C.A. Bancorp Inc. (TSX:BKP) Proposes Changes to Sentry Select Total Strategy Fund (TSX:TSF.UN)
TORONTO, ONTARIO--(Marketwire -
In
Investment Strategy
The Fund was created to capitalize on the Manager's and
For the fiscal year 2007, the Fund generated a 5.0% return on net asset value and a 7.9% return on market value assuming re-investment of distributions. The Fund paid a special cash distribution on
Results of Annual Redemption
On
The Fund was created with a view to a long term investment strategy. However, since the Fund has experienced such a large redemption, the Manager believes that in order for this long term investment strategy to be realized, proposed changes to the Fund's Trust Agreement are required. The proposed changes require the support by a two-thirds majority of the unitholders voting at a special meeting to be held on or about
If the Fund does not receive the support by a two-thirds majority, the Manager believes it may be in the best interest of the unitholders to de-list the Fund from the
Proposed Changes
The Manager proposes the following important changes to the Fund's Trust Agreement, which will require unitholder approval, at a special unitholder meeting to be held on or about
1. A shift in the overall investment mandate of the Fund from a primary focus on public securities and a secondary focus on private equity to a primary focus on private equity and secondary focus on public securities. This shift will require the removal of the current investment restriction that provides that no more than 25% of the Fund's total assets can be invested in private investments (the "Private Portfolio"). This amendment will allow the Fund to invest up to 100% of its assets in the Private Portfolio.
2. The elimination of the annual redemption feature.
The Fund's annual redemption feature is negatively impacting the ability of the Fund to make private equity investments and realize its targeted returns. More importantly, unitholders who wish to participate in the Fund's strategy (including those who bought their units on the premise that the Private Portfolio would help garner above-average returns) are negatively impacted by the actions of short-term opportunistic holders. Redemptions reduce the size of the Fund and exert pressure on the Fund to reduce its investment holdings, often prematurely. In turn, the Manager's ability to initiate new positions in private equity investments is limited regardless of how compelling the merits of the investment may be.
3. The removal of the restriction that the net proceeds of any issuance of securities by the Fund must be equal to or greater than the most recently calculated net asset value per unit prior to the pricing of such securities. Removing the restriction will provide greater flexibility to issue more units which in turn could enhance the liquidity of the units, provide better opportunities for diversification and reduce the management expense ratio.
The Manager believes that these proposed changes are in the best interests of unitholders of the Fund and will better position the Fund to benefit from a greater exposure to private equity investment opportunities (See Background and Rationale for the Proposed Changes).
Background and Rationale for the Proposed Changes
The Manager believes that an important feature of the Fund, at the time of its initial public offering, was the private equity exposure it provided to retail investors. Private equity is a higher potential return asset class that has traditionally not been available to retail investors. Under the current investment restrictions, the growth of the Fund's Private Portfolio is limited as it cannot make up more than 25% of the Fund's assets. The Private Portfolio includes those investments recommended, managed and co-invested in by
To date, the Manager has successfully originated and closed a number of private equity investments in which the Fund has participated. Looking ahead, the Manager believes it can provide the Fund's investors with numerous high-quality investment opportunities. In the Manager's view, market conditions for small- and mid-cap private equity investments, including pricing and general terms and conditions are very favourable. This is due, in part, to the high degree of uncertainty that exists in the marketplace as well as the relatively less competitive nature of smaller-cap private equity.
Alternative assets, including private equity, have increasingly become an important asset class for large institutional investors, including pension funds, seeking to generate higher returns that are not closely correlated to the public markets. These asset classes occupy upward of 10% of the total assets of some of the largest pension funds in
The Manager is of the view that the Fund represents a unique opportunity for retail investors to gain direct exposure to this asset class. The Manager believes that the Fund can deliver strong returns, uncorrelated with the public market.
Private Equity Update
To date, the Fund has made the following private equity investments:
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- Bermingham Foundation Solutions -
Also, the Fund has committed an additional
The majority of these investments have a monthly payment to the Fund in the form of interest or a dividend. Additionally, each of these investments was made with a targeted internal rate of return of over 20% per annum, with expected holding periods of between three and five years.
C.A. Bancorp Inc.
C.A. Bancorp Inc. is a publicly traded Canadian merchant bank and alternative asset manager that provides investors with access to a range of private equity and other alternative asset class investment opportunities. The Company is focused on investments in small- and middle-capitalization public and private companies, with emphasis on the industrials, real estate, infrastructure and financial services sectors.
Sentry Select Capital Corp.
Sentry Select Capital Corp. is a Canadian wealth management company that manages approximately $8 billion in gross assets as of December 31, 2007. The company offers a diverse range of investment products including closed-end trusts, mutual funds, principal protected notes and flow-through limited partnerships, covering a variety of domestic and global mandates. Sentry Select is the manager and/or advisor to 30 TSX-listed reporting issuers. In addition, Sentry Select manages and/or provides advisory services to four reporting issuers listed on the TSX Venture Exchange.
Certain statements included in this news release constitute forward looking statements including statements identified by the words "plan", "will" and "intend" and similar expressions or the negative thereof. The forward looking statements are not historical facts but reflect C.A. Bancorp's current expectations regarding future results or events. These forward looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations including but not limited to receipt of approval of the financial statements by the Board of Directors and scheduling difficulties. Readers are cautioned not to place undue reliance on forward-looking information. C.A. Bancorp undertakes no obligation to update publicly or otherwise revise any forward-looking statement or information except as required by law.