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Scoping NSI and KWE
Mickey
Posted: 27 September 2017 10:28:48(UTC)
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A couple of Investment Trusts that I am currently looking at and which seem interesting -

New Star (NSI)
Sits in the Flexible Investment sector yet appears to be mainly holding equities in the form of OEICS, many of which are quite attractive holdings. The IT sits on around a -30% discount and performance has been decent compared to the likes of Personal Assets, Capital Gearing and Ruffer. Interesting that the costs are lower than many funds which it holds and that it holds 7 Brompton funds attracting no additional costs. I wonder if the bursting of the New Star fund management company is a big reason for the market disliking this IT from the same people?

Kennedy Wilson Europe Real Estate plc (KWE)
I have been looking for a property fund and lean towards TRY but KWE seems quite decent on a large discount despite decent performance. Quite a new IT which may explain the discount.

Any thoughts please?
Mr Helpful
Posted: 27 September 2017 10:56:19(UTC)
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Mickey;51458 wrote:

Kennedy Wilson Europe Real Estate plc (KWE)
I have been looking for a property fund and lean towards TRY but KWE seems quite decent on a large discount despite decent performance. Quite a new IT which may explain the discount.

Any thoughts please?


Aren't KWE in the process of being bought back in by US parent ?
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Mickey on 27/09/2017(UTC)
Tim D
Posted: 27 September 2017 10:58:38(UTC)
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Mickey;51458 wrote:


New Star (NSI) ... Interesting that the costs are lower than many funds which it holds ...

Any thoughts please?


Careful. I see HL quotes a 0.75% management fee and 0.92% OCF (which I guess is the sort of number you've seen), but if you look at the NSI's last annual report I see that NSI's own "management fee" and "other expenses" total £898K on the NAV of ~£100M (or ~£75M market cap, with the discount). Implication is that that 0.92% OCF doesn't include the charges of the underlying holdings, if you were thinking it did.

(Not a fan of collectives of collectives - cheap stuff like Vanguard Lifestrategy excepted - but I get the impression with funds of funds the OCF will generally include both layers; doesn't seem to be true with ITs though.)

But if you believe paying yet another layer of management to fiddle around with your assets can add value, good luck to you.
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Mickey on 27/09/2017(UTC)
jvl
Posted: 27 September 2017 11:20:26(UTC)
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Aren't you always paying layers of management to fiddle around, even (perhaps especially) when you're buying individual shares such as Unilever, Glaxo, BP, Lloyds, etc?

NSI is one I've been tempted by but three things have stopped me so far:

1. It only quotes its NAV about once per month.
2. On HL it has a spread of 10%.
3. The discount's been much wider before, up to 40%.
2 users thanked jvl for this post.
Mickey on 27/09/2017(UTC), dlp6666 on 27/09/2017(UTC)
Tim D
Posted: 27 September 2017 16:33:07(UTC)
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jvl;51461 wrote:
Aren't you always paying layers of management to fiddle around, even (perhaps especially) when you're buying individual shares such as Unilever, Glaxo, BP, Lloyds, etc?


There's at least one frequenter of these boards who makes a strong case for just running a portfolio of directly held company shares yourself as the cheapest way of doing things. Hard to see how to get cheaper than that other than buying out the company completely and taking it private and slashing any of its expenses you don't like (e.g an overly deep and expensive internal management structure, maybe?)

My point was intended more about the expense of adding layers of management on top of what's already in the companies though: Personally I'm quite happy to pay 0.1%-0.2% more (more than I would be paying if I was doing direct shareholdings, that is) to hold a broad basket of things via a cheap tracker, or 0.4% to CTY or SMT's management, or 0.7% to someone I believe has real skill. But I draw the line at paying a whole additional 1% to someone to go off and invest in a bunch of funds also charging 1%. If adding these extra layers actually worked, there'd be funds of funds of funds, and funds of funds of funds of funds...
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Mickey on 27/09/2017(UTC), Micawber on 28/09/2017(UTC)
jvl
Posted: 27 September 2017 17:11:39(UTC)
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But in this case, even though the annual charges may be more than stated, you're buying a company trading at 70-80% of its book value. If it wound itself up tomorrow...

Still, I don't like the spread. It's too big, it really eats into that discount. And I prefer ITs trading at a discount that contain other ITs trading at discounts, like MIGO. (Though, sadly, that's not trading at much of a discount itself anymore!)
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Mickey on 27/09/2017(UTC)
Tim D
Posted: 27 September 2017 18:56:12(UTC)
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jvl;51474 wrote:
But in this case, even though the annual charges may be more than stated, you're buying a company trading at 70-80% of its book value. If it wound itself up tomorrow...

Still, I don't like the spread. It's too big, it really eats into that discount. And I prefer ITs trading at a discount that contain other ITs trading at discounts, like MIGO. (Though, sadly, that's not trading at much of a discount itself anymore!)


OK fair point the big discount (and "double discounting" aspect) could make things interesting... if you've got a good reason for thinking it'll close. (Even if that reason is simply reversion to the mean, or based on "z-score" type considerations).
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Mickey on 27/09/2017(UTC)
Big boy
Posted: 28 September 2017 08:29:00(UTC)
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I have been a long term holder of NSI bt on a 30% plus discount. Quote is 100.5p--109.9p ....you will need patients to build a reasonable holding. I would not be a buyer as offer price discount is 25.42% and would not be a seller at bid price discount of 31.5%. Would accumulate at discount of 30% ie 102.78p
Don't worry about double charging or portfolio split etc.
I prefer Land Secs(ex 60p to-day) and British Land on discounts close to 30% rather than KWE.
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Tim D on 28/09/2017(UTC), Mr Helpful on 28/09/2017(UTC)
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