Update Altamir SA: No “CEO self service vehicle” but still the same fees

A few days ago, I looked briefly at Altamir, the French listed Private Equity vehicle which invests exclusively into APAX funds.

This is what I wrote about the CEO and largest shareholder Maurice Tchenio based on how I understood the fee structure:

So the “privilege” of a shareholder to invest into APX via Altamir is purchased quite expensively. This also puts the CEO investment a little bit in perspective. Yes, he has invested around 100 mn of his own money into Altamir, but in 2014, the management fees and profit share netted him close to 30 mn EUR direct, whereas the proportional profit of his share position was “only” 15 mn EUR.

Last week I got a very friendly Email from Altamir’s IR with the offer to explain the fee schedule in more detail. As a follow up they did send me a nice memo with all the details.

In a Nutshell, Tchenio only receives around 2,5 mn EUR from two sources:

– he is entitled to ~22,5% of the “carry” on the old direct investments

– plus he keeps 5% of the adivisory fee paid to the general partner for the direct investments

As the IR pointed out, Tchenio earns more in dividends on the stock than on those fees, so the alignement between him and shareholders is better then I have assumed before.

Just to recap how the fees and carried interest are structured a short list based on 2014

Fees/costs: 17 mn EUR thereof

– 6,8 mn EUR fund level fees

– 1,9 mn EUR HoldCo cost

– 8,4 mn EUR fees charged by the GP (inlc. 1,4 mn VAT), 95% passed on to APAX

Carried interest: 13 mn EUR thereof

– 4,3 mn APAX fund level

– 8,5 mn direct investments, therof Mr Tchenio as former APAX partner 1,9 mn EUR

Having clarified this, this still leaves the issue that 17 mn cost for a 600 mn portfolio is quite a lot. The almost 3% fee includes ~30% listed stocks (Altran, Albioma, GFI) and cash.

As an investor, I could replicate those stocks much cheaper than what Altamir is offering, or alternatively I could invest in a French based value fund like for instance Amiral. This is a comparison chart between the CAC Small&MidCap index, Altamir and the Amiral Sextant PEA, a smallcap value fund since 2002:

alta3

The lowest line is the index and we can see that Altamir has beaten the index by around +1,5% p.a. However the Amiral fund has beaten Altamir by a large margin despite charging also around 2% fees and a 15% performance fee. Although this is clearly no apples-to-apples comparison it clearly shows that Altamir’s perfomance is not that stellar (after fees).

Summary:

So my assumption that Mr. Tchenio is pocketing a large amount of the fees was clearly wrong. Nevertheless, at least for a “non tax advantaged” investor like me, Altamir doesn’t really offer any value. The fees are much to high and justify a discount. If the right dicount is 30% or less could be discussed but paying 3% + carry on 30% listed stocks is not a real value proposition and will always lead to a discount epsecially on cash and listed companies. Again, if the discount would widen more, it would be maybe worth an investment but for now, I think I can find better investments, especially in France.

5 comments

  • Also to finish on this one and criticise a bit your chart starting from 2002:

    Amiral (Sextant) did very well post internet bubble when Badlon launched his house with trades (the best ever was Aufeminin – 25x or 30x?) that they will never be in position to replicate as they are now larger and would never take the risk to hurt (a second time) their track record.

    I have money with them and they are a good team with just the same invst philosophy as mine (and yours 😉 ).
    I also like the fact that they now hedge with futures and are much more carefull about liquidity.

    • zyx,

      thank you for your detailed comments. I agree that comparing Altamir with Amiral is an Apples to Oranges comparison. And the Amiral funds are really expensive and yes, with larger funds it will be harder to replicate the earlier successes.

      I still think “do it yourself” is better than paying 2/20 …

      • If you have got lot of time, discipline and a bit of financial skills yes…
        >> I am also in IGE and Trilogiq… like Amiral. If you like LBOs take a bit of Linedata… like Amiral.

        If you are too busy and do not want to get your hands durty: pick a good manager and work on a macro asset allocation with the simple strategy of putting more when markets are down and taking your cash out when market is up. I was able to call the 2008 crisis in 2007 (luck but also a bit of inside) and it was worth all the value investing strategy on Earth! With simple ETF you beat funds like Amiral.

        Today I am still invested but clearly not to the max.

        Good trades!

  • Hi there!
    I am in Altamir and in Sextant PEA (Amiral Gestion). So I guess I could bring a quite unbiased view here and as a value investor I still believe Altamir does the job.

    1. Sextant PEA is not cheap (from Boursorama):
    Frais d’entrée : 2.00 %
    Frais de sortie : 1.00 %
    Frais courants ** : 2.40 %
    Dont frais de gestion : 2.40 %
    Commissions de performance :
    15.00 % par an de tout rendement réalisé par cette classe d’actions qui dépasse la valeur de référence définie pour cette commission

    2. Altamir gives you access to a different asset class, Private Equity, not only French small caps. What you get with PE:
    – control over the invested companies
    – alligment of the company management to the PE house
    – leverage on your investements. 3.7x EBITDA in 2014. You do not have to bother about leveraging your book. They do it on all their deals (Also on listed stuff: I do not know how if those guys do but not rare to see PE houses putting leverage at Holdco level (i.e. leveraging the Altran holding))

    3. Others:
    – Regular dividends c.4%
    – aligment btw Tchernio and other shareholders (though no control premium because of the legal structure of Altamir), (I know Amiral team invest in their funds but they prefer the safer one: GL for obvious reasons)
    – growing NAV (when times are good),
    – closed end funds (look at the repayment on Amiral Gestion during the crisis) which protect value for LT investors
    – a decent pile of cash
    – PE returns tend to be in the 15%/20% IRR post fees over LT, so a nice snowball (I am not naive here: return is on the invested amount only!)
    – cleaner than what I thought first (just like you…) fee structure. Not a fund of funds charging twice!

    4. The discount on the NAV

    >>> these are all the reasons why Moneta AM (the best – and by far – French investor around!!) has a large chunk in this one and are pushing Apax guys to return value to shareholders.

    https://www.boursorama.com/bourse/opcvm/palmares.phtml?current=long&fromSearch=1&critgen=2&souscritgen=LC00000036&DEVISE=&valider=valider#opcvm_search

    Just to make sure the story is not too good:
    – I know Moneta bought it at much lower price…
    – I know what happened when Mandarine Gestion sold out (I picked some a 1euro to sell at 2euro in just one month – my best and worst trade ever… Life!)
    – I know how PE firms behave with their small LPs and the 2/20
    – I know this is a nice feeder fund for Apax with stucked investors
    – I know leverage works on both side

    If you want real value, have a look at I2S. A French net-net. Very very small, illiquid and risky but I am in it! Even the Daubasses don’t want it!

    This post is not to encourage anybody in away to invest in any of those stocks.
    I am invested in I2s, Sextant PEA and ALtamir.

    Best

  • “What counts in the long run is the increase in per share value” (from The Outsiders, by W. Thorndike).

    This is where the people of Altamir do not get it right. If they were more serious and really believed in the NAV of the company, they would do whatever they can to reduce the very deep discount to NAV (35%!).

    Why do they make new investments when they can buy their shares at such a bargain price and really increase per share value?

    Good job as usually, Mr MM.

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