Hygrovest Ltd (ASX:HGV) has extended the term of its Investment Management Agreement (IMA) with Parallax Ventures. The extension will keep Parallax‘s position as asset manager in place until June 30, 2023.
The agreement may be extended by a further two years at HGV’s option.
Parallex has held the position of asset manager of HGV’s investment portfolio since July 2019 and during this time, the returns have exceeded HGV’s benchmark.
Transitioning into different sectors
HGV is an Australian-listed specialist investment company, which concentrates on producing capital growth for shareholders over the medium term from investments in listed and unlisted equities and other financial assets.
Up until recently, its focus was on cannabis businesses, however, the company is now transitioning into broader investment opportunities in healthcare, the digital economy and natural resources.
Parallax will play a key role in this transition, with the bulk of its remuneration to be linked to material increases in HGV’s share price and/or net asset value.
Should Parallax achieve its targets it will be issued new performance rights.
HGV vies Parallax’s asset management expertise and importantly, its knowledge of HGV’s existing cannabis investments, which still comprise 62% of the HGV portfolio, as invaluable in executing HGV’s goal to diversify away from the underperforming sector.
The appointment of an external asset manager to manage the existing portfolio and access new investment opportunities is viewed as the best option for HGV.
The operating structure of the HGV business will be reviewed again in 2023 to ensure the most appropriate structure is in place having regard to investment performance and market conditions.
Performance rights details
While there is no change to the base fee remuneration, detailed in the previous 2019 investment management agreement, subject to shareholder approval, HGV will issue 6.5 million performance rights to Parallax.
The performance rights shall vest and be convertible by Parallax on a one-for-one basis, into shares in two tranches upon Parallax achieving the following hurdles
- the first tranche of 4 million performance rights will vest upon achieving a NAVS/SP Average which is a premium of 35% to the NAVS/SP Average on June 30 2022; or
- in the event that the first tranche does not vest due to the NAVS/SP Average not being achieved, the second tranche of 2.5 million performance rights will vest upon achieving a NAVS of a premium of at least 35% to the NAVS on June 30, 2022.