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LWDB - 12% discount

Closed-end funds and OEICs
gbjbaanb
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LWDB - 12% discount

#149043

Postby gbjbaanb » June 30th, 2018, 1:32 pm

Analysis from III today:

https://www.ii.co.uk/analysis-commentar ... -ii506361/

Discount opportunities are few and far between in the global sector, but one trust that has bargain credentials is Law Debenture Corporation Ord, which has seen its discount widen from 7% at the start of 2018 to 12% today

I like LWDB partly because it does stuff rather than just investment trading, but a 12% discount can't be sane for what is a well-respected trust, surely.

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Re: LWDB - 12% discount

#149087

Postby UncleEbenezer » June 30th, 2018, 4:14 pm

Indeed, I'm slightly shocked to see it's underperformed on all the AIC's at-a-glance timespans, and on NAV as well as share price. Not really what I want to see in a trust I hold.

Neither, of course, do I want to sell at such a discount. Unless I convince myself there's something wrong that's worth significantly more than 12%.

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Re: LWDB - 12% discount

#149101

Postby SalvorHardin » June 30th, 2018, 5:12 pm

As a very long term Law Debenture shareholder for me this article leaves out a key factor.

Law Debenture for many years used to trade at a big premium to its NAV. This was because it owns a substantial fiduciary services business (typically 40% of the dividend comes from this business) which didn't contribute anything to the official NAV. A couple of years ago they started to include it in the formal NAV, so like most ITs it then went to a discount

Can't go into much more detail - have drunk way too much cider at an open air Shakespeare performance this afternoon :D I am however a bit surprised by these claims of underperformance over the long term though given that five years ago it was one of the best performers over ten to twenty years.

When I sober up I'll have a closer look :D

StOmer

Re: LWDB - 12% discount

#149120

Postby StOmer » June 30th, 2018, 6:20 pm

iirc the fiduciary business was assessed as accounting for around 7% of the premium when it was included in the NAV mentioned earlier. Yes, LWDB has been a poor performer for awhile now, I thought perhaps due to Henderson selling out to Janus but then Henderson Smaller Co's (HSL) continues to do very well.

When we first started with IT's the stockbrokers first purchases were - Fleming American, Fleming Europe and Law Debenture. I quite like LWDB though am not currently holding any due to the outperformance of the Baillie Gifford offerings.

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Re: LWDB - 12% discount

#157193

Postby forrado » August 4th, 2018, 9:05 pm

Indications are Law Debenture could be on the road to recovery following a spell of mediocrity.

Law Debenture hikes dividend after IPS business growth
30 July 2018
"Law Debenture rewards investors with 9% dividend hike after James Henderson managed investment trust boosted by strong half-year results from its Independent Professional Services business."

https://www.theaic.co.uk/aic/news/citywire-news/law-debenture-hikes-dividend-after-ips-business-growth

Having been in place for less than a year, new CEO Dennis Jackson’s mission “to drive growth across our IPS mandate” appears to have got off to a good start. Hence the Board’s decision to up the interim half-yearly dividend to shareholders for 5.5p to 6p, along with the promise to at least maintain the 11.8p per share final payout come April.

For those investors willing to set aside the unknown ramifications of BREXIT, then I tend to support the concluding paragraph of the linked AIC release that reads …
We believe Law Debenture offers an attractive combination of value (11% discount) and yield (2.9%), with a low ongoing charges ratio of 0.43%. It is a unique business due to the combination of the IPS business with an investment portfolio. However, sentiment towards the stock has been impacted by a period of dull performance, partly as a result of a high UK weighting (73%) relative to its Global peers.

To my way of thinking, yet another example of how an investment trust can fall out-of-favour because of investor herd mentality.

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Re: LWDB - 12% discount

#157371

Postby forrado » August 5th, 2018, 5:27 pm

ap8889 wrote:Vanguard I am looking at you, you thing of beauty.

Mediocrity is the worst enemy of prosperity” so said Henry Ford. I will not passively accept mediocrity, in the shape of an index-tracker, knowing full-well from the outset that the end result will be just that - mediocre. A "thing of beauty" I don't think so.

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Re: LWDB - 12% discount

#157519

Postby hiriskpaul » August 6th, 2018, 2:03 pm

forrado wrote:
ap8889 wrote:Vanguard I am looking at you, you thing of beauty.

Mediocrity is the worst enemy of prosperity” so said Henry Ford. I will not passively accept mediocrity, in the shape of an index-tracker, knowing full-well from the outset that the end result will be just that - mediocre. A "thing of beauty" I don't think so.

Index tracker returns will only be mediocre if market returns are mediocre. The MSCI World Index total return in pounds over the 10 years to last Friday was 215%, a CAGR of 12.16% produced without the use of gearing or other risks that fund managers introduce. Personally I would not call a 12.16% CAGR mediocre. Managed funds in aggregate will produce the same returns as the index before charges, assuming they are fully invested, so if market returns are mediocre, so will be the returns of active fund managers.

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Re: LWDB - 12% discount

#157530

Postby BrummieDave » August 6th, 2018, 2:48 pm

hiriskpaul wrote: so if market returns are mediocre, so will be the returns of active fund managers.


Yes, in aggregate they will.

But surely the whole point of active investing, and spending one's own time on a website dedicated to investing, is to develop an approach, consistent with your personal goals, to get you into the half of the market that beats the average?

Index Trackers have their place there's no doubt of that. I struggle a little however, and I'm not in any way being disrespectful of other posters and their views, when responses to someone posting a comment about a Fund or IT, or their existing portfolio, and asking for comment develops into a debate about the merits or otherwise of active investment. This seems to happen quite a lot.

Taking it one step further, if I believed passionately that tracker funds were for me, I wouldn't spend much time on a website principally devoted to discussions about share and fund selection. Surely the whole point would be that as a passive investor I'd be playing golf?

If half the investments the public make fail to beat the average (and I hope this doesn't now descend into a debate on average, median, etc.) surely most folks who are interested enough to be monitoring and participating in web based investment discussions would seek to be in the other half? There is a board for Passive Investing, but you rarely see a HYPer or Investment Trust investor going on there and pointing out that in their opinion the approach is flawed.

I'll add a smiling face in the hope this post doesn't appear too negative :D

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Re: LWDB - 12% discount

#157536

Postby Lootman » August 6th, 2018, 3:35 pm

BrummieDave wrote:
hiriskpaul wrote: so if market returns are mediocre, so will be the returns of active fund managers.

Yes, in aggregate they will. But surely the whole point of active investing, and spending one's own time on a website dedicated to investing, is to develop an approach, consistent with your personal goals, to get you into the half of the market that beats the average?

It's not so much about getting into the half of the market that beats the average, but rather getting into the proportion of small investors who can consistently beat the average after costs and without taking on more risk. And that is less than half, as it is also is with professional active fund managers.

I often see that number cited as somewhere between 20% and 30% although it varies a lot with market conditions. Sometimes most active funds can beat the market, but not usually because in aggregate the funds have costs and the index does not. Index funds often feature in the second quartile, for example.

So spending your time on an investment website does not necessarily imply that you are gung ho that you can beat the market. It could just be because you have fixed goals that you learn can be met via index funds, with less cost, work and risk. You also need to decide asset allocation, what kind of tracker etc.

BrummieDave wrote:Taking it one step further, if I believed passionately that tracker funds were for me, I wouldn't spend much time on a website principally devoted to discussions about share and fund selection. Surely the whole point would be that as a passive investor I'd be playing golf?

If half the investments the public make fail to beat the average (and I hope this doesn't now descend into a debate on average, median, etc.) surely most folks who are interested enough to be monitoring and participating in web based investment discussions would seek to be in the other half? There is a board for Passive Investing, but you rarely see a HYPer or Investment Trust investor going on there and pointing out that in their opinion the approach is flawed.

I'd respond with two ideas. The first is that the active versus passive decision does not have to be purely binary. You can in fact mix the two, as I do. My basic rule is that there are some areas of the markets where I believe that I have an edge, and will adopt an active approach. There are other areas where I have little specialist knowledge that will give me an edge, and in that case a tracker can make more sense.

Or to put it another way, returns come in the form of both alpha and beta. Index funds give you the alpha and active strategies (can) give you the beta. I don't think it is a contradiction to, say, be 60% in alpha strategies and 40% in beta strategies - a passive core with active strands.

Secondly, the fact that someone believes that all their efforts should lead to an out-performance does not mean that they will actually out-perform. The reason is clear enough - they are competing with other people who also believe they have an edge. It's rather like the poll that showed that 80% of drivers thought they were better-than-average drivers. I am sure that they do, but they cannot all be correct!

There's also the "fun" aspect. It feels good and worthwhile to apply one's knowledge and experience to investing. And even if you end up under-performing, you might think that the pleasure and satisfaction you got from trying, and what you learn from getting it wrong, is worth the risk and effort. It's like someone who is below par at golf still plays and enjoys the game, even though he usually loses. And with investing, at least there is an alternative to losing most of the time.

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Re: LWDB - 12% discount

#157544

Postby hiriskpaul » August 6th, 2018, 4:58 pm

BrummieDave wrote:But surely the whole point of active investing, and spending one's own time on a website dedicated to investing, is to develop an approach, consistent with your personal goals, to get you into the half of the market that beats the average?

If only it was half that beat the market!

Seriously though, how are you going to pick funds that go on to beat the market when most funds don't? A simplistic approach based on past performance is very unlikely to get you very far. To illustrate, the top performing Global IT 10 years ago was British Empire with a 373% return over the previous 10 years. Had you picked that 10 years ago you would have since got a total return of 119% compared with 215% for the index. Or you could have picked Caledonia, the third best performer 10 years ago and got an even worse 85%. In fact you would have been far better off picking the IT at the bottom of the table, Alliance Trust* as that would have got you 228%. How many investors want to invest in underperforming funds though? More to the point, how many are prepared to hold a fund for the long term once an inevitable period of underperformance comes along? Most investors don't and end up with worse results than the funds they invest in by inopportune trading.

As it happens I think a better approach is to look for ITs on large discounts, typically following a spell of poor performance, as this can offset the running costs of the fund and so improve the odds of long term outperformance. 12% does not look particularly attractive to me at the present time though given the gearing and downside risks of the current market. Caledonia on -18% looks far more interesting, but again personally I would prefer to wait until the next big sell off and rise in discounts before playing this game.

*Electric & General was bottom, but I don't know what happened to them.

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Re: LWDB - 12% discount

#157546

Postby Lootman » August 6th, 2018, 5:17 pm

hiriskpaul wrote:*Electric & General was bottom, but I don't know what happened to them.

It was wound up and converted to an open-ended fund in 2011:

http://electricandgeneral.com/our-history/

That's the trouble with picking the worst performing funds. They have a habit of vanishing before they turn around.

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Re: LWDB - 12% discount

#157568

Postby XFool » August 6th, 2018, 7:48 pm

BrummieDave wrote:If half the investments the public make fail to beat the average (and I hope this doesn't now descend into a debate on average, median, etc.) surely most folks who are interested enough to be monitoring and participating in web based investment discussions would seek to be in the other half?

Sure! Can you tell us the secrets of how to do that, please?

Thing is (Sorry! But it's that "average, median, etc" thing) while you may well be correct that "half the ...public fail to beat the average" and that the other half do, are you perhaps making a teeny and possibly dubious assumption? That the "half" that do beat the "average" etc. are always the same half?

BrummieDave wrote:I'll add a smiling face in the hope this post doesn't appear too negative :D

Perhaps I need to add one too! ;)

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Re: LWDB - 12% discount

#157569

Postby BrummieDave » August 6th, 2018, 8:01 pm

XFool wrote:Sure! Can you tell us the secrets of how to do that, please?


No, but that's why we come on here, to debate that kind of thing. Not to be told to buy a Tracker.

XFool wrote: are you perhaps making a teeny and possibly dubious assumption? That the "half" that do beat the "average" etc. are always the same half?


I wasn't.

XFool wrote:
BrummieDave wrote:I'll add a smiling face in the hope this post doesn't appear too negative :D

Perhaps I need to add one too! ;)


Anything you can do... :lol:
Moderator Message:
removed excessive emoji's. Raptor.

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Re: LWDB - 12% discount

#157570

Postby XFool » August 6th, 2018, 8:16 pm

BrummieDave wrote:
XFool wrote:Sure! Can you tell us the secrets of how to do that, please?

No, but that's why we come on here, to debate that kind of thing. Not to be told to buy a Tracker.

It depends... But anyway, you've got Moneyvator for that!

BrummieDave wrote:
XFool wrote: are you perhaps making a teeny and possibly dubious assumption? That the "half" that do beat the "average" etc. are always the same half?

I wasn't.

OK. Then I'd characterise that as "ambition"! Nothing wrong with ambition. Let us know how you get/got on.

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Re: LWDB - 12% discount

#157573

Postby BrummieDave » August 6th, 2018, 9:00 pm

LOL - beginning to wish I'd kept quiet!

Story of my life actually.

BTW I read Moneyvator every weekend.

Bottom line, I enjoy this website tremendously. Long may it, and I continue.

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Re: LWDB - 12% discount

#157583

Postby hiriskpaul » August 6th, 2018, 10:32 pm

I am not telling anyone to buy a tracker by the way, just responding to an assertion that tracker returns, i.e. market returns, will be mediocre. Over any 10 year period it is highly likely that the median return of managed funds will be more mediocre than the market.

I like these too: :lol:
Moderator Message:
removed excessive smilies. Can we please have a little restraint on the use of smilies. Would be appreciated tha we keep them to single to emphaise the tone of the post. Thanks, in advance. Raptor.

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Re: LWDB - 12% discount

#157631

Postby tjh290633 » August 7th, 2018, 9:40 am

Lootman wrote:
hiriskpaul wrote:*Electric & General was bottom, but I don't know what happened to them.

It was wound up and converted to an open-ended fund in 2011:

http://electricandgeneral.com/our-history/

That's the trouble with picking the worst performing funds. They have a habit of vanishing before they turn around.

Now we are back to the Johnson Fry Worst Performing Fund portfolio. Their theory was that the worst performing fund in one year often became one of the better ones in the following year.

The continued poor performance of the Japanese funds sank it.

Some of the comments in this thread make the obvious point that, in a falling market, all funds and shares are likely to fall. My contention is that you can only judge their performance in relative terms. That is why I use the median holding value of my portfolio as the benchmark by which all other holdings can be judged. Some do better and some worse. Actively managed funds are circumscribed to some extent by the availability of their selected shares, hence there is an element of market following in any portfolio, but less so in a small value portfolio, especially if it is nominally equally weighted, as is the case of many individuals' portfolios.

I have shares which have been worst performers one year, yet which recover strongly in the next. Tesco is one such at the moment. The dividend level has not been good enough for me to top it up so far, but the recovery continues.

TJH

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Re: LWDB - 12% discount

#157728

Postby XFool » August 7th, 2018, 3:53 pm

ap8889 wrote:FWIW I just bought 2 "units" of Finsbury Growth and Income FGT, so I am persuing a mixed approach too. Discount is small, but the thing usually trades at a premium and I like the holdings and manager.

2 "units"
?

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Re: LWDB - 12% discount

#159395

Postby hiriskpaul » August 13th, 2018, 11:33 pm

Lootman wrote:
hiriskpaul wrote:*Electric & General was bottom, but I don't know what happened to them.

It was wound up and converted to an open-ended fund in 2011:

http://electricandgeneral.com/our-history/

That's the trouble with picking the worst performing funds. They have a habit of vanishing before they turn around.

I have not checked, but that may well have been a very good outcome for some of the investors as presumably it allowed them to exit near NAV? Bit of a pain if it crystallised an undesirable capitial gain though.

I hold a number of VCTs that I would love to go down this route!

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Re: LWDB - 12% discount

#159396

Postby Lootman » August 13th, 2018, 11:38 pm

hiriskpaul wrote: Bit of a pain if it crystallised an undesirable capital gain though.

Usually the entire point of a conversion to an open-ended structure rather than a liquidation of the fund is the ability to do a CGT rollover.

It also benefits the fund manager who gets to retain at least some of the AUM.


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