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Baronsmead VCTs - Change of manager

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james188
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Baronsmead VCTs - Change of manager

#179033

Postby james188 » November 8th, 2018, 5:24 pm

Announcements just made, completely out of the blue. Living Bridge is transferring its VCT business to Gresham House and the existing management arrangements with the Baronsmead VCTs are being novated. It is being hailed as excellent news, but I am far from convinced on the very little information so far supplied. More should have been said. I see that it is stated that the existing team will be transferred across. We need to know much more - and well before the AGMs next year.

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Re: Baronsmead VCTs - Change of manager

#179037

Postby oxmatt » November 8th, 2018, 5:35 pm

I agree - I fail to see how it is good news. Neutral possibly but we'd have to wait and see. I certainly would not consider a top-up this year if there was one.

I guess it is fallout from the rules no longer allowing MBOs resulting in much reduced synergy between the Baronsmead VCTs and the Livingbridge institutional funds in terms of deal sourcing.
Last edited by oxmatt on November 8th, 2018, 5:40 pm, edited 1 time in total.

james188
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Re: Baronsmead VCTs - Change of manager

#179039

Postby james188 » November 8th, 2018, 5:39 pm

Top-ups are intended - to be announced in December. They will need to say a lot more to convince investors to put in any money. However it is spun, this is a fundamental change.

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Re: Baronsmead VCTs - Change of manager

#179043

Postby UncleEbenezer » November 8th, 2018, 5:52 pm

Damn, I think I preferred them as ISIS. Living Bridge sounds more like a tribute to Monty Python.

This may be just the cue I needed to reduce what has hitherto been a very overweight holding!

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Re: Baronsmead VCTs - Change of manager

#179044

Postby Karellan » November 8th, 2018, 5:54 pm

Agree , if its not broke then dont mend it. The Barons have produced me a fat steady stream of dividends for the last 14 years , it cannot get any better - can it ?

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Re: Baronsmead VCTs - Change of manager

#179069

Postby scotia » November 8th, 2018, 8:39 pm

This notification from the two Baronsmead VCTs has left me a bit confused as to who does what in the operation of a VCT.
A VCT has a Board of Directors. A VCT has a Manager who makes the investment decisions.
So who has decided on the proposed changes? Has Living Bridge (the current manager) indicated that it wishes to give up the management of the two VCTs? If so, should the two Boards of Directors consider who should take over? And, after considering all possible offers, should they reach their decisions independently?
In the present case none of this appears to have happened. Living Bridge seem to have decided who the new managers of the two VCTs should be, by "selling" the management - and the two Boards of Directors have simply concurred. And the Chairman of the Board of Directors of the Second Venture Trust, is the Non Executive Chairman of the new manager (Gresham) - although it has been proposed that he will stand down from the VCT Chairman's post, but only after completion of the sale. It would appear that he sees no conflict of interest in continuing as the VCT Chairman while he arranges its transfer to a company of which he is a Non Executive Chairman.
And I thought VCT Directors were independent, looking after the shareholders. In the case of Baronsmead why do they bother having Boards of Directors? In this case it seems like an unnecessary expense.

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Re: Baronsmead VCTs - Change of manager

#179255

Postby james188 » November 9th, 2018, 5:38 pm

Scotia, I would expect that the two management agreements between the VCTs and Livingbridge would allow a transfer of the management arrangements at the instigation of Livingbridge, with limited approval/blocking rights for the VCTs. So, the VCTs would need to secure the best deal available and the linkage between the investment arrangements between the two VCTs would mean that having the same manager for both VCTs would be sensible from all angles. I am sure that the initiative to exit would have been taken by Livingbridge, so the question for me is what steps and advice the VCT boards took to determine their position and in particular what due diligence they did on Gresham House and whether they extracted any extra protections in the process. We have no visibility as to any of that. This really brings home the fact that most VCTs are heavily reliant upon the managers they engage and the detailed terms of their engagements.

There is slightly more detail in the RNS issued last night by Gresham House (who are doing a placing to fund the deal) and also on the Livingbridge VC website. It would have been better in my view if that same level had been included in the Baronsmead announcements, but still it would not deal with the above questions. Given the intended Baronsmead fundraisings, I hope that greater clarity will be given. I am certainly thinking hard as to whether to increase my investment levels and I will not do so unless and until I have a much better understanding of the implications. For example, as ever with deals of this nature, Gresham House refer to identified cost savings as a result of the acquisitions. There are a number of other decent top-ups coming up, so I think that the Baronsmead VCTs have work to do to persuade people that they are in prime position, particularly as performance has been more muted of late, compared to some of their peer group.

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Re: Baronsmead VCTs - Change of manager

#179396

Postby Kidman » November 10th, 2018, 5:35 pm

So Gresham House add LivingBridge VC to their earlier purchase of Hazel Capital. Are they trying to consolidate VCT managers and will there be more bought?

I didn't think I'd seen a long enough track record of Living Bridge under the latest VCT rules to want to take part in their forthcoming fund-raising. Now with more unknowns it is a definite no for me!

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Re: Baronsmead VCTs - Change of manager

#179755

Postby BusyBumbleBee » November 12th, 2018, 3:43 pm

James188 - you say
james188 wrote:This really brings home the fact that most VCTs are heavily reliant upon the managers they engage and the detailed terms of their engagements.
They engage? Don't forget that it is the manager who sets up the VCT in the first place and the manager that appoints the directors even before the first offer opens as they are listed in the prospectus. Can't say I know much about Baronsmead but it takes an almighty effort to break the ties between directors and the manager. Only ones I can remember are the Murray VCTs which were so abysmal that shareholder action actually brought about a change and they were transferred to what is Now Albion - a very good manager in my view. It has been tried elsewhere but it is becoming increasingly difficult to contact individual shareholders as so many have their shares in nominee accounts and there are no big shareholders or any institutions.

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Re: Baronsmead VCTs - Change of manager

#179777

Postby scotia » November 12th, 2018, 5:18 pm

BusyBumbleBee wrote:but it takes an almighty effort to break the ties between directors and the manager.

While this statement seems to match up with the Baronsmead actions - I'm still confused by the management of a VCT.
Looking at the Association of Investment Companies website, it states:-
Investment companies are governed by company law, unlike open-ended funds. This company structure means that each investment company has a board of directors to represent shareholders. The board plays an important role in terms of setting charges and reviewing investment policy, as well as overseeing and scrutinising the performance of the fund manager and management company.
I would have thought that the process of a management company wishing to "sell" the management may have required a somewhat more robust response from the directors - and I certainly feel that the director with an obvious personal interest in the proposed new management group should have been automatically removed from considering the move.

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Re: Baronsmead VCTs - Change of manager

#179795

Postby james188 » November 12th, 2018, 6:29 pm

I would agree that the VCT managers are the prime movers when companies are set up, but I also think that steps have been taken for the best in class VCTs to ensure that the boards are truly independent. It is always a danger signal for me when the manager has significant (or any) board representation. As I have previously observed, there are questions to be asked of the Baronsmead boards as to the approval of the change of management, but they probably had pretty limited options.

Being a director of a VCT is not an easy ride and if things go wrong, they are definitely in the firing line. It is not the soft option that many imagine it to be and many very good candidates will duck it.I know that I would, because the risk/reward ratio is not great. It is critical that we get excellent people to become board members. If you look at what they typically get paid, it is not much. People underestimate what is involved and the rule changes in the last few years make the job much harder. I have no vested interest in any of this, but it worries me that the best people will decide that being on the board of these companies is too dangerous. In my view, that would be a very bad result.

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Re: Baronsmead VCTs - Change of manager

#179832

Postby Kidman » November 12th, 2018, 8:22 pm

james188 wrote:As I have previously observed, there are questions to be asked of the Baronsmead boards as to the approval of the change of management, but they probably had pretty limited options.

In my experience, contracts of this type usually allow for termination without notice on a change in ownership of the contractor.
Hence at least the Board could have negotiated better terms such as reduced fees and/or reduced notice period.

If such a termination clause wasn't in this contract then that is the fault of the Board.

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Re: Baronsmead VCTs - Change of manager

#180057

Postby james188 » November 13th, 2018, 6:20 pm

I can only say that my personal experience- and I was involved in negotiating hundreds of management contracts for both institutions and contractors over a career in excess of 30 years - was rather different. I would only expect to see an absolute block on transfer/change of control for a very short term deal or where a large termination payment was due to the contractor if the transfer was blocked on the exercise of such a veto. Neither ground works for VCTs. On this issue, we will have to agree to disagree.

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Re: Baronsmead VCTs - Change of manager

#182537

Postby james188 » November 23rd, 2018, 2:18 pm

The Annual Reports for the two Baronsmead VCTs which came out first thing this morning give a few further details about the management transfer arrangements. I had assumed that Andrew Garside (Head of Unquoted Investments) and Sheenagh Egan (COO) were part of the core team transferring to Gresham House - as well as people such as Ken Wotton, who has been singled out by Gresham House as a key individual transferring across, although he has not been specifically mentioned in the information provided by the two VCTs.

Not so, however. We are told that these two individuals (both Livingbridge partners) will be consultants to Gresham House for "up to three years" (so it could be less and I would guess that they will be splitting their time between the two managers in the interim). This is linked to a three year transition agreement between Livingbridge and Gresham House (so not the two VCTs directly) including passing over "insight, best practice and networks". All well and good, but it suggests that important skills are being retained by Livingbridge and presumably the new manager will need to recruit (or identify) new staff to supplement the transferring team.

It may all turn out to be positive news in the round, but there are questions to be answered, in my view.

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Re: Baronsmead VCTs - Change of manager

#183664

Postby rhowitt » November 29th, 2018, 5:49 am

As a long term holder of Baronsmead VCTs I am extremely concerned about losing he services of Andrew Garside and Sheenah Egan. Both have been involved for a long period of time and in my view good experienced senior people are vital to the running of VCTs. I know of Andrew's experience better than Sheenah's, he held a senior position in 3I many years ago essentially working in the same sort of field. Unless Baronsmead's succession planning has been particularly good I would see this news as a major downside in evaluating the impact of the change in manager.

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Re: Baronsmead VCTs - Change of manager

#184902

Postby james188 » December 5th, 2018, 3:38 pm

I see from the hard copies of the Baronsmead VCT reports that popped through the letterbox today that Steve Cordiner has now replaced Andrew Garside as Head of Unquoted Investments and that Bevan Duncan is Head of Portfolio Management, which looks broadly like the (now retitled) post formerly held by Sheenagh Egan. Maybe we will hear from them at the presentations that take place at the time of the AGMs next February.

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Re: Baronsmead VCTs - Change of manager

#185038

Postby Kidman » December 6th, 2018, 11:15 am

I have received my Baronsmead annual reports in the post over the last two days and have a comment to make on remuneration.
Whilst all our eyes have been on the management changes, may I bring to your attention some points about Baronsmead Second Venture Trust (BMD) directors remuneration.

On page 35, you will note that directors fees took a steep rise last year. I haven't checked previous reports but suspect their rate of growth has been well over inflation in recent years. It appears that they are out to 'milk' it.
On page 34, we can see that 10% of those voting last year voted against the remuneration report. I will be voting against resolution 3 this year and ask you to consider doing likewise.

Resolution 10 is to increase the aggregate directors' remuneration limit from £150k to £200k. Even at the fees they paid themselves last year they have plenty of headroom before hitting £150k so I will also be voting against resolution 10.


On a separate corporate governance issue, on page 22 the dates when the various directors were appointed have been stated. However, they have chosen to ignore that Malcolm Groat was appointed a director of Baronsmead 4 on 16 April 2013. I feel that should have been stated for full transparency. On the other hand, all credit to them for including Gresham House (the new manager) among the chairman's list of directorships.

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Re: Baronsmead VCTs - Change of manager

#188834

Postby scotia » December 22nd, 2018, 2:45 pm

I have received emails from Baronsmead Venture Trust and Second Venture Trust dated 19th December, updating me (as a shareholder) on some key information about the forthcoming fundraising:-
I cannot yet confirm the exact date of the fundraising launch as it depends to some extent, on the timing of the sign off of the prospectus but we hope that it will be on or, close to Monday 7 January.
To ensure equality for all potential investors in the fundraising, the allocation will be based on a “first come, first served” basis across both existing and new shareholders.
The fundraising will be announced on the Baronsmead website (http://www.baronsmeadvcts.co.uk).
Shareholders will receive a prospectus containing all the details of the offer by post as soon as possible after the launch is announced.
Any potential investor will also be able to apply online from the Baronsmead website (as well as via the more traditional paper subscription form) which will be available as soon as the offer is launched.
Yours sincerely
Peter Lawrence
Chairman


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