Effingly Absurd Efforts

If I'd told you that Jeff Skilling or John Rigas were raising capital for a new investment fund or business venture, laughter would be the more polite of your reactions, though effing derision might be appropos. Of course, one is free to give it the old college try as the now overly-effervesced Sowood, Peloton and Amaranth PMs have. But legal imbroglios are different, and so it is with raised eyebrows that I bring your attention to former MAC associate Takashi Kosaka's effingly bold Singapore-domiciled activist-value fund managed by eponymous Effissimio Capital Management.

He's bought some effingly big stakes (see above) in the "time-honoured" (JCH code for shitty and shrinking) Gakken CO Ltd.#9470, also-ran Nissan-assembler Nissan Shatai #7222, "hidden-asset" landlord Tachihi Enterprise #8821 (and their intermediate parent, New Tachikawa #5996, Mitsui M&S Plant Engineer, MESCO, #1737, and PC distributer Daiwabo #9912. It is my contention that in time, they will become portfolio effigies - tributes to an investment strategy with lottery-like odds.

Why? CAll me conventional, but in contrast to other activists who often at least make an attempt to target reasonably "good" assets and companies whose share-prices have been under-performing, Mr Kosaka's effingly bold accumulations have the following in common: the enterprises are uniformly shitty and largely shrinking; they are all, excepting Gakken, wholly-owned or controlled subsidiaries of other listed companies, and all the positions are wholly and completely unmarketable in the context of the market. Transgressing any one of the foregoing might be forgiven for a three-cent nickel, but violating all three together should be a cause of grave concern to investors in the effingly absurd hedge fund. And all this is before pointing out the frightening lack of diversification to which investors are exposed for the luxury of one-and-twenty.

A very astute friend and former manager of a large global hedge fund looked at me puzzle-ingly when once, long ago, I pointed to the "cheap" assets in Japan such as those precisely owned by Effissimo. For he had cut his teeth as a well-connected opportunist in the French market and learned that such things are mostly cheap for a reason (tax, control, financial flexibility afforded the parent) and that there is little gain to be had from being a minority holder no matter how cheap. "IF it is cheap, AND otherwise 'controlled', you must own 50.1% or nothing at all..." And this is in France where at least minority investors are afforded some protection against the common Japan practice of "The Take-Under", where consolidated subsidiaries are subsumed at often-unfavourable prices back into the parent.

This was of course in the days before the agent-principal hedge fund conflicts made their pursuit an efficacious and attractive undertaking - at least for the IM. While I have been less-than effusive of Steel Partners investment manager enrichment schemes masquerading as a hedge fund (which interestingly has NOT been seen recently adding a to a single position in any MoF filings leading one to believe that my prognostications about an eventual death-spiral may be in the process of being requited), Steel's approach appears positively scientific by comparison to Effissimo's efforts (though I'll hold my tongue on their relative honourability).

But what is it in the pursuit of large illiquid holdings that seemingly prevents the ability to resist the temptation to manipulate stock prices into meaningful valuation periods? Do they think no one will notice? Perhaps like MAC (and the late Leona Helmsley), rules are for "little people"? As an observer, I admit that I must be careful not to fall prey to the behavioural flaw of seeing non-existent patterns in the erstwhile random meanderings of stock-prices. But the coincidence of quarterly ramps (as depicted in New Tachikawa Aircraft - seen adjacently) would stretch the imagination of even the strongest apologists for the primacy of an unfettered market determining price. For the former cohort of a felon, Singapore may be (from Mr Kosaka's perspective) the domicile of choice for all the right reasons...