Monthly report November 2021 - Exelity

The total return for Exelity during the fund's first weeks amounted to -1.66 %, which is significantly better than the stock market which lost approximately -6 % during the corresponding period. However, it should be noted that Exelity has no benchmark but aims to deliver an absolute return of at least 10 % per year. The majority of the negative development during November is related to our largest listed equity holding which fell by -4 %. On December 1, this position instead showed +1 % and the total return was around 0 %. This type of movement up and down, in the portfolio companies, at 4-5 %, however, we see as miscalculated money in the context because we are looking for so-called multibaggers – shares that have the potential to double several times over. Given that we are still in the ramp-up phase, however, we would like to avoid mentioning the names of our holdings in this monthly newsletter.

Our baptism of fire in November has further strengthened our firm belief that our return target of at least 10% annually is entirely possible. Before the start of the month, we identified three fantastic cases that had all rushed with an average of around 20 % as the fund was ready to make its first purchases in the middle of the month, when the stock market at the same time rose rapidly to near all-time high levels - a challenging starting position to say the least.

However, Exelity has an allocation strategy that works for all types of market climate, where we combine listed equity cases with financial transactions, such as bridge loans, guarantee issues, unlisted investments and pre-IPOs, etc. The combination of transactions and shares respectively has historically resulted in a stable, high, risk-adjusted return and opportunities to make good trades in any market sentiment. We are not aware of any other fund that offers the same exposure.

During the month, we made our first financial transaction in the form of a bridge financing corresponding to around a quarter of the portfolio. The bridging loan concerns a company with a robust equity story, strong ownership image and stable cash flows that is in need of temporary liquidity after a major acquisition. The acquisition takes place from a position of strength and the resulting financing need is at most temporary and fully manageable. If we had been able to monetize the entire origination fee for this attractive loan directly, our return would have been approximately 0 % instead of -1.66 %, which gives an indication of the strength of the management strategy.

However, building up a good pipeline of transactions takes longer than two weeks, but we have nevertheless already sniffed out several other transactions with a favorable risk/reward profile where we intend to use our large cash, which currently makes up about a third of the portfolio . Some of these transactions have unfortunately slipped past the end of the month and will occur at the beginning of December instead of the end of November.

In conclusion, I would like to conclude by stating that the strategy works and that we passed our baptism of fire. We look forward to delivering not only relative but also absolute returns going forward, fully in accordance with our established strategy.