Blue Capital listed fund to redeem shares, providing liquidity certainty

The Blue Capital Global Reinsurance Fund, the London and Bermuda stock exchange listed reinsurance linked investment fund managed by the Endurance owned Blue Capital Management, has announced it is to redeem almost $13.14 million of shares from its investors.

The board of the Blue Capital Global Reinsurance Fund announced last year that it was set to pursue share buy-backs that would be accretive to net asset value of the fund, as its shares had been trading at a discount to the reported net asset value (NAV) per share.

The reasons are two-fold. Any buy-back transaction would be accretive to net asset value, and any buy-back opportunity would provide the fund’s investor base with liquidity certainty and an ability to sell shares at NAV.

In a closed ended fund vehicle like this, where the stock market listing does not necessarily mean the typical market valuation and liquidity that a normal share investment would see, this is crucial to maintaining investor relations.

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

Why the market has priced the Blue Capital fund at a discount for so long is likely due to its liquidity characteristics, rather than anything else. Performance has been strong, it has delivered its promise to investors and remains an attractive way to access the direct returns of reinsurance and insurance-linked securities (ILS) in a listed fund structure.

The almost $13.14 million of shares to be redeemed is just over half of the allotted $22.4 million of redemption shares slated for buy-backs.