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Two IPOs - anyone tempted?
Richard T
Posted: 15 April 2017 15:13:59(UTC)
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Wondering if anyone has thoughts on the attractiveness of these two (quite different) propositions:

Jupiter Emerging and Frontier Income Trust
http://citywire.co.uk/in...r-income-trust/a1008376

Downing Strategic Micro-Cap Investment Trust
http://www.downing.co.uk...-targeting-15-pa-return

Mickey
Posted: 15 April 2017 16:40:59(UTC)
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I'm looking at the Downing IT though do not usually buy new ones when they launch. Hargreaves Lansdown are offering 0.5% in extra shares if purchased through them.

http://www.hl.co.uk/shares/ipos-and-new-issues/downing-strategic-micro-cap-investment-trust#

The manager has a good rep on Citywire and I am light on UK with just Henderson Smaller Co's at the moment. I am undecided whether to go for Downing or Rights & Issues IT at the moment.

Mickey

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Richard T on 15/04/2017(UTC), c brown on 19/04/2017(UTC)
Keith Cobby
Posted: 15 April 2017 16:44:54(UTC)
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No
Richard T
Posted: 15 April 2017 17:55:03(UTC)
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Keith Cobby;45858 wrote:
No


Hi Keith

Craving your indulgence, but I'm a real learner here, so interested in how one makes decisions when the choices out there are so varied and numerous. Have you discounted these two for the same reason, or different ones? Say for the Downing, is it the sector, the region, the manager, the risk level, a lack of fit with your portfolio, or aims, or other?

Richard
Richard T
Posted: 15 April 2017 17:57:30(UTC)
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Mickey;45857 wrote:
I'm looking at the Downing IT though do not usually buy new ones when they launch.


Hi Mickey

What's the thinking there? Do you prefer to have some performance to go on? Aren't there benefits to buying in at the outset?

Thanks
Richard

Mickey
Posted: 15 April 2017 18:05:49(UTC)
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Richard T;45863 wrote:
Mickey;45857 wrote:
I'm looking at the Downing IT though do not usually buy new ones when they launch.


Hi Mickey

What's the thinking there? Do you prefer to have some performance to go on? Aren't there benefits to buying in at the outset?

Thanks
Richard



Hi Richard,
I've bought a few funds at launch and usually been disappointed. With IT's there is the added risk of the discount widening quickly if demand is poor added to which the IT will have no assets at launch. Hence you can't see the portfolio until after you've bought a stake.

Mickey
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Richard T on 15/04/2017(UTC), c brown on 19/04/2017(UTC)
xcity
Posted: 15 April 2017 18:47:31(UTC)
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Richard T;45863 wrote:
Do you prefer to have some performance to go on? Aren't there benefits to buying in at the outset?

Buying at outset is cheaper (usually no transaction costs), but you will have paid a 2% premium for a pile of cash.

The Downing is lower cost than its equivalent fund which has performed well.

If you were interested in either, I would look carefully at the competition (performance, premium/discount, charges etc) before deciding.

I haven't looked at the Jupiter at all because the prospectus isn't out.
I haven't developed an opinion on the Downing.



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Richard T on 15/04/2017(UTC)
Richard T
Posted: 15 April 2017 19:45:15(UTC)
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Mickey;45864 wrote:
[
Hi Richard,
I've bought a few funds at launch and usually been disappointed. With IT's there is the added risk of the discount widening quickly if demand is poor added to which the IT will have no assets at launch. Hence you can't see the portfolio until after you've bought a stake.

Mickey


Hi Mickey

So what is tempting enough for you about this Downing launch to consider giving it a go? The manager, as you say, has a good track record. Are you convinced by the argument for the concentrated approach to the sector itself? Is the absence of stamp duty a factor, or not important? In the literature Downing do say they will manage the premium/discount, but that presumably isn't guaranteed... ?

Richard
Mickey
Posted: 15 April 2017 20:15:21(UTC)
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Hi Richard,
I'm looking at it as my portfolio is low on UK at the moment. In another portfolio I have added Edinburgh & Troy Income & Growth to Temple Bar but a micro cap holding would be an alternative to a routine smaller companies one in a more growth orientated portfolio.

HTH,
Mickey
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Richard T on 15/04/2017(UTC)
xcity
Posted: 15 April 2017 20:21:29(UTC)
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It's quite hard to know what the Downing IT will actually be like. Not much like a tradxitional micro-cap; possibly more private equity/venture capital. A later stage than WPCT and aiming at much smaller businesses. And expecting to buy their holdings at a discount. A falling market will suit their modus operandi, but possibly clobber NAV and discount.
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Richard T on 16/04/2017(UTC)
Richard T
Posted: 16 April 2017 09:43:54(UTC)
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xcity;45870 wrote:
It's quite hard to know what the Downing IT will actually be like. Not much like a tradxitional micro-cap; possibly more private equity/venture capital. A later stage than WPCT and aiming at much smaller businesses. And expecting to buy their holdings at a discount. A falling market will suit their modus operandi, but possibly clobber NAV and discount.


As a learning exercise I had a read through the prospectus - well, the parts that were digestible and seemed pertinent anyway - and yes, the vision is to have an interventionist / private equity approach with a relative handful of companies. When you say a falling market would suit them, is this because these smaller companies would then be keener for outside the cash, or that they would be cheaper? If we see a "correction" more generally this year then perhaps they would be coming in at a good moment?

One of the comments describes this as a "puff piece":

http://citywire.co.uk/in...=BulkEmail_Money_Weekly

"The team has been working on a pipeline of potential businesses over the past 18 months. As they seek out companies that are undergoing corporate change, MacKenzie predicts it could take 10 to 12 months before the portfolio is fully invested – and by this she means around the 85% mark."

Hope the questions are not too daft...

Richard
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Mickey on 16/04/2017(UTC)
xcity
Posted: 16 April 2017 13:11:04(UTC)
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Richard T;45885 wrote:
When you say a falling market would suit them, is this because these smaller companies would then be keener for outside the cash, or that they would be cheaper? If we see a "correction" more generally this year then perhaps they would be coming in at a good moment?

They intend to negotiate a discount for any shares they buy. If other sources of capital are reduced and other investors aren't looking for new shares, then they are in a good position to negotiate a higher discount.

Equally though, the price of the Trust shares may be falling because of the bear market and the discount may be widening (as ITs usually do in a bear market).
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Richard T on 16/04/2017(UTC)
Rishan
Posted: 19 April 2017 13:49:50(UTC)
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thanks for bringing these to attention. I have never taken part in an IPO before but am interested in these. I am also light on the UK and looking to diversify income/yield in my ISA.

I see HL has info on Downing, but having looked all over Google I can't find out how to participate in Jupiter. Their own website is not helpful in the slightest. Anyone know more?
Richard T
Posted: 19 April 2017 15:14:13(UTC)
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Rishan;45984 wrote:
thanks for bringing these to attention. I have never taken part in an IPO before but am interested in these. I am also light on the UK and looking to diversify income/yield in my ISA.

I see HL has info on Downing, but having looked all over Google I can't find out how to participate in Jupiter. Their own website is not helpful in the slightest. Anyone know more?


I know next to nothing about these things, but my understanding is that the Jupiter one is only at a sort of "sounding out" stage. Perhaps someone else will jump in to clarify the process?

Richard
Rishan
Posted: 21 April 2017 15:46:43(UTC)
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Jupiter prospectus is out now:

http://www.hl.co.uk/shar...e-investment-trust-ipo#

No 'bonus' shares from HL on this and as xcity mentioned above, there would be a 2% premium at outset.
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Richard T on 21/04/2017(UTC), dlp6666 on 24/04/2017(UTC)
Bruce J.
Posted: 21 April 2017 16:04:22(UTC)
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My recollection from reading earlier today is that the Jupiter prospectus is proposing 4% yield in the first year rising to 5.5%.

This would be fine if you had space in your ISA, but for me that % would be cut almost in half by income-tax, so I would prefer something with more growth and less dividend.

I am currently looking to open a position in Harbourvest, which is not an IPO but is more suited to my own situation.

Horses for courses as they say.

Richard T
Posted: 21 April 2017 18:32:17(UTC)
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Rishan;46070 wrote:
Jupiter prospectus is out now:

http://www.hl.co.uk/shar...e-investment-trust-ipo#

No 'bonus' shares from HL on this and as xcity mentioned above, there would be a 2% premium at outset.


Sorry to be dim, but where does that 2% come from? I did read how it worked somewhere in the documents but haven't quite grasped the details... Is it that the shares will trade at a discount of that amount initially?

Richard
Rishan
Posted: 21 April 2017 18:49:30(UTC)
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Richard T;46074 wrote:
Rishan;46070 wrote:
Jupiter prospectus is out now:

http://www.hl.co.uk/shar...e-investment-trust-ipo#

No 'bonus' shares from HL on this and as xcity mentioned above, there would be a 2% premium at outset.


Sorry to be dim, but where does that 2% come from? I did read how it worked somewhere in the documents but haven't quite grasped the details... Is it that the shares will trade at a discount of that amount initially?

Richard



It's because the share price will be 100p at issue, but the NAV (or whatever the total they plan to invest) will be 98p. I suppose it's just one of the ways Jupiter makes money out of the float...
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dlp6666 on 24/04/2017(UTC)
Richard T
Posted: 21 April 2017 19:03:51(UTC)
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Rishan;46077 wrote:

It's because the share price will be 100p at issue, but the NAV (or whatever the total they plan to invest) will be 98p. I suppose it's just one of the ways Jupiter makes money out of the float...


And set against that one sets the absence of stamp duty and dealing charge - presumably the brokers have to get a cut of that 2%. In the end it's the proposition that counts, I suppose, and one's judgement on that?

Richard
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dlp6666 on 24/04/2017(UTC)
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