Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
End of the line: Chant West shareholders approve capital return
Chant West Holdings shareholders, in the company now known as Consolidated Financial Holdings, approved with an almost unanimous vote, a return of capital recently (August 31). Until last month the listed company owned two businesses – Chant West and Enzumo. They were both sold in June this year. While the publicly available figures from the listed company do not specify the price eventually paid by Zenith Investment Partners for Chant West, it looks like it was at least $1 million less than the original deal as announced earlier this year.
To cut a long story short, Warren Chant and partner Andrea West wanted to move to a semi-retirement phase and sold their profitable 20-year-old research firm in December 2015 for $9.5 million into a listed software systems company, Enzumo (later renamed Chant West Holdings). Chant West not only provided the fintech startup with steady earnings, it also came with $2.5 million in cash. And Enzumo’s software development was burning a lot of cash.
Enzumo’s software project program failed and all three Enzumo founders left the firm. Warren and Andrea stepped up to become joint CEOs in February 2017, owning about 12 per cent of the capital. Warren and Andrea resigned from their executive functions in November 2017 after recruiting Brendan Burwood, an entrepreneurial wealth management person, as the new CEO. Warren became chairman, replacing Niall Cairns, who spoke for the largest shareholding block, and Andrea remained as a non-executive director too.
But in early 2018 there was a boardroom coup which saw Warren and Andrea resign as directors and cease having any involvement with the company. The board was left with the two original directors, Niall Cairns and Phillip Carter (as the new chairman), as well as Brendan Burwood, who was to lead the company forward at a planned accelerated pace. Cairns and Carter had back-door listed Enzumo in May 2015.
But the growth plan went out the window at some point and the business was put on the market. It would seem that such a plan was going to take too long to implement for the big shareholders who initially invested in a financial planning fintech start-up. In February Chant West Holdings announced a memorandum of understanding with the private equity backed Zenith, valuing Chant West (before typical adjustments) at $12 million, but, shortly after, in March, as the share market hit stormy weather, Zenith said it wanted to void the deal. Chant West Holdings took them to court and the two companies settled on undisclosed terms in June.
Following the August 31 meeting, shareholders will receive 11c for each of the total of 126 million shares. After such a bumpy ride, it seems like not a bad return, certainly compared with what was likely to happen if the original Enzumo business was allowed to run its course.
– G.B.
