Conversus Capital LP could hasten its wind-down by offering itself to the highest bidder. Conversus, the world’s largest publicly traded fund of funds, said on Feb. 27 that it has begun a formal review of its strategic options, including a possible sale.
The company, launched in 2007 as a spin-out of Bank of America Corp., has struggled since the financial crisis. And although it returned to a net cash position in the fourth quarter of 2010, its stock price, $19.90 on Feb. 28 on the on the NYSE Euronext Amsterdam exchange, has consistently traded below the net asset value of the company’s portfolio, $26.70 per share as of Jan. 31. A Conversus spokesman said that Conversus always had sufficient liquidity to fulfill its investment commitments and never had to sell assets on the secondary market or raise additional equity.
(Although its market is in Amsterdam and its legal domicile is in Guernsey, in the Channel Islands, Conversus trades and reports its financial results in dollars; it is managed by Conversus Asset Management LLC, whose principal owners are BofA and the Menlo Park, Calif., asset manager Oak Hill Investment Management LP.)
Conversus said in January 2011 it would return to making investments in private equity funds if it could raise its market price, and it launched an aggressive program of buybacks and cash distributions to try to stimulate investor interest. When that failed to lift the shares, the company announced in September that it was adopting a “permanent harvesting strategy,” making no new investments except to fund existing commitments and would instead focus on returning capital to investors.
Since the adoption of the harvesting strategy, Conversus has declared distributions per unit of $2.00, or $129.2 million in aggregate, it said in January. But if the plan has failed to impress the market, it did attract the attention of individual players.
“Since the announcement of our harvesting strategy in September, Conversus has received approaches regarding potential strategic alternatives,” said Paul Guilbert, the chairman of management company Conversus GP Ltd, in the press release announcing the review. “The board has determined that this process will better enable us to determine the best option to enhance value for our unit holders.”
Conversus has retained J.P. Morgan Securities LLC as its financial adviser for the strategic review. Cleary Gottlieb Steen & Hamilton LLP is its legal adviser.
Conversus and Oak Hill declined comment. Bank of America did not respond to a request for comment.