What the manager wrote
Douglas Elliman, the fifth largest residential broker in the U.S., was added to the Fund back in 2024. The recent period of higher interest rates in the U.S. resulted in a sharp slowdown in residential transaction volumes that weighed heavily on Douglas Elliman’s business. Its stock price sold off to the extent that, adjusting for the company’s net cash balance at the time of the Fund’s purchase in 2024, we estimated that the implied valuation of the real estate business – which had generated $1 billion in revenue in 2023 – was less than $20 million. This was despite Douglas Elliman boasting a market-leading position in a number of attractive high-end residential markets. Since then, Douglas Elliman has been a meaningful positive contributor to the Fund’s performance, including in H1, when the stock surged roughly 39% amid published reports suggesting that the company had received a takeover offer at a price of over $4 per share.
