Pacific Current Group Limited (ASX:PAC)

Aurora Trust Accounts Pose More Questions Than Answers

Constructivist equity investment manager Advocate Strategic Investments (ASI) is calling on its investee company Pacific Current Group Limited (PAC) to claw back losses of at least $120 million from its joint venture partner Northern Lights Capital Partners LLC (backed by Laird Norton LLC) and BNP Paribas Investment Partners LLC following the public release of Aurora Trust’s accounts for the first time yesterday.

Aurora Trust – the joint venture vehicle established in November 2014 to hold interests in 21 boutique fund managers contributed by both Treasury Group and Northern Lights – has written down the value of the Northern Lights portfolio by more than $120 million in less than two years. 

In particular, the purported jewel in the crown of the Northern Lights portfolio, US equities manager Seizert Capital Partners, has been written down by $85.3 million in the time it has been part of Pacific Current Limited – or just over half the value of Northern Lights’ entire contribution to the deal. 

This is after Treasury Group shareholders effectively funding the US$48 million loan with which Northern Lights bought Seizert – despite Treasury Group entering the merger with Northern Lights debt-free. 

ASI investment director Michael de Tocqueville says that PAC must conduct an urgent investigation into whether it was deceived about the value of the Northern Lights boutiques. 

"The Trust owes nearly $70 million to Northern Lights vendor interests – unwinding this debt and other transactions and suing Northern Lights and BNP Paribas Investment Partners for the rest needs to be on the table for consideration, as a matter of urgency," says de Tocqueville. 

"If PAC does not take action, then PAC shareholders, who have seen the value of their investment collapse by more than 60% over the same period, will need to consider what steps they can take to recover the money," he adds.

Aurora Trust was established in the November 2014 merger of Pacific Current Limited (PAC) – then known as Treasury Group Limited – with privately owned US-based multi-boutique aggregator Northern Lights Capital Group. The Trust was established to hold the 21 boutique investment managers owned by the merged entity – 13 of which were contributed by Northern Lights, and eight by Treasury Group – managing a combined $49.6 billion at the time of the merger.

Pacific Current (the former Treasury Group) owns 65.15% of Aurora Trust, with Northern Lights owning 27.19% and BNP Paribas (a cornerstone shareholder of Northern Lights) owning 7.66%.

Aurora Trust’s 2015-16 accounts show $121.41 million worth of write-downs to the carrying value of the boutique firms, most of which ($85.3 million) is attributable to Seizert Capital Partners, with the majority of the balance attributable to other US portfolio companies Raven Capital Management, Nereus Capital, AlphaShares, TAMRO Capital Partners and Northern Lights Alternative Advisors (NLAA). In 2014-15 the Trust wrote off WHV Investments to the tune of $16 million.

Aurora Trust’s accounts shed no light on the real value of these assets – in particular AlphaShares, which, as far as ASI can ascertain, appears to have little value.

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About ASI

ASI is a Melbourne-based independent investment management firm that provides institutional and sophisticated investor clients with customised alternative investment strategies. The firm’s senior investment team uses its unique, company-specific, value-oriented investment approach, with a strong focus on equity special events and credit opportunities. ASI’s approach is focused on the preservation of capital through extensive and rigorous investment analysis on a position and portfolio basis. ASI is the manager and adviser to the Advocate Partners Constructivist investment strategy. Shareholder constructivism is about advocating an owner’s perspective in relation to how a public company is governed and operated, in order to build the conditions necessary for its equity value to appreciate.

Disclaimer

This Press Release has been prepared by Advocate Strategic Investments Pty Ltd ABN 77 101 691 598 AFSL 224560 (ASI) for the information of shareholders. This release has been prepared from information available to ASI on the date of release and from publicly available sources. ASI has not verified this information and no responsibility is accepted for the accuracy, currency or completeness of this information. This release must not be taken to be financial product advice in respect of shares in the Company.

Advocate Strategic Investments Pty Ltd

ABN: 77 101 691 598 AFSL 224560

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