BOUSSARD & GAVAUDAN HOLDING LIMITED

Transcription

1 BOUSSARD & GAVAUDAN HOLDING LIMITED A closed-ended investment company incorporated with limited liability under the laws of Guernsey with registration number JULY 2017 STATEMENT Total value of the investments of BGHL based on the final NAV for the Euro & Sterling ordinary shares million as of 31 July 2017 NAV per share Euro ordinary share Sterling ordinary share BGHL s portfolio The proceeds of the initial and secondary public offerings have been invested into the Sark Fund (net of a certain amount retained by BGHL for working capital requirements and other requirements). Since 1 November 2010, BGHL is invested into the BG Fund (formerly known as Boussard & Gavaudan Fund). In addition to having substantially 100% of its assets under management invested into the BG Fund, BGHL has other investments. Euro Shares Sterling Shares Shares issued 28,862, ,912 Shares held in treasury - - Shares outstanding 28,862, ,912 A. BG FUND Note that trade examples detailed in each strategy below are among the best and worst performances of the month. COMMENTARY AND HIGHLIGHTS Eurostoxx 50 finished July slightly up +0.22% on the month. VStoxx ended July at 13.9%, down from 17.3%. itraxx Crossover (S27) ended the month at 234bps (13bps tighter). BG Fund finished the month up +0.33% for the USD A share class, primarily driven by a very positive earnings season in the equity strategies. This positive performance was offset by volatility trading which continued to suffer from the low volatility environment. Volatility Strategies Mandatory convertible bond arbitrage 1 The total value of the investments of BGHL is based on the final NAV for the euro and sterling shares and the currency exchange rate for the Sterling vs. Euro.

2 The contribution of mandatory convertible bonds was slightly positive this month. There was no new issue and secondary flows were limited. Convertible bond arbitrage Convertible bond contribution (excl. mandatories) to the performance of the fund was positive in July. As expected, there was no activity on the primary market and flows were limited. In this context, changes of valuations were minimal. Volatility Trading Realized Vol Spot level 30/06 (VIX / V2X) Monthly realized Vol (ES1 / VG1) Difference US EUROPE Implied Vol July. Vol Index Fut as of 30/06 July. Vol Index Fut as of 31/07 Vol move US Europe Volatility trading contributed negatively. This month was the most painful month of the year mostly due to the collapse of long dated volatilities on equity indices. We saw subdued realised volatilities again, but not particularly more so than the previous six months, especially if we take into account a few of the intraday moves. As a consequence, the negative carry of the long-dated volatility positions has been in line with that experienced since the beginning of the year, indeed the carry has even been positive on some relative value positions (Eurostoxx50 vs S&P500). Conversely, the repricing of long dated volatilities on the main equity indices has been brutal since 12 June 2017, and particularly over July for the Nikkei 225 and the Eurostoxx50, illustrated on the table and graph below. Source: Bloomberg. Observation date Implied volatility of NKY Dec18 Put 19,000 Implied volatility of SX5E Dec18 Put 3, Dec Jun Jul

3 The speed of collapse is due to several factors. First we saw capitulation of a few bank traders and hedge funds given the already painful theta was accompanied with an increasing cost of roll down due to the volatility curve steepness. Secondly we saw very limited flow on long dated volatilities and no hedging activity by institutional clients. This poor liquidity and market imbalance probably accentuated the move lower. In this context, it is hard to see a quick recovery of these volatilities. We decided to stop-loss on Nikkei volatilities, the most painful to carry, but have kept our relative value positions on Eurostoxx50 volatilities versus S&P500 volatilities. Despite their volatile marked-to-market, the carry on these has been relatively manageable. We also experienced losses on our VIX exposures; convexity has automatically reduced our delta and we have also reduced our outright long VIX futures. The foreign-exchange book also suffered losses as we positioned for a dovish ECB, given that we saw this as our main risk to a further equity volatility collapse. We were wrong as the perceived hawkish speech led to a Euro appreciation but did not prevent a further move lower on Eurostoxx50 volatility and EUR/USD volatility. Going forward, we have reduced substantially our outright long volatility bias and we will be patient and opportunistic on short dated gamma as short dated volatilities look fairly priced to us. Equity strategies In July, European equity markets were stable with the Eurostoxx 50 up +0.22%. Our equity portfolio performed well with a positive performance, mainly driven by a very positive earnings season. Our Telco companies reported a relatively strong set of results across the board and our positions benefited nicely. In particular, KPN beat EBITDA estimates reassuring investors following recent fears of a deteriorating trend. We believe there is still more outperformance to come as investors return to a sector that has been derated since early 2016 and which has multiple tail-winds: earnings momentum is improving, the well-advertised regulatory roaming drag will be behind us after Q3, valuation looks attractive to us and the M&A speculative premium has totally disappeared (while we believe consolidation is inevitable in the mid-term in the sector), and finally rate increases seem to be on hold for the moment.

4 In the context of a broadly disappointing capital goods results season, Prysmian has outperformed due to a combination of short and long term value drivers. In the short term, its cyclical businesses are moving past the trough and, in the long term, structural growth comes from increasing fibre demand in telecoms and accelerating offshore wind connections in energy projects. In addition, speculation is increasing that consolidation will occur in the sector and Prysmian has made clear its desire to be a catalyst. Schneider reported strong H1 results, with organic growth and margins beating expectations, while guidance was upgraded. Furthermore, the acquisition of ASCO for a sensible multiple is accretive to earnings and was well received by the market, reassuring investors over its acquisition strategy. Although volatility kept decreasing on the broader market, stocks moved significantly around earnings, and the portfolio benefited from our extensive use of options to express views and contributed to our long gamma strategy. Credit strategies Capital Structure Arbitrage Capital structure arbitrage was roughly flat this month. The low volatility environment persisted despite renewed speculation around an anticipated monetary policy shift. Overall, credit as an asset class slightly outperformed equities. Most CDS are at their tights while performance of equities was more mixed, mainly due to FX headwinds. Arbitrage opportunities remained limited in this structurally subdued context. We traded marginally around existing positions, particularly on Casino/ Rallye after the earnings release. Credit long / short Credit long / short was positive in June. Credit markets continued to be well orientated in a low volatility environment with supportive technicals (primary activity was outpaced by bond redemptions and inflows). Financials in particular continued to outperform and witnessed compression between core and peripherals. This confirmed the trend observed last month following resolution of the principal remaining distressed banking situations in Spain and Italy. AT1 and insurance subordinated paper were particularly well bid. On specific positions, Groupama bonds continued to benefit from their migration into Investment Grade indices. In high yield, the market focus was mainly on the primary market again ahead of the Q2 results season and summer close periods. Credit special situations Credit special situations contributed positively this month. CGG announced a positive outcome in the creditor committee votes that were held on 28 July in relation to the proposed restructuring plan. The draft safeguard plan received unanimously approval at the lender committee meeting and a majority approval at the bondholder general meeting with 93.5% of creditors casting a vote. Based on the indicative timetable, the restructuring plan is expected to be implemented by the end of February 2018 with the shareholder meeting to be held by end of October. EcoBat also contributed positively as the majority shareholder of EcoBat made a new offer to the Steering Committee of debtholders. Trading Trading contributed net positively; some positive came from quantitative equity trading, some positive from systematic trend following and some negative from others.

5 B. DIRECT INVESTMENTS OTHER THAN BG FUND On top of its investment in BG Fund, BGHL has other investments. As of 31 July 2017, the net asset value of these investments represents less than 5% of the net asset value of BGHL. Rasaland Investors ( RLI ) RLI is a Malta-based holding company structured as a private equity fund in terms of fees and organisation and managed by BK Partners. RLI is dedicated to investing in land, hotels and high-end resort developments in Mexico. RLI main asset is a majority interest in ACTUR its private subsidiary. ACTUR s other shareholders are Mexican public institutions. ACTUR owns land developing assets (Mandarina and Xala projects) and a minority interest in the publicly-traded company RLH Properties (ticker: RLHA:MM). RLH Properties owns majority interests in the Four Seasons hotel in Mexico City and in four hotels in Cancun (Fairmont hotel, Rosewood hotel, Banyan Tree and the Hyatt Andaz hotels and the Camaleon PGA Golf Course) and RLH Properties owns land lots in the Mandarina area on which the One & Only hotel and the Rosewood hotel are being developed. Based on recent indications that BGHL would only be able to exit at a material discount to RLI s NAV, BGHL decided to mark down the position by -50% in May The position is valued at 50% of the NAV calculated by RLI s administrator. In July 2017, BGHL purchased 9,075,135 shares of Rasaland. BGHL currently holds 19,075,103 shares which represents approximately 10.1% of the share capital of RLI. GFI Informatique BGHL holds GFI shares. GFI is a major player in value-added IT services and software in Europe. GFI is listed on the Paris Euronext, NYSE Euronext (Compartment B) - ISIN Code: FR On 10 May 2017, Mannai Corporation ("Mannai") announced an agreement for the acquisition by Mannai of the remaining stakes held by Boussard & Gavaudan and Apax. The announcement is available here: In accordance with this agreement, BGHL sold two thirds of its position in July 2017 at a price of 8.00 per share for a total amount of 20,232,688 and is expected to sell the remaining third in June 2018 at a price of 8.50 per share for a total amount of 11,076, C. BOUSSARD & GAVAUDAN INVESTMENT MANAGEMENT UPDATE TRANSACTION IN THE COMPANY S SECURITIES Please note that transactions in the Company's securities that have been performed by officers, directors and persons referred to in the section 5:60 of the Financial Supervision Act ("Wft") are reported: directly on the AFM website: (professionals > registers > notifications > insidertransactions 5:60 wft); on the Company s website through a link to the AFM notification: (Investment Manager > Regulatory information). Transactions in the Company s own securities are also reported on: the AFM website: (professionals > registers > notifications > price-sensitive press releases); the Company s website: (Investor Relations > Financial announcements).

6 BGIM S AUM As of 1 August 2017, BG Fund assets under management are 2.51bn. E. Boussard & E. Gavaudan Contact information Boussard & Gavaudan Investment Management, LLP 1 Vine Street, London W1J 0AH - United Kingdom

7 Disclaimer The Company is established as a closed-ended investment company domiciled in Guernsey. The Company has received the necessary approval of the Guernsey Financial Services Commission and the States of Guernsey Policy Council. The Company is registered with the Dutch Authority for the Financial Markets as a collective investment scheme pursuant to article 2:73 in conjunction with 2:66 of the Dutch Financial Supervision Act (Wet op het financieel toezicht). The shares of the Company (the "Shares") are listed on Euronext Amsterdam. The Shares are also listed on the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange plc's main market for listed securities. This is not an offer to sell or a solicitation of any offer to buy any securities in the United States or in any other jurisdiction. This announcement is not intended to and does not constitute, or form part of, any offer or invitation to purchase any securities or the solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of the securities referred to in this announcement in any jurisdiction in contravention of applicable law. Neither the Company nor BG Fund has been, and neither will be, registered under the US Investment Company Act of 1940, as amended (the "Investment Company Act"). In addition the securities referenced in this announcement have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act"). Consequently any such securities may not be offered, sold or otherwise transferred within the United States or to, or for the account or benefit of, US persons except in accordance with the Securities Act or an exemption therefrom and under circumstances which will not require the issuer of such securities to register under the Investment Company Act. No public offering of any securities will be made in the United States. You should always bear in mind that: - all investment is subject to risk; - results in the past are no guarantee of future results; - the investment performance of BGHL may go down as well as up. You may not get back all of your original investment; and - if you are in any doubt about the contents of this communication or if you consider making an investment decision, you are advised to seek expert financial advice. This communication is for information purposes only and the information contained in this communication should not be relied upon as a substitute for financial or other professional advice. VC