FCEV F&C Event Driv

    RNS Number : 9981D
  F&C Event Driven Limited
  22 September 2008
   


    F&C Event Driven Limited 
    22 September 2008 

    Estimated Monthly NAV 29 August 2008 



    F&C Event Driven Limited (the "Company") 



    As at the close of business on 29th August 2008, the estimate net asset value per share of the Company's ordinary shares (� shares) is
86.39 pence. 


    This valuation, which has been prepared in good faith by the Company's investment adviser, is for information purposes only and is based
on the unaudited estimated valuations supplied to the Company's investment adviser by the administrators or managers of the Company's
underlying investments. Such estimates may be subject to little verification or other due diligence and may not comply with generally
accepted accounting practices or other generally accepted valuation principles. In addition, some of those estimates may not be supplied on
a regular or timely basis with the result that the values of such investments are based on the latest available estimates which may be some
time before the date set out above.  17 of the Company's 22 managers have been valued within 7 days of the above date. Certain other risk
factors which may be relevant to these valuations are set out in the Company's prospectus. 

    Estimated top ten holdings:

 Canyon Value Realization Fund (Cayman), Ltd  8.5%

 Glenview Capital Partners (Cayman) Ltd       8.5%

 Polygon Global Opportunities Fund            8.2%
 NGA Fairfield Limited                        7.4%
 Tosca Fund Limited - USD Class               6.5%
 Litespeed Offshore Fund Limited              6.1%
 Taconic Opportunities Offshore Fund Ltd      6.1%
 Amber Fund (Cayman) Limited                  6.1%
 Shepherd Investments International Ltd       6.0%

 LIM Asia Arbitrage Fund                      5.3%

    Data source: F&C Partners LLP; Holdings shown as a percentage of Fund Net Asset Value.


    Estimated month asset allocation and performance attribution: 

               Distressed Debt  Emerging Market and   Equity Long / Short  Merger Arbitrage /    Multi Strategy
                                Asia                                       Event Driven          Arbitrage
 Weight        18.3%            5.3%                  14.9%                43.4%                 18.0%
 No. of Funds  4                1                     2                    12                    3
 Attribution   -4bp             -2bp                  -22bp                -62bp                 11bp

    Data source: F&C Partners LLP; Allocation shown as percentage of Hedge Fund investments, Attribution based on Event Driven GBP fund
Gross Performance. 


    August comment: 

    I am writing this commentary in mid September after a week in which Freddie Mac, Fannie Mae, Lehman Brothers, Merrill Lynch, HBOS and
AIG have all failed. It is impossible not to bring some of that perspective into the August commentary.  

    The key feature of the market remains liquidity. The scale of the problem continues to reveal itself as its implications reach out from
the financial sector to all geographies and sectors. Last year, Bernanke estimated that the total write down might be in the order of $50 to
$100 billion. This estimate may well have been right in the first instance, but it did not take into account the simple fact that a
reduction of $100 billion in bank equity requires either another $100bn to be raised in new equity or the sale of assets by banks. But each
$1 of equity in a bank supports up to $30 of assets. So in the absence of new equity, the alternative is the sale of up to $3 trillion of
assets. The sale of assets inevitably leads to significant mark downs which in turn leads to more losses and the need for further equity or
further asset sales. So far, declared losses are in the region of $520bn.

    The good news is that new equity has been raised. Since the third quarter last year, there have been around 75 capital raising from
banks totalling $365bn. The bad news is that virtually none of these new shares are trading above the price they were sold for. In fact,
many are trading at a mere fraction of their issue value. These immediate losses have warned off the very investors that the banks need to
attract and have left them with no alternative but to sell assets to bring their equity to asset ratios back into line.

    Estimates of eventual losses in the financial sector are now in the region of $1 trillion to $2 trillion - that is 20 times the Bernanke
number of one year ago and 2 to 4 times the amount already declared. 

    Any sensible bank executive faced with the imperative of having to radically reduce his balance sheet is not going to be too sympathetic
to making new loans. From being the engine of economic expansion, banks have turned tail and are calling in loans wherever they can.
Companies whose businesses rely upon even moderate access to overdrafts and credit are finding that they no longer have access to cash. For
example, clothing retailers stocking up for the winter season found they could no longer finance their stock. This is evidenced by sharply
increasing receivables on supplier's balance sheets - particularly in Asia.  

    So, back to liquidity. Cash is massively in demand. Where it exists, it is being hoarded. Where it is promised, there is doubt that it
will ever be delivered. Where there is a need - it is assumed that the need will not be serviced.  

    The environment is tough for valuation and event investors. Valuations seem to be driven entirely by technicals. If you are holding an
asset that someone else is selling then its value will go down regardless of any fundamentals. This dynamic has impacted hedge funds. Merger
arbitrage spreads have ballooned out as banks have unwound their books. Consensus trades have turned into liquidity traps as funds have
de-risked or serviced redemptions. Our event managers report that the market has no interest in hard facts. Deals which are done dusted and
financed trade as if they are speculative. Hard events in companies are assigned no value and cash flow metrics 6 months in the future are
ridiculed. In August, our event portfolio fell by 1.41% on average.

    Distressed funds continue to maintain a cautious stance. True, there are good returns to be made in senior paper. But there are two
factors that overshadow the market. First, there is a lot more assets selling to be done. These are not distressed loans but distressed
sellers. Put simply, the paper is good but the owner is bad. The opportunity here is immense. The second category is distressed borrowers.
Thus far, corporate defaults remain low. 2009 will see this change. According to Moody's there is $12 billion of speculative grade debt
expiring in 2008 and nearly $30bn in 2009. Both of these factors are likely to have a negative impact on prices in the short term. In August
our distressed managers recorded a modest loss of 0.22%.

    Emerging markets continue to suffer. At the end of August we reduced our exposure to Asia. Shipping rates to and from Europe suffered a
collapse at the end of July reflecting a much reduced traffic both ways. Whilst shipping rates on the Asia to USA route had been declining
for the last year, the drop in the European rates was a shock. The fact of reduced consumer demand was sobering. The E in the P/E became the
focus and stocks dropped accordingly. In August, our portfolio of Asian hedge funds dropped 0.37% on average.

    Our equity long/short funds recorded a loss of around 1.43%. We nonetheless noticed that the market finally started to distinguish
between banks on the basis of value and franchise - a condition helpful to managers, like ours, that focus on fundamentals.
    In August, our performance was moderately down. Like any investor, we are seeking positive returns and would rather not be reporting a
loss - however moderate. Times of such volatility give rise to opportunities but they are there only for those who moderate their risks in
the meantime. We continue to focus on risk and liquidity. We thank you for your continued support. Please call us if you would like to
discuss the portfolio.  






This information is provided by RNS
The company news service from the London Stock Exchange
 
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