Do I understand that ACAS has a higher percentage of investment in the equities of it's portfolio companies than its peer BDC Group? If so, I presume that if the Market falters to any degree the company may be faced with significant quarterly write-offs under mark to market. Is that assumption wrong?
Mark to market is an issue here and was a significant part of the problems they incurred during the 2007-2008 crash. They were debt frozen because of it and had to project unrealized losses as losses because of valuation changes. This has also had a reverse effect that they have been careful not to let valuations assume a more natural high high valuation because that also effects them. I am not a fan of mark to market, it can be deadly to asset driven companies.
So my thought is ACAS largely benefits from M2M during growth cycles. We have been largely sideways for the last year or so. So as turns happen in equity I would think ACAS should continue gaining some traction.
I have been told there are accepted accounting methods around this M2M problem but I do not believe it or know of them.
I think that is partially correct. I believe some of their privately held companies are valued based on their EBITDA (adjusted earnings), rather than the stock market movements. So, if those companies are growing earnings, their value should go up not down, regardless of what the stock markets are doing.