What is an expected return for active investors seeking control through Fulcrum securities?

Active investors seeking control through Fulcrum securities typically expect higher returns due to the inherent risks and complexities involved in these types of investments. Fulcrum securities are often a form of debt that can convert to equity or provide other compelling rights during distress situations—essentially when a company is experiencing financial difficulties. This elevated risk, combined with the potential for significant upside should the company's fortunes improve, justifies a higher expected return.

In the case of a 20-25% expected return, this is in line with the premium these investors look for as compensation for taking on additional risk associated with investing in distressed assets. They not only face credit risks but also the uncertainty regarding the company's future operational and financial performance. Therefore, the expectation of a return in this range reflects the aggressive nature of these investments, which aim to maximize returns through active management and strategic positioning during potential turnaround scenarios.

The expectations of returns lower than this range, such as 5-10% or 15-20%, do not adequately account for the level of risk and the active involvement typically required by these investors. Henceforth, a 20-25% expected return aligns well with the risk-reward profile associated with Fulcrum securities.