Waterland Global Asia (“Waterland”) is an investment company with an established portfolio, which will build a new portfolio of bio-based economic units complemented with add-on investments in targets, know-how and IP. These add-on investments will enhance the bio based economic units by providing access to those technologies that will strengthen the value chain of the bio based economic unit concerned.
The process of building up a portfolio of bio based economic units has been described in the Investment Process. It is of utmost importance that after careful selection of the investments in bio based economic units, high quality portfolio management is conducted in order to ensure that:
Pre-agreed targets, as laid down and agreed in a business plan, are matched, or even better, beaten;
- Business is conducted in accordance with the SEED principles, as adopted by Waterland;
- The performance of the investee companies’ operations are closely monitored and if necessary, corrective measures are defined and implemented;
- The exit strategy is implemented and managed;
- Together with investment management, identify add-on investment opportunities to strengthen the bio based economic unit and Waterland’s portfolio as a whole.
Scope of Waterland Portfolio/Fund Management
The Portfolio Management activities of Waterland have the following scope.
Strategy definition and monitoring, business development
Together with the Chief Strategy Officer, Chief Executive Officer, the Chief Portfolio/Funds Manager will, based upon the Waterland strategy defined and updated regularly, make recommendations for the further development of the business. Various trend and market developments are to be recognized. This could lead to a redefinition of the investment focus, as well as the definition of auxiliary products for the benefit of the portfolio, e.g. finance products (mezzanine financing); clustering of IP into a tax attractive scheme; etc. Further, the launch of investment vehicles for co-investors and the management of separate accounts, conversion of parts of the portfolio into managed investment funds or limited partnerships will be part of the business development activities of Waterland Portfolio/Funds Management.
Pre-portfolio phase – Investment phase
Waterland Portfolio/ Funds Management will be involved in the investment process. By involving portfolio management at an early stage in the investment process in close cooperation with the investment managers involved in the transaction, the assessment whether the target would add value to the portfolio of Waterland will be made at the beginning of the investment process. Further by involving portfolio management from the outset, the integration of the new investment into the portfolio will be prepared well in advance.
During the portfolio phase, the investments will be monitored closely. The financial departments of the portfolio companies and operations will submit on a [monthly] basis a management report which will include the K(ey) P(erformance) I(ndicators). These monthly reports will be submitted and recorded into Tracksparency. These KPI’s are predefined which will enable portfolio management, in conjunction with the office of the CFO, to monitor the performance of the portfolio, and to define and to undertake necessary corrective measures, if necessary.
In defining the tax and legal structure for the portfolio, the following considerations are taken into account:
- Transparent structure – investment grade
- The use of Off-shore regimes will be avoided, save for tax transparent vehicles
- Attractiveness to co-investors
- Structures will contain fund-like elements, so they can easily be converted into funds without heavy tax and legal engineering
- Investment grade compliance and management structure
- Capable of approval or registration by a good financial regulatory body
The definition and implementation of the tax and legal structures for the portfolio will be the joint responsibility of the legal and portfolio management departments of Waterland.
Exit Phase or Co-Investment Phase
As described in the investment process, one of the pre-requisites for deciding to make an investment is that the investment proposal should include a clear exit strategy. The investment period of one particular target should provide sufficient time to develop the investment target, so it will be an attractive investment proposition for either a strategic investor, or an IPO. It could also be attractive for co-investors. These co-investors may join the investment at the execution of the investment, or at any stage during the portfolio phase. As described before, the tax and legal structure of the investment should allow coinvestors. One overriding principle is that Waterland always has substantial control over its portfolio until exit.
Creation of Funds and or separate accounts
Creation of Funds
Waterland has an established portfolio of investments and will create additional investments using its agricultural models. When Waterland has created a new Portfolio, which has reached a certain critical mass, or certain parts of which can be packaged under one of the Investment Themes or by region, Waterland will be able to allocate these parts of the Portfolio into a separate fund, established under an appropriate fund structure. Each fund initiated by Waterland is expected to meet the following criteria:
- Minimum fund size, the equivalent of USD 100 million;
- Open only to professional and institutional investors, with no retail investors envisaged;
- Fund to Fund investments are allowed;
- Discretionary Fund Management by Waterland is a pre-requisite;
- Management fees based on net asset value of fund;
- No blind pool;
- Carried interest structure for Fund Management, payable by investors.
On top of the asset based funds, as described above, funds of auxiliary products can be launched by Waterland Portfolio Management. These funds can provide its products and services both to the Waterland portfolio and to third parties, as long as they agree to abide by the SEED principle test. These auxiliary products funds could include without limitation:
- Mezzanine products
- IP, know-how and patents
and such other instruments as the Board of Directors of Waterland decide.
All the auxiliary product funds managed by Waterland should be matched with underlying assets. Under no circumstances will Waterland launch funds in which speculative positions, hedge instruments and any other derivatives are traded, other than as part of a normal price smoothing exercise for the underlying product. The strength of Waterland is to manage investment in bio based economic units and related technological investments and, as the case may be, funds of auxiliary products, which bring added value to the Waterland portfolio. Any purely speculative derivative product launched in Waterland’s own book will constitute an unacceptable risk.
Waterland Portfolio/Funds Management may accept mandates from individual client separate accounts, on the following conditions:
- Separate account should be for an institutional investor with investment grade status
- Portfolios to be managed should be within the scope of the Investment Themes of Waterland
- No blind pools
- Compliance according to Waterland’s principles and procedures
- Governance model – discretionary power to Waterland
- Margin on fees should amount at least 25%