Blue Capital continues listed fund buy-backs, offering investors liquidity

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Sompo (previously Endurance) owned reinsurance and insurance-linked securities (ILS) investment manager Blue Capital Management is to continue redeeming shares from investors, as a way to provide its third-party investors with guaranteed liquidity opportunities.

Blue Capital began acquiring shares of its Blue Capital Alternative Income Fund Limited (previously known as the Blue Capital Global Reinsurance Fund) back from investors earlier this year.

Share buy-backs are seen as offering two positive aspects for the manager, firstly being accretive to net asset value, particularly as the fund had been trading a discount to the reported net asset value (NAV) per share, and any buy-back opportunity offers provide the fund’s investor base with liquidity certainty and an opportunity to more readily sell shares at NAV.

The Board of the Blue Capital Alternative Income Fund has announced today that it is to redeem just over $8.12 million of shares, with the proceeds distributed to shareholders who participated in a recent tender offer.

In a closed-ended investment fund like this, where the stock market listing does not necessarily mean the typical market valuation and liquidity that a normal share investment would see, these buybacks are seen as an important tool for maintaining investor relations.

Investor’s appreciate understanding that there are liquidity options available to them in a closed-end fund structure. Similar to a U.S. mutual fund structured with an interval facility, it means they have an option for an exit at the NAV price.

The reason that this Blue Capital fund has been priced at a discount for so long is likely due to the liquidity characteristics of a closed-end vehicle, rather than anything else.

Performance for the fund has been strong, and it has delivered on offering its investors an attractive way to access the direct returns of reinsurance and insurance-linked securities (ILS) in a listed fund structure.

The just over $8.12 million of shares that will be redeemed account for the majority of the almost $9.15 million of redemption shares available for buy-backs.

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