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aims to provide a high level of dividend as well as capital appreciation from a diversified portfolio
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Pretty standard nearly all active ETF's eats your capital away.
Nice, 180p will get me interested in this one.
As predicted -- months ago -- HFEL plunging under the 210p level. The shareprice is back to 2007 levels!
Any test of the 200p threshold here before Xmas will hit sentiment like a sledgehammer. The 180p all-time low is within touching distance.
China continues to struggle and drag down Asia and thus the HFEL shareprice.
it’s a shame that slownsteady’s reading of my letter to the chairman of hfel was stopped when he came to the words “ponzi scheme”, because the following paragraphs contained some facts of which he may have been unaware. it’s the facts that need addressing, not my choice of words to describe them.
i wrote, “rather like" a ponzi scheme and explained why. to answer slownsteady directly, although hfel is classed as a closed end fund, in reality it doesn’t quite match that description, for the reason i stated. it has been persistently issuing new shares, which of course bring in new money, but this means that hfel is, shall we say, half open-ended. that money then has to be invested to meet the increased number of shareholders wanting their dividends. some contributors to this chat facility evidently think this additional money is a good thing, but i have questioned that, thinking that the quality of the additional investments obtained with that money might not be as good as the earlier investments upon which hefl’s reputation was founded. qed perhaps.
it was not me who first suggested that hfel might be milking dividends by repeatedly buying and then selling the same shares. it was comments from others that alerted me to the possibility. it is however the accusation that i have put to ronald gould, to which he has yet to respond. i found addresses for all the directors, including an email address for one, but none has yet thought fit to respond. interesting, that.
now, let us consider some further facts. last year’s dividend cost £36mn. the cash flow statement shows that this was principally paid for by “profit” of £11.5mn and “losses” of £22.6mn. i don’t understand how income sheet losses convert to positive cash flows, but have to assume that this is because of my indequate accountancy knowledge. the more interesting figures though (as i now think, not having noticed them before), again taken from the cash flow statement, are the £449.6mn from the sale of investments and the £447.6mn used to buy investments. as the balance sheet shows investments valued at £438.5mn, it appears that there was a roughly 100 per cent turnover of the company’s assets in the space of one year. why?
like other investors in hfel, i have to hope this will all work out well, but there are sufficient reasons to wonder and perhaps even to worry, for me to expect one of the directors to respond to my letter. for those who might wish to press them on the matter, here are the other addresses i wrote to.
timothy clissold, peony advisors ltd, 1 waverley place union street st helier jersey, je4 8sg; david ma****er, meridian asset management c i ltd, 13-15 charing cross po box 22 jersey, je4 0xn; nicholas george, john lamb hill oldridge limited, ormond house, 26-27 boswell street, london wc1n 3jz; ms julia chapman, julia.chapman@tisegroup.com.
What, more than likely, will cause this fund to 'do a Woodford' and send people running for the doors is all of this non-factual and negative speculation. Most of this sector is down at the moment, probably a good time to reinvest dividends.
I started, just to amuse myself, to read your letter. But stopped immediately when you mentioned the phrase. "Ponzi scheme", needing new Investor's funds.
You do know the difference between Investment Trusts (where you have buyers and sellers in a closed Trust) and Unit Trusts (which are open ended), don't you?
Total BS
All fe markets have experienced huge sell off since Feb 23
If and when the Chinese government make some serious economic stimulation measures, the market and sp will come back, hopefuly 2.50 ,/2.60p nav this time next year in the meantime the fund manager can't fight the market
Contact address
IFC1, The Esplanade, St Helier, Jersey, United Kingdom
Phone: +44 (0) 1534 813800
"This is not a growth company needing more equity to grow its business and thus make bigger and bigger profits."
The company has been selling shares at a premium to NAV whilst EPS has been covered according to results ... maybe go work out what the drop in the top listed investments are to get an idea of the market volatility.
Funds such as this grow by selling shares preferably at a premium to NAV, whilst buying shares back when at a discount.
The share is currently trading some 2% below NAV with a divi on the horizon ... the risks here are China, Russia and Taiwan ... along with the Western spat.
Personally, and given the malaise in China and Hing Kong, it's hardly a surprise the NAV has fallen ....
... like pretty much everything on my watch list .. so I'm not quite sure what you expect.
I have it on good authority it is being looked into although the outcome is yet to be seen.
Well done Bott - let us know how it goes.
I think that is an excellent letter and if it doesn't get a full and honest response then I think we can all read into that, unfortunately I am using this (like many) for a very large part of my income and was prepared to withdraw the lot when a modest £10k down but was desparately hoping for a turn around, not through greed but a simple mathmatical return to investment ratio made it very attractive to me, I am now suffering a 34% drop in my investment and am basically caught between a rock and a hard place, I have 1 fund in profit (for now) and the rest between 3-13% down so this is by far and away the worst performing stock, personally I think it's time for Kearley to stand down or be stood down as I don't see him turning this around anytime soon.
I agree itis very disappointing but I invested for the income to meet my living. costs. If HFEL went under I woud have. severe economic. difficuties like not being able to. pay my rent. I do not wish to sell as I bought. at about 33 a few years. ago. I am sure there. are many like me..
Letter sent to Ronald Gould, IFCI, The Esplanade, St Helier, JERSEY, JE1 4BP
Henderson Far East Income Ltd [HFEL]
Are you aware, I wonder, what the chat rooms are saying about the management of your company’s portfolio? If not, I strongly urge you to visit at least one. This is a comment extracted from https://www.lse.co.uk/ShareChat.html?ShareTicker=HFEL&share=Hendfar-East
but other comments there are pretty damning too.
“On the Citywire forum investors in Hendeson Far East Income are actually willing to face the truth that this trust is converting capital in to income. One comment on this forum refers to the trust as "eating itself", which I thought was a good way of putting it! other comments refer to the obfuscation committed by both the managers and the board of directors, who are meant to act in the best interests of shareholders.”
That investor thinks the fund is likely to “do a Woodford”. See https://moneyforums.citywire.com/yaf_postsm242296_HFEL--Henderson-Far-East-Income--I-just-bought-more--having-2nd-thoughts.aspx
In essence, a growing number of investors believe shares are being bought cum dividend then sold when they go ex dividend. This would certainly go some way to explaining the persistently falling NAV. In your chairman’s statement last November you claimed that the NAV had grown by 1.9%, but that is at odds with the Janus Henderson fact sheet. That shows minus 6.7% for the 12 months to June 2022 and minus 1.6% for the full five years to June 2023.
My holding, in an ISA, is 6,000 shares. It is well under water and although some are inclined to suggest that this is all to do with China I don’t think that stands up to scrutiny. What stands out for me is the 77 per cent increase in balance sheet equity since 2018, which has produced no benefit for shareholders at all.
This is not a growth company needing more equity to grow its business and thus make bigger and bigger profits. It is in fact struggling to keep its head above water, in the sense that its principal object is to provide an income from its investments, now needed to satisfy an ever-growing body of investors. In that respect, it seems to me it has become rather like a Ponzi scheme, inasmuch as it is constantly seeking new investors in order to sustain its dividend, which in real terms has actually been shrinking. This inevitably means that the quality of its assets will deteriorate, thus limiting the potential for returning to the NAV of five years ago, let alone growing it to meet one of the company’s stated objectives.
when hfel began, it could focus on quality, but that gets more difficult as the portfolio grows, as illustrated by the rising audit cost, from £35,000 in 2018 to £58,000 in 2022, an increase of two thirds.
in 2018 there were 121.13mn shares, but at 31.8.22 there were 154.95mn, an increase of 27.9% more mouths to feed. this activity raised an additional £107.3mn, but by the end of last august investment value had actually fallen, by £24.1mn. if investments had instead risen in line with new capital, the value would have been £818.0mn and the dps touching 39p. however, only one quarter of increased profit after tax has been converted to eps/dps. because of its artificially high dividend yield, hfel has become a wealth-destroying value trap. dividends per share for the 4 years since 2018, plus those for 2023 to-date, total 110.7p, but the share price in that time has dropped by 143p, from 361 to 221. those buying in 2018 haven't even had their money back.
the poor investment performance is reflected in the dividend. this looks good by comparison with the share price, but only because the share price has fallen so much. the last three dividend increases have measured just 1.7% each, which does strongly suggest that the new investments bought from the new equity raised by hfel have actually been progressively weakening hfel’s dividend paying capacity. there is in fact a widespread expectation that the dividend will soon be cut, using china’s problems as an excuse but in fact caused by hfel’s own actions.
the company of which you are chairman is failing its investors, with a falling value and diminishing return. this requires vigorous corrective action before it is too late.
copies sent to julia chapman, timothy clissold, david ma****er, nicholas george and janus henderson fund management.
The RNS link shows the NAV with and without revenue.
"As at close of business on 14 September 2023, the unaudited net asset value per share, calculated in accordance with the AIC formula (including current financial year revenue items), was 225.8p.
As at close of business on 14 September 2023, the unaudited net asset value per share (excluding current financial year revenue items) was 222.1p."
Earnings are currently 3.7p by the time of the xd date the earnings usually exceeds the November dividend currently 6.1p.
MrTC
"WTF are the directors doing?"
This seems to be the real failure here. It is not unusual for Managers to be replaced or poorer performing Investment Trusts to be taken over. I guess only the Directors themselves can answer that question.
Their job is to look after shareholders interest. All we can do is sell or post messages on notice boards.
My question is: If MK is doing so badly WTF are the directors doing? they are there to ensure the investment is doing what it signed up for yet we see/hear nothing from them. Are they simply happy to take their cut regardless or what? answers on a chat post please :-)
Dam
''1. The capital destruction becomes so great the manager puts his hands up and says "oops, we need to reset the dividend".
The capital value has fallen from about 380p per share to the current about 226p per share.
HFEL have just increased the dividend.
As an example the capital value (index) of the Hang Seng has fakken from about 30.600 to the current about 18,200.
Are you suggesting that the companies that make up the Hang Seng are making capital returns disguised as dividends?
2. The Asia Pac markets recover strongly, the manager gets away with it, and says "phew".
An excuse for claims of capital returns not having to be proven
3. The manager makes some excellent stock picks that boost the capital value of the trust, and says "phew".
An excuse for claims of capital returns not having to be proven
Hi Actuary63,
Yes, correct. Putting it another way, if 10% yield is required from underlying investments yielding 5% annually, then the way to arrive at 10% is to get 5% twice. How to do this? Buy stocks that are about to pay a dividend and when said dividends have been paid, sell the stocks and recycle the money in to different companies leading up to their ex dividend. It really is simple maths that not many on here have the brain for.
This strategy can be successfully hidden if stock prices are rising, but in a stagnant or declining market it can create a doom-loop of reducing capital values and the need to recycle more and more capital to create the income. The possible eventual outcomes are:
1. The capital destruction becomes so great the manager puts his hands up and says "oops, we need to reset the dividend".
2. The Asia Pac markets recover strongly, the manager gets away with it, and says "phew".
3. The manager makes some excellent stock picks that boost the capital value of the trust, and says "phew".
Outcomes 2 and 3 are looking less likely as time rolls on. Would you want to take a risk on the manager finding a get out of jail free card up his sleeve?
Hi Damianmoore,
Thanks for the link. I think the writing is on the wall for this Trust, although when the inevitable dividend cut occurs is anyone's guess.
I'm thinking of constructing a simple two share model to illustrate how dividend-washing works. Assume each share pays the same annual dividend, but at different dates in the year. Further assume there is no underlying captial growth, so the XD price of each share remains fixed at 100p. Consider a strategy where the fund manager invests in one share which is sold just after the XD date, then re-invests in the other share which is sold just after the XD date, and keeps repeating. This will generate twice as much dividend income as the underlying yield on each share, but number of shares held (and the capital value of the fund) will slowly but steadily decline.
Dam
stop the nonsense - capital is not being returned to shareholders. Capital returns since the start of Hfel being on the market would have the share price a lot closer to zero.
Face the truth - capital values of the underlying company investments have gone down
On the Citywire forum investors in Hendeson Far East Income are actually willing to face the truth that this trust is converting capital in to income. One comment on this forum refers to the trust as "eating itself", which I thought was a good way of putting it! other comments refer to the obfuscation committed by both the managers and the board of directors, who are meant to act in the best interests of shareholders.
https://moneyforums.citywire.com/yaf_postsm242296_HFEL--Henderson-Far-East-Income--I-just-bought-more--having-2nd-thoughts.aspx
I wonder if the investors here will ever face the truth, even though it's staring them in the face.
Thanks for clarifying.