Only the keenest small-cap followers would have followed the conversion of struggling IT firm ConvergeNet into a new listed private equity offering called Stellar Capital. But its decision to buy fellow private equity player Blackstar's stake in struggling financial services group Cadiz for R45-million has made the market sit up and take notice. Business Times put Stellar Capital CEO Peter van Zyl on the spot.Is Cadiz really a good investment? Surely, if it had such a fantastic future, Blackstar wouldn't have sold?We've had a relationship with both the management that has bought [into Cadiz] and the empowerment partners.They [Blackstar] weren't keen exiters, but I think eventually what they realised was that we didn't have to spend a lot of effort and time building a relationship with management and empowerment - we already had that [while] they would have had to spend time building those relationships.Also, they have a big deal [with Kagiso] going down at the moment. Look, we gave them a decent price, so they made money out of the deal. We understand they've added a lot of value in the four or five months they were there; it's been very amicableCadiz's share price is now 110 cents per share, 58% of what it was three years ago. How much did you pay Blackstar for its shares?We paid 112 cents per share.You might have a closer association with Cadiz, but it is still a company in trouble. What future does it have?I don't think we jumped in with our eyes closed. Blackstar got in because they saw value, and management got in and have taken a serious risk because they see value. I think there's a lot of upside.The reality is the listed company's net asset value is north of the price we've paid. Even if you applied very little value to the asset manager, your downside risk is limited.Blackstar has already cut a lot of the cost base that was required to be cut to make this a functional, operational, [profit-making] entity. The material work has been done.You now have ... a wonderful asset management platform - a historic brand which can be used as a base to build a financial services group. To go and start something like this yourself, you risk investing a lot more time and money to get it to the same place Cadiz is already at. We think what's left in the business is sound.Is Cadiz still losing assets under management, or has it stemmed the outflows?Since the last market update - and I don't know the exact details - it's probably lost further assets. But I think the cost-cutting process was done to make the business viable on a lower base, even [more] than has previously been reported.You also have this delayed effect which people must realise ... there are notice periods around people withdrawing assets ... There's nothing that would suggest that big assets are moving out that we're not unaware of.Have you had any discussions with Cadiz clients?Unfortunately, I think the downside of being listed in the asset management space is that when there's negative news, everyone always assumes that what's happening at the listed company impacts their assets and their asset manager, which is not the case. When Allan Gray lose assets, they don't have to publish in the market that they've lost assets, so it's sort of a spiral that the negative press around it creates. There have been some meetings and there are still to be a lot of meetings with clients to just reassure them.What's Stellar Capital all about?We were involved in fixing what was previously an IT business in ConvergeNet ... It was a controlling shareholder in a whole lot of desperate IT businesses that weren't really working well together ... there was no obvious link between them, so we embarked on a disposal of a number of those [assets] over the last two years and then the final two were disposed as part of a transaction to acquire a 30% stake in Tellumat. Along with that, we invested in three or four other assets and raised a whole lot of cash, which led to the Wiese family getting a material stake in the business.What makes you decide to invest in a company?Stellar Capital [looks at] investing in businesses where, first, management are shareholders of significance, [and], second, we feel we can add corporate finance, capital raising, M&A assistance.One of the businesses we're still involved with is a company called Torre Industries.It started out as a struggling listed business called SA French. We got stuck in and backed it, and we're now in a position where Torre is a much bigger business and is running well and growing. We raised about R150-million and we had R50-million in the pot already.You've got Cadiz, Tellumat, a 20% stake in DigiCore ...We also have a 20% stake in Goliath Gold and a 34% stake in a company called MRI. We have an NAV of around R560-million.How much does Wiese's family own of Stellar?About 28%.Does that give you pause, that Christo Wiese is such a big shareholder?No. In creating this, that was one of the deliberate strategies in having discussions with him. He wrote a cheque for cash, he helped underwrite the cash issue we had ... He's putting faith in the team to go take these assets and do something with them and having him as a major shareholder does two things for you: it creates a level of credibility in the market, but puts pressure on delivering.Talevi is a BDTV presenter..