Caledonia Investments Highlights Funds Strategy, North America/Asia Focus and NAV Discount Actions

Core Insights - Caledonia Investments focuses on long-term partnerships with fund managers, primarily in North America and Asia, aiming for steady capital deployment and value creation [4][6][19] - The company targets a diverse portfolio across public companies, private capital, and funds, with a significant emphasis on the North American lower mid-market and Asian private markets [5][10][19] - Caledonia's strategy is supported by a robust framework that includes thorough manager selection and ongoing monitoring, ensuring alignment with investment goals [3][4] North American Market - The U.S. lower mid-market consists of approximately 400,000 companies generating over $10 trillion in revenue, with a significant portion being founder-owned businesses [1] - Caledonia's North American portfolio includes 30 managers across 45 funds, with typical commitments of $25 million to $30 million per fund, providing exposure to around 200 underlying companies [9] - The largest sector exposures in the North American portfolio are industrials, consumer discretionary, healthcare, and technology, with a focus on service-oriented businesses [9] Asian Market - The Asian investment strategy targets the growing middle class and innovation, with Asia's share of the global middle class expected to rise to two-thirds by 2030 [10] - The Asia portfolio totals £313.8 million, comprising 15 managers across 35 funds and investments in 385 companies, with healthcare being the heaviest sector weighting at 33% [12] - Despite macroeconomic challenges, the portfolio has seen seven IPOs in the last 18 months, indicating improving market conditions [14][13] Financial Performance - Caledonia aims for absolute returns of inflation plus 3% to 6%, having delivered a 9.8% annual return over the last decade, outperforming inflation by 6.5% [6] - The Funds strategy represents about 30% of NAV, or £894 million, with a significant portion invested in North American lower mid-market funds [5] - The company has a long history of increasing dividends, maintaining a commitment to shareholder returns [6] Strategic Actions - Caledonia is actively addressing its discount to NAV, with plans for share buybacks and other capital allocation strategies to enhance shareholder value [18] - The company does not hedge its balance sheet but may consider hedging specific known cash flows [16] - Recent sales, such as the expected cash proceeds of £290 million from the sale of Stonehage Fleming, are anticipated to positively impact NAV [17]