• Portfolio Performance: Increased by a little over 5% in the last 12 months.
• Historical Performance: Approximately 9.8% since Wilson Asset Management took over.
• Trading Discount: Currently trading at about a 13% discount.
• Yield: A little over 5% fully franked, grossed up to over 7%.
• Portfolio Composition: Approximately 75% of the portfolio has been exited and reinvested.
• Defensive Portfolio Return: Infrastructure delivered 11%, with 7.5% as income return.
• Private Debt Yield: Running yields approximately 9%.
• Cash Level: Just over 25%, with two-thirds already committed.
• Realized Exits Premium: On average, 35% premium on exit to carrying value.
• Recent Exit Example: Birch & Waite delivered over 25% internal rate of return or 3.5 times money invested.

• Warning! GuruFocus has detected 5 Warning Signs with ASX:WMA.

Release Date: September 17, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The portfolio achieved a solid performance with a little over 5% growth in the last 12 months.
• Since Wilson Asset Management took over, the portfolio has grown by approximately 9.8%.
• The company is democratizing access to private equity, providing a balanced portfolio option.
• The portfolio includes a strong defensive segment with stable investments in infrastructure, healthcare, real estate, and private debt.
• The company has successfully exited 75% of its inherited investments, indicating effective portfolio management.

Negative Points

• The portfolio is still trading at a 13% discount to NTA, despite efforts to narrow this gap.
• The market environment has been challenging, with low transaction volumes affecting private equity exits.
• The valuation process is complex and varies across asset classes, which can be difficult for investors to understand.
• There is uncertainty regarding the premium target, which may deter potential investors.
• The company has faced difficulties in reducing its allocation to water rights, which has been volatile due to climate factors.

Q & A Highlights

Highlights of WAM Alternative Assets Ltd (ASX:WMA) Earnings Call

Q: When looking at the investment portfolio exposure, should uncalled capital commitments be considered as cash and cash equivalents? A: Dania Zinurova, Portfolio Manager: We report uncalled capital commitments as cash because we need access to those funds within 14 business days' notice. However, in our reports, we show it as total cash flow.

Q: Can you discuss the valuation process for the holdings in the portfolio? A: Dania Zinurova, Portfolio Manager: We conduct valuation assessments on all 129 assets every six months, involving independent valuation reports and market updates. Different valuation approaches are used depending on the asset class, such as discounted cash flow for real estate and KPM approach for infrastructure.

Q: You mentioned reducing the investment portfolio's allocation to water rights. Do you have plans to reduce this further? A: Dania Zinurova, Portfolio Manager: Yes, we plan to reduce it to approximately 10% to 12% by early next year. Part of the current allocation is linked to our investment in the Strategic Australian Agriculture Fund, which is maturing.

Q: Are any of the WMA holdings geared, and if so, what is the overall look-through gearing level? A: Dania Zinurova, Portfolio Manager: The WMA portfolio itself isn't leveraged. Underlying investments use gearing, and the overall look-through gearing level is approximately 30%.

Q: Can you advise if the premium to NTA target has been achieved and how you intend to address this by October 2025? A: Geoffrey Wilson, Director: The target has not been consistently achieved. We are confident it will trade at a premium, but the timeline is uncertain. We continue to engage with shareholders and improve the portfolio to achieve this goal.

Q: Why not bring the vote forward to remove the uncertainty regarding the premium target? A: Geoffrey Wilson, Director: Bringing the vote forward could be seen as a no-win situation. We decided to stick to the original timeline to avoid any perception of manipulating the process.

Q: What does "harvest of investment" mean, and does WMA still hold property in the United States? A: Dania Zinurova, Portfolio Manager: Harvesting means selling your equity stake and realizing the investment return. Currently, we have low exposure to the US market, with some private equity businesses having minor holdings there.

Q: Are alternatives short or long-term investments? A: Sally Box, Investment Committee Member: Alternatives are generally longer-term investments, often requiring patience to see through the business plan or strategy.

Q: How do you make the decision to completely exit a holding? A: Dania Zinurova, Portfolio Manager: Each exit is unique. Generally, once the investment is matured and there are interested buyers, a full exit is considered. Market conditions and the specific circumstances of the investment also play a role.

Q: If there is no success addressing the discount to NTA, what can or will be done? A: Geoffrey Wilson, Director: We have a defined strategy to address the discount, including performance, providing a growing stream of income, treating shareholders equitably, and having a robust shareholder engagement strategy. We will continue these efforts.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.