AIQ Targets $44.6 Million Capital Raise via Rights Issue at $1.47 per Unit

Context and Offer Details

One Managed Investment Funds Limited, acting as the responsible entity for the Alternative Investment Trust (AIQ), has announced a non-renounceable rights issue to raise up to approximately $44.6 million. Eligible unitholders are invited to subscribe for one new unit for every existing unit held at an issue price of $1.47 per unit. This price reflects a 19.4% discount to the trust's latest net tangible asset (NTA) backing, signaling a strategic move to attract capital while balancing dilution concerns.

The rights issue is non-renounceable, meaning entitlements cannot be traded or transferred, and includes a shortfall offer allowing eligible unitholders to apply for additional units beyond their entitlement. The offer excludes unitholders outside Australia and New Zealand due to regulatory and cost considerations.

Strategic Rationale and Investment Focus

The capital raising is designed to provide AIQ with immediate liquidity to pursue investment opportunities arising from current market illiquidity. The investment manager, Warana Capital, highlights two key opportunities – acquiring stakes in absolute return funds at significant discounts on the secondary market, and investing in credit opportunities that provide funding to funds impacted by illiquidity, such as loans or preferred equity arrangements.

AIQ’s portfolio primarily consists of international absolute return funds, including private equity and hedge funds that are in liquidation phases. The trust has historically acquired assets at an average discount of 58% to underlying net asset value, aiming to capture value as these assets are realised. The new capital will enable AIQ to expand its exposure to these discounted opportunities without waiting for liquidity from existing holdings.

Impact on Unitholders and Control

Major existing unitholders, including Robert Blann Holdings Pty Ltd and Boju Pty Ltd, which together represent approximately 58% of units, have indicated they will not participate in the rights issue. This non-participation is expected to create a significant shortfall, which will be offered to other eligible unitholders and potentially placed with new institutional or sophisticated investors. Consequently, the largest unitholder’s stake could be diluted from around 40% to approximately 20%, and the second largest from 18% to about 9%.

The rights issue is pro-rata, so if all eligible unitholders participate fully, control structures would remain unchanged. However, given the anticipated shortfall, dilution effects are likely for non-participating unitholders.

Risks and Forward Outlook

AIQ’s offer document outlines a range of risks including market volatility, liquidity constraints in underlying assets, valuation uncertainties, currency fluctuations (given the portfolio’s US dollar exposure), and regulatory changes. The trust also faces risks related to the performance and governance of underlying fund managers, as well as potential conflicts of interest within the investment manager group.

Looking ahead, AIQ intends to increase its distribution policy to 10% of adjusted NTA starting in early 2026, reflecting confidence in its portfolio’s cash flow generation. The success of this capital raising will be pivotal in enabling AIQ to capitalize on discounted secondary market opportunities and credit investments that could enhance returns over the medium to long term.