aims to provide a high level of dividend as well as capital appreciation from a diversified portfolio
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Dam
''It looks like "longtime" investing hasn't made you smarter.''
I am very smart - the value of my portfolio suggests that I have also made smart investments
Nal
''I hope you were equally happy when you sold at circa 296 in January''
I didn't make a sale in January - i made a sale on 11th November 2022
LTI, are you okay? You appear to be on repeat mode. We know you bought shares at 210.5p and we know that the capital values of assets very over time. But this is not the topic of discussion. We are talking specifically about the performance/conduct of the HFEL managers and relative performance of the trust, which has been poor.
Your repeated reference to the trust performing in line with the Hang Seng is absurd. All you are doing is pointing out the fact that the trust, somehow, failed to benefit from diversification, as HFEL is an Asia-Pac fund with an investment mandate to seek opportunities across multiple asia pacific markets. You are simply pointing out the failure and taking comfort in it. It looks like "longtime" investing hasn't made you smarter.
You said that yesterday ! Im so glad you bought at 210 and are happy. I hope you were equally happy when you sold at circa 296 in January. I bet you are
Share price is now getting nearer to NAV - maybe we will be back to what has been the 'normal' most of the time - a premium.
Happy with my purchase at 210.5p when at a good discount
Guitarsolo
Good that you have taken time to try to explain things but unfortunately as I have found, some simply do not understand.
Dam
''To put it in to context, the share price was this low in the aftermath of the global financial crisis, between 2008 and 2009; 14 years ago. THIS IS EMBARRASSING.''
As far as I can see in 2008 the share price went as low as about 177p in 2008 - currently at 221p.
As far as I can see the HFEL share price from that low point until now mirrors that of the Hang Seng index.
Capital values can go down as well as up
Bott, I'm afraid you have the wrong end of the stick. The money raised from new equity is quickly deployed by the manager and on a per share basis the company does not lose assets. The money doesn't simply disappear and then dilute the NAV per share. However, as we know, the per share NAV has been declining due to poor stock selection and management. Part of the poor management is the very high turnover in the underlying investments, which the manager does to buy in to companies leading up to ex-dividend dates. The manager has also been using the cash from equity raises to buy in to companies just before ex-dividend, to boost the revenue account of the trust. Mike Kerley says by doing this he is being "dividend aware". This is his jargonistic way of stating that he is dividend stripping.
The dividend stripping is not speculation - it is a fact the manager is doing this, and it is reasonable to contend that this could be the cause of the abysmal capital performance / total return. To put it in to context, the share price was this low in the aftermath of the global financial crisis, between 2008 and 2009; 14 years ago. THIS IS EMBARRASSING.
In the past 10 years HFEL's total return with dividends reinvested is 38.4%. In that time the FTSE 100 has returned 70%, and FTSE World 201.3% (SOURCE: Trustnet).
The managers have failed, and continue to fail. Shareholders should be indignant and asking questions.
Bott, those original investments would have fallen in value whether or not new equity had been issued. The fact is it has, at a marginal value over the NAV, but it has of course befallen the same fate as other investments. You say there is no advantage to issuing new equity to existing shareholders but I disagree. First, it allows the fund to get larger and therefore it has more clout when investing. The larger the fund the more it can use its size for its advantage (that's why the big boys get to dominate). Secondly, the increased scale reduces costs per share.
To be honest, this is not what HFEL investors should be concerning themselves with. The greater concern is the falling NAV. Some believe there is dividend washing/stripping going on but as far as I am aware no one has confronted Mike Kerley about it (I tried but there wasn't enough time during the presentation). I would appreciate a greater deal of transparency from Mike about how the income is generated but, to correct a point just raised, HFEL DOES have a reserve fund equivalent to about 16pps I believe.
Guitarsolo
Bott
I am not disagreeing with you I want to understand but I do not understand the basis of the numbers.
Guitarsolo
There is no benefit to investors from issuing new shares - at any price - if the resulting investments quickly lose value. That is what has been happening. You delude yourself if you think otherwise.
Guitarsolo - a postscript
You are wrong to say that the outcome of issuing more shares and investing the proceeds is that things stay "in balance". As I have now shown, repeatedly, they are woefully out of balance. Neither the dividend nor investment values reflect the extra money. The value has fallen dramatically (which cannot be anything like wholly attributed to market values generally) and the dividend increases have been pathetically small.
Dear Damienmoore,
I would like to thank you for alerting me to HFEL's damaging dividend-washing strategy. For some time, I had wondered how the fund had a distribution yield significantly higher than the underlying yield on its portfolio, and decieived myself that it was explained by option-writing or leverage. Thanks to you, I sold my shares 287p and saved myself further captital losses. Please continue to post here - you are performing a public service and may discourage unwary investors from buying HFEL shares.
At some point, HFEL will be forced to cut its dividend. The dividend yield on the unit trust equivent of HFEL (Henderson Asian Dividend Income) is already much lower, because a unit trust has no reserves and can only distribute income. I occasionally visit this board for the same reason that a psychologist might be interested in the behaviour of passengers aboad the Titanic. It gives me no pleasure.
Bott, you're confusing the performance of the shares bought by the fund managers with the value of the equity. By definition, if new equity is issued at a premium to the NAV of the shares then that new money is marginally benefitting the fund and the existing shareholders. What happens afterwards is a different matter.
By way of example, on 15th May 2023 the fund issued 200,000 new shares at 250.5p for a total value of £501,000. If the issue was at say 2% premium (about the average) then the new equity effectively gave Mike Kerley £10,020 more than what he would be able to buy assuming he replicated existing investments. That £10k has gone into the pot which all existing shareholders share. It's marginal but issuing equity at a premium is a benefit to existing shareholders. If you like it is just the opposite of a company doing an equity raise at a discount, which dilutes existing shareholders.
What Mike Kerley does with the money afterwards is a different matter.
Regards
Guitarsolo
Guitarsolo
It is a fallacy to think that existing investors in an IT benefit from it issuing more shares. This is so, regardless of the price at which they are issued. New investors in HFEL are obviously attracted by the DY, but seemingly don't notice (as I did not until recently) that the new money is not being invested profitably.
The only beneficiaries from new shares issued by an IT are the managers, the auditors, probably the registrars and, of course, the directors. This is not just true of HFEL; I have seen it before.
Although HFEL isn't mentioned in the article, Questor in today's Telegraph ruminates on the poor performance of ITs. It bears thinking about.
Bott,
In 2018 the dividend was 21.2p (4 x 5.3p). It is now 24.4p (4 x 6.1p).
The new equity issued means there are more shares in issue. The funds are used to buy more dividend paying shares but the aggregate dividends have to be divided by the larger number of shares in issue. Hence it largely stays in balance.
The funds have not been squandered but they have been invested into shares where the NAV has declined (that can't be disputed).
To be honest, I find it impressive that Mike Kerley has managed to keep issuing equity at a premium. I have other investments which have performed immeasurably better than HFEL where the fund trades at a discount to NAV and that prevents the fund from being able to issue more equity and grow (why would you buy new shares at the NAV when you can buy existing shares at a discount?). That has resulted in at least one of those funds being wound up despite it earning 12-14% returns. So I am grateful in a way that we're at NAV and HFEL continues to issue new equity.
Guitarsolo
Ade
76.8% up from the starting point, which, for my calculations, was 2018. That should be obvious. It means that HFEL started 2023 with three quarters more shareholders' money 'invested' than four years previously. As I have pointed out, this can't be seen in commensurate increases in dividend or value. That's why I have said it's been squandered. Can you demonstrate otherwise?
LTI
It is a public board.
What percentage of your funds are in HFEL?
This is BS
Ade
''Investing percentages?''
I have a large number of stocks in my portfolio- The percentage of money invested in each is irrelevant.
What is relevant is that YOU stated that 1.4% of your 'portfolio' is in HFEL, so a relevant question is why are 100% of your posts on a board relating to 1.4% of your 'portfolio' ?.
It is BS.
Zac
Neither did I.
News to me
I wasn't aware there was a % threshold required to post on this forum. I've just done the maths and my holding here represents around 3.25% of my total portfolio value. I hope that is enough to qualify!
" . . . take the S&P500 was 22% down last year and 7% down the average this year without the big 8 involved . . . "
Then it's not the S&P500 with almost 30% of the market cap removed is it? Get real!!!!
LTI
Investing percentages?
Ade
that is easy to see - just click my name
LTI
This is a public board.
What are your investing and commenting percentages?