Frank Brosens Long Kaupthing Icelandic Bank: Invest For Kids Chicago 2016 ~ market folly

Thursday, October 27, 2016

Frank Brosens Long Kaupthing Icelandic Bank: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Frank Brosens of Taconic Capital who pitched long Kaupthing, one of three Icelandic banks.

Frank Brosens' Presentation at Invest For Kids Chicago 2016

•    $6 billion AUM, event-driven and multi-strategy

•    Risks are high due to central banks

•    We seek very low correlation in our investments; we want no beta or duration; look for non-economic actors and forced sellers

•    Angst in the hedge fund industry as high as ever, but the opportunity is actually pretty good •    Returns likely to be muted versus historical levels

•    Long Kaupthing, one of three Icelandic banks

•    Iceland’s banking industry swelled in the prior decade to unsustainable levels – assets/GDP of ~10x

•    We are largest Kaupthing creditor, having acquired most of the stake in 2012 and 2013

•    In 2015 our partner in London got restricted and entered the negotiations with Icelandic task force

•    In December 2015 the liquidation process finally commenced; payouts began in January 2016 but only 1/3 of proceeds distributed so far

•    >200 assets in 12 countries; disclosure is very opaque – have to be a detective

o    Our partner went person by person within Kaupthing, often using LinkedIn, to piece together relationships and affiliations; then talked to local businessmen and brokers to triangulate asset values

o    Today, 16% cash, 33% operating assets and real estate, 25% stake in stable Icelandic bank, 25% other/misc.

o    We believe our notes are worth par, with some upside beyond that, against a price of 86

o    Most asset sales are coming in the next few quarters, so time horizon should be one year or less

Be sure to check out the rest of the presentations from Invest For Kids 2016.

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