Castle PE shareholder battle intensifies

John Bakie
18 July 2012

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Castle Private Equity’s battle with its shareholders has intensified after activist investor Abrams Capital became its largest investor.

Castle has been under pressure since November last year, when a group of shareholders led by Abrams called for the firm to cease new investments and return more capital to shareholders.

Following a cancellation of 1.5 million of the listed fund's shares in an effort to return more capital and reduce fees, Abrams now owns a stake of more than 20%, while Castle itself holds just 2.7% of its own shares.

Castle is the latest fund to come under pressure over its deep discount, which means shares trade well below the reported net asset value of the fund. It has had to cut fees from 2% of NAV to 1%.

Activist investors can be a major threat to listed funds. Speaking at an LPEQ conference in London in June, RedRocks Capital founder Adam Goldman warned of the difficulties funds can face from activist investors that build up significant power, saying they can lead to distressed sales of portfolio companies and a premature winding down of vehicles.