RE: TFG: The Enigma wrapped up in a mystery16 Mar 2022 19:30
Hi Agricore, it's not the most user-friendly Annual Report I've ever read and in some respects it's still mystifying.
I'm left with more questions than answers. If you have any thoughts I'd be very interested.
Regarding the buy back you mention, is that the $50m Tender Offer to shareholders to buy their shares at between $8.00 and $9.75 per share? If so, do you know why they are going down the Tender Offer route to buy back their shares? I mean companies and Investment Trusts usually buy back their shares in the open market, according to whatever authority was given to them, and, equally, sellers simply sell their shares via the market in the usual way. I can't immediately see the point of the Tender Offer either for TFG, or for shareholders for that matter, who would be receiving a price pitched near enough to the current market price anyway. What reason could there be for a Tender Offer? I'm racking my brain, could it be a lack of liquidity in TFG shares? Then again, $50m doesn't sound like very much, given the size of the Trust. Do you think it'll even move the dial (in terms of reducing the discount to NAV)? If you're a shareholder, are you thinking of taking up the Offer?
Re the possible inflation hedge you mentioned, do you think that's the 20% of NAV invested in 'event driven equities and other hedge funds'? Who knows what 'event driven equities' are - they don't really tell us.
They seem to like owning part or all of the asset management companies they invest in, and I see that 44% of their net assets as at 31/12/22, was ownership of such companies. Owning asset management companies is a leveraged bet on the future of equities... which may not be so rosy in future years (at least compared to the past decade). You may know the investment trust LTI. That trust owns a chunk of privately held asset manager Lindsell Train Ltd (it's the only way retail investors can obtain an interest in the asset manager). As I'm sure you know, LTI Trust often trades at an eye-watering premium to NAV, such is the esteem towards the asset managers. Worth mentioning when this trust is on such a big discount! Of course, unlike TFG, Lindsell Train are very 'open' managers, constantly informing and updating retail investors, which surely helps with the discount..?
Two more reasons for the stubborn discount. Firstly the fees. About 25% of the gross NAV progression for the year (fig 6 on page 24 of the Annual Report) went on fees and Hargreaves Landsdown has the ongoing charge at 7%! These are akin to a hedge fund. Secondly, availability. Platforms make it hard to buy this - the prospective investor is directed to a special questionnaire, which makes it clear that this is some sort of super-sophisticated product only for super-sophisticated investors ( I forget the terminology). This is off-putting. That was Hargreaves. Barclays, my other broker, don't even offer it (although when I phoned them they said that would be changing).
Why a TFG and a
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