Important Update RE: Blue Planet Investment Trust Plc


Dear Friend  

Sorry to be so soon after the last missive but there is an important update on Blue Planet Investment Trust Plc for participating investors. Please see below. It really is quite unbelievable and wholly unacceptable and how ‘it’ has been allowed to do what it has done like this and without anyone accountable is beyond belief.

Before anything else, may I share the good news with you. We are pretty fully invested at the moment with little cash and yesterday, the FTSE250, a favoured investment area for some time, rose by one of the biggest daily increases it has ever seen (3.6%) – but it is still good value. Looked at another way, add-in a year’s dividends and that is a fair, average return to expect for a whole year. Many of our largest holdings had a good day and long overdue this is, regardless.

The Bank of England increases Base Rate to 4% and the IMF predicts that we shall have economic regression this year. It is joining the Governor of the Bank of England in trying to talk-down the UK’s prospects. In part that is ‘right’ as we need to kill inflation and thus consumer confidence to pay high prices whether they can afford things or not and all these strikes don’t help, as excessive awards fuel inflation as they have to be funded. Then the merry-go-round continues ever upwards till ultimately it leads to savage job cuts. The general public may now already be looking at the published average rewards for some of the striking staff, including their generous holidays and pensions – local authorities pay as much as a quarter of the salary towards a teacher’s pension for example. There must also be fairness in our societies and inevitably, the taxpayer has to shoulder the cost of all the public services so will taxes have to rise yet again to pay big increases?

What some may imagine is ‘politics’ but that aside, economically I believe the IMF and the Governor are wrong. The ‘signs’ I see do not support the pessimism they are promulgating. Once these disputes are closed (and some will be defeated, yes), Society can begin to be more productive again. Last year we read that the public sector, yes, a big contributor to our economic growth, fell on reduced productivity so there is plenty of room to catch up again. I also see much improved opportunity in the ‘City’ – the important financial services’ sector which is responsible for 10% of our economic output. The UK stock market stands as perhaps the most promising of the major markets going forwards for 2023. Sterling is also due to recover. Natural gas has dropped by 77% since 26 August and our reliance upon it as a fuel was noted by the IMF as one of the negative factors but have they not seen the price drops yet

Accolades  

It is always pleasing to be recognised for our efforts and no more so than by an independent industry appraisal, so by our peers in that sense. We have been nominated for the regional award by New Model Adviser. Thank you very much and well done to the whole Team!  

https://citywire.com/new-model-adviser/news/revealed-2023-nma-regional-award-shortlists/a2407557  

Of course, our best accolades are always from our clients to prove we are doing the best we can for them of course but these sorts of things always help keep us on our toes too.  

Discounted Investments  

Our favourite discounted fund has just published its latest asset price. This is for a company which is winding-up and returning money to shareholders. So for 72p, we can still buy assets worth £1. Isn’t that barmy? We do – we keep buying as many as we can – within predefined limits for individual clients of course as we are still always careful but how careful can we be? So if ‘tomorrow’ it sold all its assets and returned the cash, we’d receive £1 less a little cost – an investment return of 39%. Meantime, we still enjoy the income its component holdings may be paying and also the daily movement in those market assets. Yes, there are risks as there is with everything but with a big fat cushion like that, they are seriously mitigated. Yesterday another of our winding-up loan funds has given us another 5.5p per share too – thank you very much. We’ll use that to buy more!  

Blue Planet Investment Trust Plc  

Without consulting us, the largest independent shareholder with over 25% of the ownership of this ill-fated, fully London Market-listed Investment Trust which satisfied all the regulatory requirements for retail investors, the Board has rushed a proposal to investors to close-down. We wonder if this action is in league with their solicitors with whom they were working on all these matters previously, Samuels in Barnstaple. They have also written to certain of our clients directly again, without authorisation and in breach of Date Protection rules (Blue Planet Investment Trust is still not registered with the Information Commission). First of all, our clients do not own the shares in their names so they cannot register a vote direct with the Registrar. Their voting rights are preserved of course and meantime, as clients’ discretionary managers, as we are authorised, we shall be voting our shares appropriately (if the Board does not illegally decline to accept them like they did last time).

There is not a single apology for the atrocious and recklessly negligent and potentially illegal behaviour over the last few years. The report blames ‘bad conditions’ and not the atrocious management – really? So here we go and you can decide who has been sleeping at the wheel. Remember, this is a full-market, mainstream investment which up till perhaps the Pandemic, held a good balance of fixed interest assets, mainstream big companies and some growth orientated holdings with a benchmark of the FTSE100 (that changed, without shareholder approval, only on 1 June last year).  

On 28 April 2021 I wrote to the FCA demanding intervention. I noted grave concerns which needed to be addressed to put the Trust back on its original firmer footings and to pursue its fund objectives (as it was still advertising) of a balance between ‘income and growth’ etc. At that time, the share price was 30p. The underlying assets were worth 36.75p. The FTSE100 since that date would have suggested a present asset value per share of 45p. Even if the new and inappropriate benchmark of the NASDAQ100 was used, in Sterling terms that figure would still be 37p. Of course over the time we have sent copious new and damning information to the FCA for it to act. Had we been appointed to manage the Trust when it seems the manager began to lose the plot (a matter never discernible till sometime after the event) at the trough of the Pandemic when the asset value was 27.4p, based on our own funds under management (not a pure reflection of performance of course but an indicator), the asset value would now be around that 45p too.  

What is testament to our capabilities is that despite this awful behaviour and having carried this on expectation of intervention to correct the wrongs, whilst investors may have lost on this asset all our affected strategies have taken that on their chin and have dramatically out-performed mainstream markets, including the ‘safest’ government bonds and especially over the last year when very few investors saw anything other than nasty losses on their investments ‘elsewhere’. That is no excuse for Blue Planet’s negligence however and we shall be continuing to press for heads to roll and prospective compensation.  

Anyway, our clients do not need to do anything at this stage. We shall do what is necessary and as has been the case so far, all at our not inconsiderable cost. We are very angry that when we raised our serious qualms with various entities including the SRA and the ICO, clearly no action ensued – as had that been the case, there would have been immediate changes. Even then, as the share price fell, there remained ‘fat’ by way of a big discount from the underlying assets but the management has squandered all of that over these few short years.  

What the circular does not remind shareholders is that the Murrays’ management company has a two-year penalty contract so on the liquidation, it will expect payment of perhaps £700,000. That is disgusting and wrong. We may have to vote against the motion till they agree to waive that. The ace we hold is that the Murrays have 29% of the shares so they won’t be able to unlock their £1.5million either and we think they may be desperate for funds. Meantime, as I have said many times, we are concentrating upon the 99.6% of assets we manage and not the 40ps in clients’ £100s in this corrupted asset. I am proud to report that throughout all of this fiasco, we have never lost sight of that and our results reflect that in spades, especially over 2022.  

Risk Mitigation  

One of the best ways (only ways?) to mitigate all risks is by diversifying your assets. This can mean within a ‘type’ (eg shares but not all in just a few) but also asset types – eg commodities, secured loans, cash deposits and so on but it can include ‘property’ too though that is harder to diversify with your own buildings. We like commercial property funds to this end – tenants still have to pay rent to be there, however economically impoverished they may feel and of course tenants can include governments and other organisations, so not so economy-orientated.  

This ‘sector’ has seen values dip and people withdrawing from it as interest rates have risen (so the cost of holding property rises) and also the easier returns from higher cash rates. However, as usual, people over-react… one of our favourites, a £1.3billion quoted Trust, pays our shareholders almost 6% dividends being part of the rent money received. It has warehouses, industrial units and infrastructure assets as well as office blocks and so on. Based on the latest asset value of all these, the shares are available at a discount of 42%. That means that for £1 we buy £1.72’s worth of property. At some point, the two will be much closer together and if the markets don’t do that, then an opportunist will do something, even if that entails pushing for properties to be sold and cash returned to shareholders to unlock the discount. Meantime, we are paid to wait. That is far better than owning your own ‘property’ investment I can tell you! We have several like this and as you will know, no single asset exceeds around 2% of our clients’ total assets as we spread capital and the risks so widely (we have several of these funds – all different). In theory, if next week the Trust decided to pack-in and it could secure all the valuations just like that, we’d see that 72% uplift overnight as well as the rents still coming along meantime, minus the disposal and winding-up costs.  

This week, one we don’t own reported with the expected drop in its asset valuations but the shares still sit at a deep discount to that suppressed figure so that if the shares moved back to the 31/12/22 property values, that would be a 45% gain for investors. Meantime, the rents are being paid and the shares yield a dividend of over 5%. This too is no tin-pot company but one worth £1.2billion last April. Can you have too much of a good thing…?!

On top of these we have several funds at deep discounts to their net asset values. We are expecting an announcement on one of those next week (one of our biggest mainstream assets) and which will see our investors unlock the discount which has ‘always’ existed since we purchased them – one of the core reasons for our interest. This will provide an uplift to all investors of some 20%, just like that. You don’t receive that with open-ended funds or ‘cheap’ index-trackers…  

We also have some direct shares in myriad companies as icing on the cake – very well diversified after ‘funds’. Last week, Sainsbury’s which we’ve held some time and which we prioritised for accelerated further purchases when it fell heavily in the autumn, has had possible takeover interest noted following a big stake changing hands. Yes, this sort of thing happens regularly in the ‘Value’ space (which we like so much) and meantime whilst we are paid handsome dividends to wait from a ‘boring’ investment in a safe sector as we buy our groceries, however economically impoverished we may feel.  

LONG-DATED GILTS AND NAIVITY  

After a torrid year last year when rock-solid government bonds delivered seriously bloody noses to investors who thought they were the safest of the safe, Vanguard has now re-risk-rated its relevant fund and noted it as 6/7 – so almost the highest risk of any asset class!

https://www.vanguardinvestor.co.uk/investments/vanguard-uk-long-duration-gilt-index-fund-gbp-acc/overview It lost all its low-risk investors 40% last year – on an asset class of which we had none. Yes, Vanguard’s charge is cheap at 0.12% but that didn’t soften the blow did it – far better paying our 1.25% and seeing our Defensive assets NOT lose 40% and in fact on average UP on the year. There was hardly any income from that asset class to compensate either – our balanced income is nudging 5%pa at present!  

The point is that it was high risk when $18trillion of such bonds were in negative territory. It is nothing like the same risk now – how stupid are these risk ratings – and misleading. But who are we to say such things? We are mere tiny asset managers in provincial North Devon; we don’t run trillions like they do and don’t know anything of course.  

Chooseday – Tuesday 24 January  

The second coffee morning went well on 24 January and it was good to welcome guests to share some company and coffee. The next one is at 10.30am till noon on 7 February – feel free to come along and join us!  

Risk Warning  

Stock market investments can offer income through the payment of dividends and interest and good opportunities for capital appreciation over the longer term. By this, generally we mean periods in excess of five years, preferably much longer. However, we can never promise you particular returns, especially in the short-term. At any point in time but especially in the short term, your capital could be worth less than the original amount invested as some of the selected holdings may fall in value, regardless of expectations at the time of acquisition. We may also invest in funds that hold overseas securities. The value of these investments may increase or decrease as a result of changes in currency exchange rates. Returns achieved in the past cannot be relied upon to be repeated.

To remind you, why do I send out occasional emails? Because everyone can save money. We have no connection with any companies mentioned and you have to make your own contacts and satisfy your own enquiries. What is in it for us? If we can prove that we are knowledgeable and that our service and advice have good value, then you might contact us for professional financial planning and investment help. You don’t have to do that though and there’s no charge for emails. If simply they save you money, then accept them with our compliments! However, you’ll know where we are!

If you have any queries of any form or indeed any subjects you think I could include, please contact me. I also refer you to our website www.miltonpj.net. We celebrated our 35th anniversary in 2020 and have been publishing a well-respected independent column in the local Paper for most of that time and free client newsletters as well.

Do not forget however the usual caveats – this is not ‘advice’ and you are encouraged to seek that before embarking upon any financial route involving investments, etc.  

My best wishes

Philip J Milton DipFS CFPCM Chartered MCSI FPFS FCIB
Chartered Wealth Manager
Fellow Of The Personal Finance Society, Fellow Of The Chartered Institute Of Bankers