Private Debt Funds

Third Eye Capital's CEO Arif Bhalwani's rebuttal to OPM Wire

OPM 3 min read

This is the response Third Eye Capital's CEO Arif Bhalwani sent OPM Wire in response to our first post on Third Eye Capital:

I received a copy of your article spilling so-called kompromat about our firm and wonder what purpose is served by dressing up invective and opinion as facts. If you are interested in the truth and would like to get behind-the-curtain insights from one of this country’s most successful special situations investors, why not just give us a call?
Significant portions of your article are false and objectionable on many bases. In 2020, we raised more than $400MM in new, longer-term institutional funds and 60% of the capital redeemed from our evergreen Third Eye Capital Alternative Credit Trust (the “ACT Fund”), was transferred to one of our other funds. We’ve had gross inflows, including committed capital and co-investment accounts, across all of our family of funds of nearly $1 Billion over the past eighteen months. In contradiction to your “impression”, Westcourt Capital, a long-standing partner of our firm, is helping sponsor the transition of the ACT Fund into a new longer-term capital fund that is targeting a $500MM raise.
Our pioneering partnership with Ninepoint, which started with its predecessor in 2010, continues to thrive and grow. Ninepoint’s oversight of TEC has always included periodic operational audits conducted by recognized third parties. This is in addition to their continuous monitoring of portfolio activity, individual portfolio company performance, credit risks, and changes in our firm (such as employee turnover, any conflicts, and governance structure).
And because we believe in eating our own cooking, TEC, its affiliates, and key insiders are, collectively, among our largest investors. I think with a little more digging, you will find that we have invested more cash into our portfolios than any other private debt manager in Canada.
The investments we make are idiosyncratic, complex, and often out-of-consensus. We admit a willingness to make more painful decisions than our competitors but that accounts, in large part, to our above-average performance over the past 16+ years. This was not accomplished with a “thin” team as your claim. Half of our 30-person team is involved in analyzing, managing and monitoring investments, and we have full-time operating partners with senior industry and business matter expertise dedicated to certain of our portfolio companies to help orchestrate turnarounds or increase enterprise value. You will be hard pressed to find these types of resources at other private debt firms in Canada.
When we invest, we do so with a large margin of safety, aimed more at minimizing worse case outcomes rather than maximizing for returns. This allow us to reduce the severity of loan defaults and gives us the flexibility to takeover defaulting businesses that can be fixed and later sold – something our competitors are unwilling or incapable of doing. Our actual exposure on King Street Food Company, for example, is less than 1% of our AUM, which affords us time to effect the turnaround of a beloved set of restaurant brands. Since inception we have made 110 investments totaling $3.7 Billion, and we have had to step into 15% of those with outcomes that have been exceptional. Our industry is full of people who are either smart or think they are – we are simply more comfortable enduring uncertainty and more patient in harvesting our gains.
If you or your partner Alejandro want to learn more about our firm, our strategy or our asset class, generally, please reach out.

You can read OPM Wire's full report on the Ninepoint Third Eye Capital fund here:

The Ninepoint Third Eye Capital fund: initiating with a rating of PoS
The Ninepoint Third Eye Capital fund has more red flags than a Chinese Communist Party banquet.

This post about some events in Arif Bhalwani's career prior to Third Eye might also be of interest.

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