Alternative Investment Trust (AIQ)

AIQ is a listed fund-of-fund manager. In 2009 the decision was made to wind-up the fund by selling-off assets and gradually return cash to unit-holders. I previously traded AIQ at higher levels and have been looking for a new entry point. The trick is to buy units in the fund at a sufficient discount to Net Tangible Assets (NTA) in order to make a profit and allow for time and risk. Just like when you have a garage sale, the first assets to go are the easy and popular ones, leaving the harder stuff for sale towards the end of the day. AIQ call the harder to move assets ‘side pocket’, which I suppose is a nicer term than ‘basket case’ assets. So as the wind-up progresses, the time component to realise the value of the remaining assets becomes potentially longer and harder to predict.

Hot off the press: AIQ has recently announced a fresh payment of AUD13c. The ex date of the payment is today 22 January. Pre the ex-date, the AIQ price traded at 43c and the most recently announced NTA was 54c; therefore the price to NTA discount was 20%. Aside from 2009, the greatest price to NTA discount has been ~35%, and often the price to NTA is greatest just after the ex-date. So, my strategy was to buy AIQ on the ex date if the price dropped to around 26.8c (41c*(1-35%)). Well, that little idea of mine just hasn't worked out at all as the stock has only dropped to 30c; the price to NTA discount has remained fairly static. So i have missed out on this trade, however will continue to keep an eye to see if there discount opens up again at some point.