The DCG Iris insurance-linked securities (ILS) fund, marketed and operated by Dexion Capital with Credit Suisse providing ILS investment management services via the master-fund CS Iris, will move forwards after its shareholders voted in favour of a continuation resolution.
The future of the DCG Iris ILS fund had faced some doubts after it failed to reach an ambitious target capitalisation by the end of its first year. When DCG Iris was launched it was set a target of raising £150m in commitments by the 30th June 2013, but only managed to raise just over £61m.
The articles of incorporation of the company stated that a continuation vote should be held, asking shareholders whether they felt the fund should continue to operate, if it failed to meet the capital raise target. It turns out that the target was over-ambitious, but despite failing to meet it investors have continued to show their confidence in the ILS fund and its managers.
Investors first turned down an opportunity to redeem their shares in the ILS fund at an attractive price, showing they were confident in the investment strategy. Then at the extraordinary general meeting held this morning they all voted in favour of the fund continuing.
As well as voting for the fund to continue, a number of other resolutions were all successfully passed at today’s EGM.
First, investor shareholders voted in favour of a change to the articles of incorporation. This change was related to removing the £150m figure as a continuation trigger, very sensible, and amending this to £50m, a much more realistic amount. It also sought to amend rules related to conversion of C Shares to better protect shareholders by delaying their conversion back into ordinary shares if there is good reason.
Next, two related party transactions were approved by DCG Iris investors. The first related to key investor Ericsson, the largest investor in DCG Iris, which wants to acquire more shares in the next proposed placement. This will allow Ericsson to hold as much as 22% of the fund after the next placing, how much that is will depend on the amount of shares it can issue in this latest fund-raising round.
The second related party transaction relates to Dexion Capital itself. This passed resolution will allow Dexion Capital to invest in DCG Iris itself, helping to further boost assets under management and likely as a way to bring an element of ILS to other multi-asset fund strategies it manages.
So this was a very successful EGM for DCG Iris and the fund is now here to stay and will turn its thoughts to raising additional capital very soon. It recently said that it intended to close the next placing of shares on or around the 23rd September, if the continuation vote was successful.
With the continuation vote passed, and these other resolutions now in place, we could see DCG Iris grow more meaningfully at the next placement with the help of investments from Ericsson and Dexion Capital itself.