Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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.
Ade, Just ignore them and don't engage their childishness. Anyone can participate in free speech and debate irrespective of whether they own shares in the company or buy-to-let beach huts in Bognor Regis. Don't even spend a second justifying yourself. LTI's inner chimpanzee appears to be running riot. He needs to get a grip or move to China and join the totalitarian regime there.
Jamesmaggs, why so touchy?? Shareholders are stakeholders of a business and have a right to object to the management, and have an input in to how their company is run. This is nothing new, so what's the stroppy teenager act all about? If you don't like democracy, go and live in China.
The half year report is satisfactory with NAV increasing to Euro 14.77, and the share price creeping up during the period. The following comment made by interim chair, Fionnuala Carvill:
"My fellow Directors and I would like to take this opportunity to thank you for the continued confidence you have shown in Princess during the first half of the year. Acknowledging the sensitivity in Princess not fulfilling its dividend objective in 2022, and the impact that had on shareholders, it is our belief that Princess offers an attractive long-term investment case within Listed Private Equity with a well-respected Investment Manager that is well placed to navigate the current environment. "
has a conciliatory tone that will offer some appeasement to those shareholders willing to forget/forgive the inept foreign currency trades that destroyed a large amount of shareholder capital.
I am not willing to forgive/forget, but it appears they did at least listen.
Ade,
Oh, I see. You are not in disagreement with the contention the managers' have obfuscated their dividend stripping strategy. You simply feel it is unproductive for me to be on here complaining about it, when I should be directing my energy down other, perhaps more effective channels.
You have a valid point, but allow me to explain my motives for posting on here: I AM HERE TO RUFFLE FEATHERS. That's right, I am here to provide the irritating truth to see what happens from it. I am not expecting people to like me or the content of my posts, but this is understandable. Can you imagine the level of cognitive dissonance a person would feel attempting to accept that they made a mistake trusting an investment manager who has successfully hidden the truth about how they produce an outsized yield?? It's a huge assault on the ego, and as is evident denial and anger are the tools used to protect the fragile ego.
BUT, there may be one or two people who have enough insight and openness to start asking questions, which may in turn be enough to (1) prevent investors making the mistake of investing more/new money who may not have given it a second thought (2) give a bit of impetus to those who object to the conduct of the manager, with the chance (albeit remote) that one or more investors start asking them confontational questions.
It has taken me a long time to accept that I made a mistake investing in HFEL, and that the wool was successfully pulled over my eyes. But now I am older and wiser, I am willing to accept that sometimes investment managers allow salesmanship to override truth and transparency. This should not happen and I am calling it out.
Thanks for your reply, and All The Best.
Ade, I find it really peculiar that you believe it to be the fault of investors for unwittingly placing their money with an investment manager of an income fund who is dividend washing. If the manager followed the core principles set out by the Financial Condut Authority pertaining to the fair teatment of customer (TCF) and transparency, we would not be having this argument. The manager will have already told us all, truthfully, how the income is produced.
I invested in HFEL for income from a portfolio of companies in the Asia Pacific region. When I invest in an investment trust I am looking for a covered dvidend (most of the time) from the underlying companies without return of capital. I actually avoid investment trusts who return capital as income, such as the European Assets Trust, because I am looking for the underlying businesses of the trust to be true dividend payers.
The capital value of my investment trust holdings, as Long Time Investor states, is irrelevant, so long as the income keeps coming in. Murray International has been a poor performer versus a global index tracker on a total return basis, but this does not matter because the income has kept coming in for me. It has served my objective.
However, with HFEL it is different. Every time they buy a company cum-dividend that same company loses capital value the moment it goes ex-dividend, and this strategy has been eroding the capital of the trust (it simply converts capital to income), and at some point they will have to stop doing it, such will be the extent of the capital depletion (particularly in a falling market). There will be insufficient capital to recycle to achieve the level of income required to maintain and increase the dividend.
This could leave investors with both a reduced capital value and income from the trust, and herein lies the source of my objection. No investment trust manager of an income fund should behave in this way. It is appallingly bad.
I have a relatively small allocation to the trust as I have spread my investments across 21 vehicles. I just feel really sorry for those who have put a large allocation of their retirement wealth on to HFEL, not knowing what they were really getting in to. Perhaps if the investment manager had told them via their various publications, they would have made a different decision. It angers and saddens me in equal measure.
Hi philpot1001, that's the kind of homework you can do yourself if you want to ask the wrong questions. The more approproate question is how has Kerley performed *relative* to his peer group. Answer: abysmally.
Noted, JohnJunior, I am appreciative of your negative opinion of the managers. Most on here defend them because they remain under the enchantment of the yield - the ongoing magic trick that's going wrong, but keeping most people fooled.
Johnjunior, I don't understand your point. The ASX200 is up 2.15% over the past year, the Kospi up 2.37%, Nikkei 225 up 13.06%. This is a far east/asia pac fund - there is plenty of Asia Pacific markets to choose from where success can be found, so I don't buy the idea that the problems in China are an excuse for poor management. I also don't buy the idea that it's okay because another manager is also in a minority group making a pigs ear of things.
Ade2a, You are absolutely correct. The HFEL managers do not have a buy-and-hold stategy, even though they mislead shareholders by giving the impression they hold a "portfolio" of shares, 50% high yield, 50% dividend growth - in their own words! They are continually recycling shareholder capital to produce the yield, selling holdings ex-dividend and buying in to companies that are closer to declaring dividends. This is destroying the trust's capital in trading and transaction costs, and converting capital in to revenue.
The latst Edison reports (17th July) states: "At end-May 2023, HFEL’s top 10 holdings made up 31.4% of the fund (Exhibit 5), which was a notably lower concentration compared with 37.3% six months earlier; just two positions were common to both periods."
Unbelievable; this means that at least one third of the trust's capital was recycled in a 6 months period.
The managers have lost the plot. They have no conviction and are chasing yield to the point of self-destruction. Someone at Janus Henderson needs to intervene and give them their medicine. What they are doing does not constitute investing. They are traders. Traders are not investors - they are fools.
I continue to bang the drum that Mike Kerley and Sat Duhra are reponsible for capital erosion via the recycling of capital to chase yield i.e. dividend stripping. They also trade options, which may also had the effect of converting capital in to income. However, it's the investors in this fund who are complicit in the foolishness, as they continue to be lured by the artificial yield, and today the trust trrades at a 3.32% premium to NAV. Until investors stop being fools and start asking questions, the managers will continue to issue equity and make copious amounts of money in fees, from failure.
What a wonderful job - to get paid significant amounts of money, year after year, for failure.
Yes Roley, I would be much obliged. Please list the trusts trading at 52% discount to NAV.
Not particularly clear and concise, roley. He bemoans the large discount to NAV the shares trade at, but didn't allude to a credible reason why the stock is unpopular - which is the large management fees, relative to NAV, that risk eroding the capital down to a point where the trust will not have sufficient scale to continue.
Agreed with regards to this trust. Worth holding for a high and covered dividend from value opportunities across the UK market cap spectrum. I do not agree with you about HFEL, which generates a high proportion of income via options and capital recycling.
Do people really invest in this vehicle? Look at the accounts. The NAV is £10,588,000 versus an investment management fee of £413,746. That's 3.9%. If that's not enough, of the £318,933 "administration expenses" £126,785 is paid on salaries.
With the share price down 37% over 5 years, I can't help putting all the facts together and asking the question "who is this vehicle run for?"
I think on a simple winners versus losers analysis, you know the answer!!
It's thinly traded, that is why the spread is soo large. BUT, on a different matter, the CEO spent half a million quid on share purchases on 13th June. That is a serious commitment.
Woooooo Hooooooo. It's raining bargains!! Fill your boots is all I can say, and lock in income yields that will make a difference to your life in the longer term. A true bargain hunter's paradise.
I think this is an all-time low.
Taken a bit of a dip recently, so will top up. This is a decent global equity income ETF with very low charges. Buy and forget.
This is a decent global income ETF with low charges. I won't hesitate to add more as time progresses.