Australian Leaders Fund (ALF) has announced a $45 million equal access off-market share buyback scheme as it prepares for the end of the longest business cycle and believes a downturn or slowdown is inevitable over the next few years.
In an announcement to the Australian Securities Exchange (ASX), the fund declared a final dividend of 2.5 cents per share, 50% franked for FY19.
It said it would launch initiatives covering both short and long-term capital management to have a meaningful and sustained impact on the firm’s net tangible asset (NTA) backing discount.
Subject to shareholder approval, the off-market buyback of up to 20% of the ordinary shares would be available to eligible shareholders. A further off-market buyback was also in the pipeline in the future.
The firm noted none of the board’s directors intended on tendering their shares into the buyback despite feeling it a necessary step to address the discount to NTA.
Noting that the current business cycle was the longest in the modern era and a downturn looming, ALF said “there will be opportunities for the investment manager to make full use of its mandate, taking active tactical positions both long and short, as it has done to great effect in the past.
“This was best typified during the global financial crisis (CFS) in 2008/2009 financial year, where the All Ordinaries Accumulation Index fell by 22%, while ALF’s portfolio increased in value by over 26%, outperforming the market by 48.6%.”