some successful ones like the first twenty years at BAM or L.
It is very clear that management focuses only on the per share value of the business and not the price of the shares. They have told this to investors every year for the last four years. I like this. Their stated view is that the strategy they employ combined with the size of the company will make it impossible to generate any significant secondary market interest in the company. The retail market interest in the shares is next to nil. Most retail investors simply do not understand what they are doing as is evidenced by some of the comments on this board. For instance "investing along the capital structure" is HF code for "loan to own" meaning they are buying NPLs and making loans with the unstated but clear desire to take control of a company or asset.
They also purposely invest in opaque markets within opaque markets. Their move into the Angolan petroleum products business via a convertible loan is a page right out of Glencore or Trafigura's playbook but at nano scale. Buying NPLs in SA is probably a case where they want to force the borrower to liquidate the assets in a hostile manner and the bank who sold the loans couldn't or did not want to be hostile. They are buying land from distressed investors during Brazil's credit crisis. They probably want the Greek hotel to default so they can own it cheap. Mykonos isn't going away. Greek banks might. Typical asymmetrical vulture fund deals.
The problem is the AIM market is not really the right venue for this type of company. This is probably why they tried to move to another exchange. There are no buyers for the stock in retail size and no sellers in institutional size even if it was big enough to invest. The company is way too small for institutions and will be until it has a market cap of at least 100 million or maybe more. Even small family offices don't take positions of less than a quarter of a million dollars, for most the minimum is a million. It is not possible to buy that in the secondary market. This is likely why they raised capital through a placing to people who understand the strategy and will hold long term. Still there are lots of ways they can create value over time.
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