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Good Morning Guitar Solo, I have indeed noticed that Mr LongTimeInvestor has the time to create circuitous conversations by quoting out of context, denying facts that have already been evidenced, and supporting fallacious/false premises. But that's not to say I should allow him to deter me from making my point to fellow investors . As with the PEY debacle, I am indignant in cases where a fund manager fails to provide the full picture of their activities - particularly activities with risk attached. I may contact investor relations, but sadly past experience diactates that it would yield little. I'll give it some thought.
Longtin
(1)"''and there should be complete disclosure by Mike Kerley '' really - why?"" - because disclosure is fair to investors who are committing their own money. You are probably the only investor I have come across who is anti-disclosure. Strange, but there's a first time for everything.
(2) "I am not aware of investment trusts publishing every single purchase and sale transaction - you do however get a frequent update of the holdings held within the trust." - I'm not arguing for the trust to publish all their trades; this is a different matter. What I am arguing for is for the trust to give information on how much income generation is from the dividend stripping strategy they have been employing, so I have an idea of how much of the income yield is naturally occurring from the underlying investments.
(3) "The trust has an investment objective. Any investor can decide for themselves based on the trusts objectives, whether to make an investment or not." - No, nonsense. No sensible investor invests on objectives alone without knowing what methods and tools are being used to achieve the objectives. As we know, some methods and strategies are better than others. If you are a "long time investor" you should know this. If not, may lady luck forever be on your side.
(4) " If an investor has concerns then don't invest." - Of course, except when I made the investment I did now know about the dividend stripping, because the managers have not been transparent about it. How can an investor be concerned about an activity they don't know about.
If you are so pro investor responsibility, why are you against a level of transparency that would allow investors to make an informed decision that they can truly be responsible for?
Many thanks for sharing this, Guitarsolo.
"Reviewing their options". Well, congratulations to them. After destroying a large chunk of the company's value on forex positions, they have come to understand that betting on currency markets can result in losses. Doh!!
And what are these huge losses for?? To hedge a portfolio of investments that is already inherently hedged via geographical diversification - pardon? And furthermore, to hedge to Euros when the shares are listed on the London Stock Exchange, where British investors need dividends in GBP - pardon?
Congratulations on selling a holding here - you've just idiot-proofed this money, though you should not be investing for your in-laws. That may not end well.
Significant share price uplift driven by on-market share purchases by the management. The shares will be held in treasury should the share price move to a premium. A good decision made for the benefit of shareholders.
Longtit, Thank you for your comment, and I am pleased you agree. HFEL have indeed left shareholders clueless on the extent they dividend strip, because they don't tell us. You are absolutely right that we should not be clueless in this regard, and there should be complete disclosure by Mike Kerley and his team.
Ade,
Fascinating to hear your long term history with HFEL, and Micheal Watt. Thanks for sharing this. However, I would not share your view that, just because our fellow contributors to this board are finding it difficult to accept/understand the truth, they are agents acting for the fund. Though, I do hope they take the time to assimilate the evidence and come to understand that a significant proportion of HFEL's income revenues are from "dividend stripping". Just how much, we don't really know, and this continues to be a fundamental part of my argument - the reprehensible lack of disclosure.
Fund managers are very good at shaping how they disclose information to justify their existence, and to make themselves look smarter than they actually are - like many salespeople do. I've grown wiser (I think!) and more intolerant of it.
D
longtimeinvestor, I am very sorry but I can't explain it any further than I already have. I suggest you digest the Edison report yourself and think it through.
Thank you for your comments, ade2a.
I refer to your comment "You are probably correct". I regret to report that there is no "probably" or "maybe" about the crux of my argument. Some of my fellow investors here perhaps feel that I am simply making assumptions or "have fears". However, I believe my contention to be factually based. Please refer to Edison's December 2021 report:
https://www.edisongroup.com/publication/compelling-income-and-recovery-potential/30350/
"The current 7.9% yield is well above the c 4.8% portfolio yield for several reasons. Kerley uses option-writing to generate extra income (7.7% of FY21 revenues) and is ‘dividend aware’ in the timing of purchases and sales".
Edison are a valid information source, and in fact I believe HFEL pay them to issue their reports.
I continue to believe that Mike Kerley and the Chairman have a duty to be transparent about the strategy of buying companies cum-dividend, and the contribution (and costs) associated to this activity. I see no reference to this in their reports, though it is evident they are employing this strategy. I have no respect for for this type of opacity - in fact it makes me downright suspicous and annoyed.
We are the shareholders - they are accountable to us and I want to see more transparency so investors are empowered to make an informed choice. Again, time for Mike Kerley to justify himself.
Good Afternoon, Guitarsolo. For me the management have lost credibility. Let's analyse this - they actually believed that forex contracts would achieve NAV stability. In other words, they assumed the forex positions were a one way bet, and there was limited downside risk. How unintelligent can they be?? How can an investor possibly place their money with people who have made such a peculiar, illogical assumption. Do you really want to keep your money invested with people like this?
I will stay invested, but not because I wish to. I have lost too much to make it worth selling.
Absolutely appalling nonsense. If they think today's presentation with all their financial jargon masks the truth of what they have done, they have a twisted sense of reality. Let me sum up the excuse they have made, versus the truth:
EXCUSE: “Hedging policy focuses on NAV stability”.
TRUTH: The hedging policy has actually introduced volatility to the NAV, and destroyed a significant proportion of the
company’s capital.
Where was the apology, or at least an expression of regret? So they think it’s okay that they have used the dividend money due to us to pay for THEIR mistake. How about using some of the 55 million Euros they took in performance and management fees during the 2021 financial year? Unless they feel that shareholders exist to take losses, while they take nothing but gains?
Where the hell is the Chairman? Is he going to say something about this debacle or just keep taking his pay cheques to be docile?
I just can’t believe the audacity and arrogance of the entire situation. Shame on the board, Shame on Partners Group.
Thank you for your comments, Actuary63. I find it interesting how you describe it as "worrying". This is apt, because worry would be derived from a perception that the manger is possibly doing things that we are not fully informed of, and that we are precluded from understanding the possible consequences. I am pleased to share some common ground with a fellow investor here.
Thank you for your input, mrcautious. Your comments are somewhat vague and off-topic. The recent drop in the share price is due to FOREX positions that have adversely moved against the company and resulted in suspension of the dividend. As a shareholder I am converned about the possibility the manager has mismanaged the fund given the extent of the losses. We are awaiting further details from them.
Thank you for your reply, longtimeinvestor. My views are not based on a hunch, or fears - their is sufficient evidence in the fact that the underlying portfolio yield is significantly lower than the yield of the trust. Edison Research made this point in December 2021:
"The current 7.9% yield is well above the c 4.8% portfolio yield for several reasons. Kerley uses option-writing to generate extra income (7.7% of FY21 revenues) and is ‘dividend aware’ in the timing of purchases and sales. As share issuance creates a drag on returns per share, the proceeds from new shares may be invested to maximise income".
I am sorry to keep repeating myself, but again, as a shareholder I want Mike Kerley to justify his less conventional income strategies and provide greater transparency surrounding them, given the poor total return performance of the fund. If he is turning over (or "timing") investments to generate income, I want to see this referred to in the annual report, and detail provided. I also want to know what the costs are to the trust for employing such a strategy.
The majority of investors appear to be blinded by the allure of the yield, hence the consistent premium to NAV they are paying. But I for one, as a long term holder, want more accountability and transparency from the manager given that my faith has gone unrewarded for a prolonged period of time.
Thank you for your comments, longtimeinvestor. I agree, the managers are indeed there to produce an income. What I am challenging is the artificial production of income that is coming at a total return cost to investors. As I said in my original post, the current yield is not naturally occurring from the underlying businesses the trust invests in. The manager boosts income via options trading and purposefully turns over investments to buy businesses that are about to go ex-dividend. This enhances the income account, but at the same time introduces cost and capital erosion in to the mix. Converting capital in to income + costs is not a wealth creation exercise - it is robbing Peter to pay Paul.
My argument, which is a reasonable one, is for the manager to justify this behaviour, which hasn't been working for a number of years, and to address the contention that the trust should perhaps cease the income boosting activities and pay dividends from the natural yield occuring from the underlying investments.
Hopefully the above clarifies my view, and it appears less strange to you.
It is time for status quo to be challanged. The manager uses financial creativity to achieve the current yield, which involves 2 behaviours:
1. OPTIONS WRITING - using options to boost the revenue account, which can drag on returns if the options/bets work against the company.
2. BUYING BEFORE EX DIVIDEND DATES - the manager is said to be "dividend aware", and will buy companies where they are about to go ex-divi. This will boost the revenue account, but the cost comes in the form of transaction fees, and the companies bought being marked down ex-dividend.
The result has been that over recent years HFEL has become a capital return vehicle (and worse), and as a shareholder I am now saying the manager has to justify why they think this strategy is appropriate in to the future. Is it time to cut the dividend and for the trust to pay at a level truly covered by the dividends paid by the underlying companies - without the financial hocus pocus?
Shareholders have been blinded by the yield for too long - time to wake up and start asking questions about the poor total return performance. Let's not forget, the manager wins in all weathers. If we lose, they still get paid!!
This has been going lower, even when I thought it wasn't possible for it to do so. However, the selling in EM's is likely due to the interest rate rises around the globe. A lot of money invested in EM's tends to be borrowed, so when interest rates rise, investors are forced to sell to cover their debts. Might be worth putting more in to this, but I do get fed up with the downward trend.
Interesting announcment today: "Princess will hold a quarterly investor update on 22 November......Princess portfolio based on unaudited figures as at 30 September 2022 as well as providing further background regarding the suspension of the second interim dividend for 2022." This is at least showing a willingness to provide detail on the issues we are all concerned about.
I couldn't have put it better myself, SageofLondon. It is difficult not to assume they overexposed the company to the forex contracts to see if they could make quick/effortless returns from Euro appreciation. Why else would they have an exposure to forex that significantly outweighed the value of (USD denominated) pipeline asset disposals?
And here we are, waiting to hear what the extent of the gambling has been. Could it be £200m, £300m or £400m?? We don't know, because they don't want to inform the extent of their ineptitude. But at some point the information will have to come out, one way or another. I sense it is not going to be pretty!
I believe my pessimism to be appropriate, Guitar Solo. When a listed company makes a negative announcement, but fails to provide any context or meaningful detail i.e. deliberate obfuscation, there is worse to come.
I believe It will get worse than this, Guitar Solo. 6 Euros per share by the end of the week, is my guess. It is pointless for me to sell now. I will hold in the small hope that I am wrong, and they can turn the situation round.