Accessing Apax Partners investments
through the stock market

20 years 1995-2015

Why are you suing Moneta?

The suit is based on a note dated 17 April 2015 which includes "unfounded and misleading" allegations on Altamir's performance and fees. This note was broadly circulated by Moneta Asset management prior to Altamir's shareholders' meeting and published online on its website.

Altamir hired a renowned independent expert, Mr Didier Kling, an Expert to the Court of Appeal of Paris and accredited by the French Cour de Cassation, in order to objectively study the content of this note. His conclusion was uncompromising:

"In the end, it therefore appears that the demonstrations produced by Moneta in its note dated 17 April 2015, whether with respect to Altamir’s management fees or its performance, are biased and tainted with many methodological inconsistencies that do not comply with standard practice. Consequently, all of the conclusions drawn are unfounded and misleading and, as such, could misguide readers and skew their judgement."

Consequently, Altamir filed a legal action against Moneta Asset management. It is Altamir’s duty to put an end to the dissemination of misleading information in the market, thereby protecting its interests.

How does Altamir's performance compare to that of its peers?

Altamir delivered an excellent performance in 2015, with 19.1% pre-dividend growth in Net Asset Value (NAV).
According to Morningstar NAV TR data published in February, which measures the performance of NAV, dividends reinvested, Altamir outperformed the Morningstar Investment Trust Private Equity index (composed of 20 listed European private equity companies) over 1 year, 3 years, 5 years and 10 years (as of 31/12/2015).

What are your management fees? Are they higher than average?

Altamir is among the most cost-efficient companies in its sector. It has opted for full transparency and is one of the only companies in its sector to publish both direct fees (paid by Altamir) and indirect fees (paid by the Apax funds in which it invests).
In 2015, direct fees represented 1.69% of the average NAV, whereas total fees (both direct and on amounts subscribed to in the funds) represented 2.86% of the average of the total capital committed and invested.
Contrary to Moneta’s statements in its note of 17 April 2015, Altamir is one of the most cost-efficient companies, as confirmed by the report of Mr Didier Kling, an Expert to the Court of Appeal and accredited by the French Cour de Cassation:

"Clearly, when one considers the type of fees taken into account by the companies in the sample selected by Moneta and conducts a comparison using a consistent basis, the conclusion reached is exactly the opposite of that of Moneta. It is interesting to note that regardless of whether one analyses direct and indirect fees together or direct fees only, Altamir is still one of the most cost-efficient companies. (…) An effort to establish consistency leads to the conclusion that not only is Altamir cost-efficient, it is more efficient than the average of the sample selected by Moneta, contrary to what the latter indicates."

Why does Altamir invest exclusively with Apax Partners ?

Altamir's strategy is to build on the strengths of the Apax brand. A pioneer and leader in the private equity industry, Apax Partners has a 40+ year track record of making successful investments which have led to consistent outperformance of private equity and global public market benchmarks.

Founded by Maurice Tchenio, a co-founder of Apax Partners, Altamir was created and listed on the Paris Stock Exchange in 1995 as a means to access the Apax Partners France portfolio through the stock market. The vehicle has grown to include investment in the funds of London-based Apax Partners LLP.

To date, Altamir has invested alongside or in Apax Partners funds via four successive and concurrent investment mechanisms, as follows:

  1. Co-investment alongside Apax Partners France (from 1995 to 2011);
  2. Investment in Apax Partners France funds (beginning in 2011 with Apax France VIII);
  3. Investment in Apax Partners LLP global funds (beginning in 2012 with Apax VIII LP);
  4. Co-investment alongside Apax Partners LLP and Apax Partners, as the opportunity arises.

What is the rationale for the stated objective of growing AuM to €1Bn?

The Manager has stated as one of Altamir's three principal objectives to grow assets under management (roughly €500m at present) to a critical size of €1Bn. The reasons are threefold:

  • To increase the universe of potential shareholders by increasing liquidity of the shares. At present, many institutional investors that are interested in the Altamir investment case are not able to invest in the vehicle due to its relatively small size, and to the low liquidity of the shares. Doubling assets under management to €1Bn should tangibly address the liquidity issue.
  • To remain viable within a consolidating sector. Listed Private Equity is a sector in consolidation. Recent cases in point are provided by the acquisition of Conversus Capital by Harbourvest, and by the merger between Aberdeen Private Equity and SVG Capital. The Manager believes that in order to remain a vital and viable player in this space, two critical factors are a relatively large size, and a strategy of differentiation vis-à-vis other players in the sector.
  • To remain an essential partner to Apax Partners France, and to become a very important partner to Apax Partners LLP, thus securing the ability to optimize performance via dynamic cash management (ability to adjust commitment levels semi-annually to available cash). In order to play this role vis-à-vis the two fund managers via which it invests, Altamir must ensure its position as a Limited Partner of significant size within the investment funds to which it makes commitments.

How is the investment portfolio valued?

Altamir’s valuation policy and process

Altamir’s portfolio comprises:

  1. Direct co-investments, primarily alongside Funds Apax France VI and VII; and
  2. Investments through Funds Apax France VIII and Apax VIII LP (a global fund).
  • In either case, portfolio companies are valued by the Funds’ investment managers, reviewed by the Funds’ auditors, and agreed upon by the Board of Advisers of the Funds.
  • Altamir’s policy is to follow the valuations made by the Funds’ investment managers.
  • In addition, these valuations are reviewed by the management of Altamir Gérance, by Altamir’s auditors, and by the Audit Committee of Altamir’s Supervisory Board.

Methods of valuation

Altamir’s investment managers – Apax Partners SA and Apax Partners Mid-Market in France, and Apax Partners LLP in the UK – use valuation methods that comply with the International Private Equity Valuation (IPEV) guidelines.  Valuations made by the Apax Funds’ managers have always been conservative, as evidenced by consistent uplifts when portfolio companies are exited. 
Apax Funds value their unlisted investments on a semi-annual basis, and their listed investments on a quarterly basis.

Apax’s valuation of unlisted investments:

  • Companies in the portfolio for more than one year
    • Valuations are usually based on the multiples of a sample of comparable companies (listed companies and recent transactions).
    • Adjustments:
      • Apax Partners France may apply an adjustment of up to 30% on portfolio companies, based on an assessment of their liquidity.
      • Apax Partners LLP generally applies no adjustment, as their investments tend to be larger companies.
  • Companies in the portfolio for less than one year
    • Apax Partners France holds companies at acquisition cost during the first year, except for specific cases
    • Apax Partners LLP usually holds Growth and Venture investments close to acquisition price.  Buy-Out investments may be re-valued at day one.

Apax’s valuation of listed investments:

  • Listed investments are valued at the closing price of the last day of the reporting period.
  • Adjustments:
    • Apax Partners France applies an adjustment (in a range of 5% to 25%) to listed shares that are subject to a lock-up, and also in extenuating circumstances.
    • Apax Partners LLP generally does not apply adjustments to its listed investments, but may do so if warranted by extenuating circumstances (not including lock-up restrictions). 

What is the legal structure for Altamir?

Altamir is a Société en Commandite par Actions (French Limited Partnership by Shares), and from a tax perspective has opted for the tax status of "Société de Capital Risque" or SCR (translated as venture capital company).

What is a "Société en Commandite par Actions" (French Limited Partnership by Shares)?

A société en commandite par actions (Limited Partnership by shares) or SCA is a French legal structure with two types of partners:

  • Limited Partners or shareholders who own the existing shares of the company, an any shares that may be issued in the future, and have limited liability as relates to the company.
  • A General Partner with unlimited liability

In the case of Altamir, the General Partner appoints the management company, which in turn is overseen by a Supervisory Board (conseil de surveillance), made up of ordinary shareholders of the company.

What are the management fees paid by Altamir to Altamir Gérance (the management company) and Apax Partners SA, the investment adviser?

1% excl. tax (1.2% incl. VAT) semi-annually on statutory shareholders’equity. 95% of the fees are paid to Apax Partners SA under the investment advisory agreement and 5% are paid to the management company Altamir Gérance.

Does Altamir pay fees to the Apax France funds VI, VII and VIII to co-invest in their portfolio companies?

No, it does not.

What fees are paid to the managers of Apax France VIII and Apax VIII LP?

As an LP in the Apax France VIII and Apax VIII LP funds, Altamir pays the same management fee as all other investors in those funds. It is the same for the carried interest.

Is there a double fee structure?

In order to avoid a double fee structure on the investments made through the Apax Funds (Apax France VIII and Apax VIII LP), a fraction of the management fee paid by those Funds to their managers (Apax Partners MidMarket and Apax Partners LLP) is deducted from the management fee due by Altamir. However, there is ultimately an additional layer on the management fee, since the Apax Funds (Apax France VIII and Apax VIII LP) charge fees on committed capital while the amount of the fee which is deducted is only computed on the amount of equity actually invested by Altamir in those funds. No performance fee (carried interest) is paid at the Altamir level for the investments made through the Apax France VIII and Apax VIII LP funds.

Why is the payment of a dividend included within Altamir's objectives?

Altamir's primary objective is to maximize total Shareholder Return (TSR). A mechanism for achieving this is the payment of an annual dividend. While yield is not a priority for larger investors, it is regarded as an important component of shareholder return for many other investors (both institutional and private). Please see below for further details on the dividend policy and the rationale behind it.

What is Altamir's dividend policy? What is the rationale for this policy?

In March 2013, Altamir's Supervisory Board established a new dividend policy, defined as a range of 2% to 3% of year-end NAV, to be paid annually. The new policy is expected to provide an annual dividend which is:

  • Sustainable: NAV is always positive.
  • Visible: NAV is published on a quarterly basis; analysts can update their dividend estimates on an on-going basis with availability of new information.
  • Growing: The objective pursued by the Manager is NAV growth; barring a cash crunch, the dividend should grow at the same rate as NAV

Does Altamir have a share buyback program in place?

Altamir does request from its shareholders at each AGM the faculty to buy back its own shares on the stock market. This faculty is used to put a "liquidity contract" in place, executed by a top tier French broker, which serves the role of ensuring a minimum level of liquidity in Altamir shares. The number of shares bought and sold, and the amount of cash used to buy and sell the shares is reported by Altamir twice a year.

Altamir's Manager does not believe that it would serve the best interest of the company or its shareholders to carry out a share buyback program in order to cancel its own shares. In effect, the outcome of such a program would be to further reduce liquidity of the shares. Most importantly, after studying the issue in great detail, there is no evidence to suggest that share buyback programs carried out by listed private equity players have any long-term effect in reducing the share price discount to NAV.

What are the tax advantages of a SCR (Société Capital Risque)?

Under French law, SCRs have full tax exemption for all income received and capital gains realized by the SCR. Consequently, as an SCR, Altamir does not pay corporate taxes.

What is the impact of the French tax reform of 2013 on Altamir?

Given its status as an SCR, the French tax reform of 2013 has a negligible impact on Altamir.

What is the advantage of the SCR status for investors?

The shareholders of a company with SCR status may be exempt from tax under certain conditions. Individual investors who reside in France and commit to hold their shares and re-invest the dividends for five years, do not pay capital gains taxes on dividends, nor do they pay capital gains taxes when they sell their shares, assuming they comply with the five-year commitment. Individual shareholders who reside outside France and make the same commitments, will not be subject to withholding tax. Legal entities residing in France are exempt from tax on capital gains on disposal of Altamir shares held for at least 5 years, and exempt from tax on dividends which are derived from capital gains on sale of equity investments.

Further information regarding the tax benefits of SCR and the impact on French resident or non-resident shareholders are available in Altamir’s Registration Document.

What are the eligibility requirements for the SCR tax status ?

The main rules and restrictions that apply to SCRs are the following:

  • The sole purpose of the SCR, barring exceptions, must be the management of a portfolio of securities.
  • The SCR must have at least 50% of its net book value invested at all times in non-voting equity securities, shares or securities giving access to shares issued by eligible companies:
    (i) whose shares are not publicly traded;
    (ii) whose registered office is located in a European Union Member State, Norway, Iceland or Liechtenstein;
    (iii) engaged in industrial or commercial business activities (as described in Article 34 of the French Tax Code), excluding non-commercial activities;
    (iv) that are subject to corporation tax or would be subject to the tax if they engaged in the same activities in France under the same conditions (newly established companies exempted from corporation tax may also be eligible).
  •  The SCR may not hold more than 40% of the voting rights in an eligible company as a result of its shareholding.
  • An SCR may not invest more than 25% of its net book value in securities issued by any one company.
  • The SCR’s cash borrowings may not exceed 10% of its net asset value.
  • No individual may have, together with the individual’s spouse, ascendants and descendants, directly or indirectly, rights to more than 30% of the net income of the SCR.

Why has Altamir historically traded at a discount to its NAV? What is the Manager's view and outlook?

There are several factors that have an impact on the share price discount to NAV in the listed private equity sector. On the one hand, Listed Private Equity (LPE) stocks are not immune to macroeconomic trends and the tendencies of their respective stock markets. Within the sector, issues related to perceptions of the quality of the investment portfolio, the manager, transparency, disclosure and liquidity also have an impact on the discount.

After studying this issue in great detail, our conclusion is that the factor most highly correlated to share price performance and the discount is long-term total shareholder return: the LPE players with the highest total shareholder return over ten years present the lowest share price discount to NAV.

Altamir actively seeks to reduce its discount, and this is one of the driving factors of the recent change in dividend policy. A higher TSR should lead the discount to narrow. The market's reaction to the announcement of Altamir's new dividend policy on 7 March 2013 lends credence to this hypothesis.

In addition to the new dividend policy, other factors which we believe will lead to a narrowing of Altamir's discount are:

  • Internationalization of the portfolio
  • Expansion of analyst and broker coverage
  • Increase the number and scope of International roadshows
  • Increasing attractiveness of LTA shares for private investors in France (tax advantages)

What is Altamir's performance against the most relevant indices?

Net asset value

NAV Total Return as of 31 December 2015 over 1, 3, 5 and 10 years (Morningstar data as of 20 April 2016)

Comparative performance 1 - 3 - 5 - 10 years
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