AIQ’s 2025 Diluted NTA Return Hits 2.0% with A$34.5 Million Rights Issue

Currency Pressures Temper 2025 Performance

Alternative Investment Trust (ASX:AIQ) delivered a diluted net tangible asset (NTA) return of 2.0% for 2025, a notable slowdown from the prior year’s 10.3%. The trust’s portfolio is predominantly USD-denominated, exposing it to currency risk that materialised as an approximately 8% appreciation of the Australian dollar over the year. This currency shift weighed on returns despite the underlying investments maintaining relative stability.

AIQ employs a two-year AU$15 million foreign exchange hedging program initiated in December 2024 to partially mitigate this currency exposure. The program, which carries low cost and no margin requirements, provided some cushion against AUD strength but did not fully neutralise the impact.

Rights Issue Fuels Capital Expansion and New Investments

In September 2025, AIQ completed a significant capital raise through a 1-for-1 non-renounceable rights issue, securing A$34.5 million at A$1.47 per unit. This move nearly doubled the trust’s size, enhancing its capacity to pursue new opportunities. Shortly after, in November, AIQ invested US$25 million (approximately A$38.2 million) into the WSS Master Fund, a vehicle focused on absolute return strategies via loans and preferred equity positions.

This capital raising is part of a broader strategy to scale the trust since its investment approach was restarted in February 2018, including prior placements and distribution reinvestment plans. Some of these capital events involved issuing units at discounts to NTA, which has diluted net asset value per unit and impacted reported returns.

Related Warana Funds Constitute Majority of Portfolio

Approximately 85% of AIQ’s NTA is invested in related Warana-managed funds, including Warana 2018, 2019, 2021, and 2023 Funds, Warana SP USA III-A LLC, and the WSS Kings and Master Funds. These funds provide diversified exposure to global absolute return strategies, private equity, private credit, real estate, and litigation claims.

The Warana Funds exhibit mixed performance for 2025, with some like Warana 2021 Fund posting strong gains (61% NTA return) while others such as Warana 2018 and Warana SP USA III-A recorded significant declines (-54% and -46% respectively). The WSS Master Fund, into which AIQ recently increased exposure, posted a modest 2% return but its figures are non-annualised given the recent investment.

Liquidity and Leverage Considerations

AIQ’s liquidity profile remains conservative, with only 6.3% of assets held in cash or equivalents and the remainder generally locked for more than 12 months. The trust expects to settle any short-term liabilities within 10 business days. The Warana Funds mostly restrict redemptions, except for the WSS Master Fund which allows quarterly withdrawals.

Leverage within the Warana Funds is primarily indirect, arising from underlying investments. WSS Master Fund holds a credit facility maturing in 2028, while other funds have limited borrowing capacity but no current debt. Transparency on underlying leverage is limited.

Stable Service Providers and Legal Disclaimers

There were no changes to key service providers during the year, aside from the addition of Grant Thornton for U.S. tax services. The annual report reiterates standard legal disclaimers emphasizing that neither the responsible entity nor Warana Capital guarantees investment performance or capital return, underscoring the inherent risks in AIQ’s investment strategy.