CD Private Equity Fund Insights

Summary : On 26 Oct, E&P released details of its Updated Merger Proposal via a Supplementary Explanatory Memorandum and PDS . I previously summarised concerning questions regarding what the Updated Merger Proposal nominally offers compared to the reality when you parse the tricky language and obfuscation. In this post, I provide further details on the stated aims of the Merger Proposal with my commentary. And then I clarify the true aims, which unsurprisingly are in E&P's interests, not investors in CD1, CD2 or CD3. E&P has already let slip the true aims and can't delete them!

 Summary : Just a week after releasing the secret Merger Proposal, E&P flagged major changes after furious feedback from CD1/2/3 investors seeing they were going to be trapped for several years. On 26 Oct, the details arrived in the form of a Supplementary Explanatory Memorandum and PDS. In a subsequent more detailed post, I will conduct a full examination of the actual purpose of the Merger Proposal. For now, I will simply list a few pertinent questions CD1/2/3 shareholders should consider before voting. Savvy investors can now see the real motivations of the Merger Proposal

Summary : In prior posts using CD2 as an example, I explained that if E&P were a truly responsible entity it would be adding value for shareholders by providing a continuous flow of accurate, meaningful information on what each CD fund owns rather than a black box or incomplete, out-of-date or misleading data.  In this post, I will utilise the disclosures in the Explanatory Memorandum to provide some insight into what CD4 owns. This is particularly relevant for CD1/2/3 shareholders as CD4 companies (and their marked-up valuations) will suddenly become their biggest exposure if the Merger Proposal succeeds. An opaque CD4 portfolio is a minefield for CD1/2/3 investors if the merger vote succeeds!

  Summary : E&P argue the massive NAV discounts in CD1/2/3 in the current structure are unresolvable despites its best efforts, hence its Merger Proposal. Yet, as I have shown, the extent of the discounts are due to E&P's lack of effort and competence in managing such a fund. I do more to provide meaningful insights, unpaid, with a few hours of my free time, than E&P has done in several years. Instead, they waste millions in investor funds working on proposals that benefit them but are not desired by investors and will be voted down once again. In this post, I will provide some insight into the specific companies that CD2 owns via the U.S. LP Funds. If E&P was doing its job, I wouldn't need to turn super sleuth!

  Summary : I've been a holder of CD2 for a couple of years and have had to maintain my own spreadsheets trying to figure out what it currently owned because E&P's monthly reports and CD funds website are so inaccurate and limited. In this post, I'm going to provide some insight into what CD2 actually owns as an example of how a truly responsible entity could be adding value for shareholders and making best efforts to reduce the NAV discount. E&P's struggles with transparency and accurate info are key to the discount

Summary : Just a week after releasing the secret merger proposal (over 400 pages in total) it has spent months working on, E&P rushed out a 1 page Merger Proposal Update . It is desperately trying to stop a flood of votes AGAINST being cast by furious CD1/2/3 investors by allaying their concerns. However, the merger is hopelessly flawed via its inclusion of CD4 and the ending of CD1/2/3 investors sight of the exit line in the specific self-liquidating funds they chose to be in. In this post, I will translate E&P's Merger Proposal Update into more accurate, candid language. E&P yet to climb the first step in candid communication!

  Summary : If you own any shares in CD1, CD2 or CD3 you have till 9am Nov 5th to vote on E&P's merger proposal. Voting is open and it's best to vote NO early so that you don't miss the deadline and also to put maximum pressure on E&P to give up on the merger or make maximum concessions before the vote. Below is a step-by-step screenshot guide on how to vote. Note: If you don't vote For or  Against or Abstain then E&P will direct all Open votes to be in favour. Vote NO or don't ever complain you got trapped in the new merged fund!

Summary:  On 5 Oct, E&P proposed to merge the self-liquidating funds CD1, CD2, CD3 with the unlisted CD4 into a single, unlisted permanent fund with no cash distributions, pooled outcomes (not specific to the fund investor's bought) and max 5% of units per 6 months able to be sold (starting Dec 2023). On 14 Oct, they rushed out a major update: CD1/2/3 investors were furious at suddenly being trapped and the update promises to prioritise withdrawals before new investments. However, the many significant reasons for shareholders in CD1/2/3 to vote against the merger remain, with the hasty application of lipstick to the pig fooling no-one who has looked at this proposal closely. Look closely or your feet will get burnt!

Summary : E&P argue the massive discounts CD1. CD2 and CD3 have traded at are unresolvable in their current structure due to the reputation overhang from the rapacious losses that URF and New Energy Solar investors suffered under the prior incarnation of Dixons Advisory. This is completely false. The discounts are resolvable if the CD funds were professionally managed due to the commendable performance of the vast majority of US private equity firms the Cordish family partnered with. E&P have done none of the obvious steps to reduce the discount

Summary : In it's Explanatory Memorandum  (Section 3.3, pg 10) about the CD fund merger E&P lists the following reasons a shareholder might vote in favour. I have provided initial comments on these below. Update : On 14 Oct 2022 E&P rushed out a Merger Proposal Update: CD1/2/3 investors were furious at suddenly being trapped and the update promises to prioritise withdrawals before new investments. However, the many significant reasons for shareholders in CD1/2/3 to vote against the merger remain. I will wait for details of the revised Proposal before further comments. However, the original comments below largely stand and are worth considering given E&P recommended it to shareholders as in their best interests! Even if you trusted E&P before, should you still trust them now? The harder you look the less sense E&P's arguments make!