Marlton Partners commentary for the month ended April 30, 2025.
Dear Partners,
In April, the fund delivered an estimated +2.8% return, versus -0.7% and -2.3% for the S&P 500 and Russell 2000 indices.
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Correspondingly, the fund’s year to date return of +4.6%, compares favourably to the S&P500 (-4.9% YTD) and Russell 2000 indices (-11.6YTD). Both in the month, and year to date, positive returns have been generated across a varied set of investments, and no one investment has been a disproportionate driver of positive returns.
Significant volatility at the beginning of the month allowed us to add new investments which we had been following for some time but had previously not offered an acceptable rate of return under our framework.
In the month, positive contributors to returns included:
- A complex of aftermarket service and parts distribution businesses serving automotive and industrial vehicle end-markets trading at ~40% discount to the sum of its parts.
- A US Office REIT in effective wind-down trading at a greater than 30% discount to our estimate of net realisable value, positioned to begin making capital distributions to shareholders by the end of the year.
- The US CEF and UK IT Corporate Action basket, principally delivered by a mispriced cash exit opportunity in a North American equity Investment Trust, an equity Investment Trust merger trading at a dislocated spread to the deal economics, and a closed-ended Japanese equity vehicle.
Moving through the balance of the month and into May, we remain committed to exercising our investment philosophy without our defined framework.
We are grateful for our limited partners support and are available for any questions.
Sincerely,
James C. Elbaor
Notable portfolio updates
Ocean Wilsons Holdings Limited (LON:OCN)
Ocean Wilsons is a London-listed Bermudian holding company. Ocean Wilsons owns a 56.6% interest in Wilson Sons S.A. (PORT3.BS), a Brazilian maritime services company, and through its investment arm Ocean Wilsons Investments Limited (OWIL).
Wilson Sons operates container terminals, oil and gas support services, towage, and logistics among other activities in Rio Grande and Salvador, and Brazil’s largest port, Santos. OWIL manages a highly- (likely over-) diversified $322.6m portfolio of funds invested across public and private markets.
Ocean Wilsons is approximately half owned or controlled by relatives of a single family, either through direct ownership, or vehicles managed by family members. The appointed investment manager of Ocean Wilson’s largest shareholder, itself a publicly traded entity (HAN/A.LN), is also the external investment manager of OWIL. Several Ocean Wilsons Board members serve as Directors of the external investment manager, including Ocean Wilsons’ Deputy Chairman. These ownership dynamics, coupled with the relative complexity of the situation conspired to push Ocean Wilsons stock to a meaningful sum-of-the-parts discount.
We began following Ocean Wilsons closely after the announcement of a strategic review of the Wilson Sons asset in June 2023. The announcement of a strategic review followed considerable speculation in the Brazilian media. In October 2024, it was announced that Ocean Wilsons would be entering into a transaction to sell the Wilsons Sons asset to SAS Shipping Services, a subsidiary of the MSC Mediterranean Shipping Company. Though, in our view, there remained material uncertainty regarding any potential return of capital.
A press release in March 2025 confirmed that it was the Board’s intention to return capital to shareholders via a tender offer for 20% of the shares outstanding. Adjusting the sharecount for family ownership increases the ‘effective’ tender offer to >40% of the shares outstanding. We believed it likely that family shareholders would not participate in the tender offer at their pro-rata proportions, if at all, such minority shareholders could expect to receive a tender offer corresponding to 30% - 40% of their shareholding. This view was leant further support by the change to the Ocean Wilson’s bylaws ensuring that no shareholder is required to make a mandatory offer for the company if their shareholding excess 30% of the company solely as a result of share repurchases.
Volatility early in the month allowed us to acquire shares in Ocean Wilsons ahead of the tender offer scheme likely effected in Q3. Versus where were created the position, we stand to make a satisfactory return under our current framework, even if the tender offer is fully oversubscribed such we are scaled back to our pro-rata proportion of 20%.
The PRS REIT plc (LON:PRSR)
We exited our position in PRS REIT in April, realizing a 22.2% gross return (33.6% IRR) over our holding period.
We acquired a position in PRS based on the view that continued activist involvement portended a total portfolio sale of the company at a significant premium to then traded prices. It remains our view that PRS could be sold, indeed PRS is in receipt of indicative. However, we are concerned that these bids are in a range which may not be supported by all members of the Board and certain large shareholders. These potential disagreements present a material risk to our investment thesis; such we chose to fully exit our position.
UK Investment Trust & US CEF Corporation Action Basket
As described in previous letters, the UK IT / US CEF corporate action basket resulted from our work earlier in the year to systematize top of funnel research in UK ITs and US CEFs.
The work underlying the allocation was considerable and proprietary to Marlton, involving the aggregation of data across multiple sources, and the manual cleaning and compiling of this data. Putting in place the architecture to screen, monitor and run the trades in the basket, was a time- and resource-consumptive exercise. To preserve the alpha opportunity we see in this corner of the market, we are selective in our monthly letter disclosures of current and past positions in the basket.
In the month we participated in a tender-offer at a North American equity Investment Trust, realizing a 2.7% gross return over a seven-week holding period (>20.0% IRR). The tender offer was undersubscribed, allowing us to realize almost 50% of our shareholding at NAV less costs of implementing the scheme (~98% NAV).
Significant volatility at the beginning of the month allowed us to create a position in a high-profile equity Investment Trust merger with the deal trading on a dislocated spread. Over a two-week holding period we realized a 2.3% gross return (>70.0% IRR). We also trafficked in a closed-ended Japanese equity vehicle realizing a 5.4% gross return (>100.0% IRR) over a two-week holding period.
As at the end of March, current basket exposures included a European equity vehicle tendering for 20-25% of issued share capital in the second quarter, as well as a UK equity closed-ended vehicle.
