James Henderson: Why I’d buy my fund and not my trust

April 15th, 2014
The manager says that while he “loves investment trusts dearly”, the high premiums many of them are trading on mean funds represent better value.
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FE Alpha Manager James Henderson (pictured) says he would currently prefer to buy his Henderson UK Equity Income & Growth fund over his Lowland Investment Trust, as the latter is now trading on a 4.7 per cent premium to NAV. Investment trusts have performed very well in the recent rising market, which has meant that many of them are now either trading on premiums or on much tighter discounts than they have done in the past. However, due to the ultra-low interest rate and currently high prices of bonds, the majority of closed-ended equity income funds have become extremely expensive compared with their historic averages. Henderson says that given that equity valuations are now looking toppy without strong earnings growth, investors would be better off using open-ended income funds because they would be buying them at NAV and would therefore not be taking discount risk. “I would definitely say that if I were buying for myself right now, I would buy the open-ended fund,” Henderson said. When the manager spoke to FE Trustnet, the trust was trading on a 7 per cent premium, a figure that has come in slightly to 4.7 per cent over the last few days. Lowland Investment Company and Henderson UK Equity Income & Growth are very similar portfolios as the manager looks for companies that are in a position to consistently increase their dividend. For example, the likes of Senior Group, Hiscox, GlaxoSmithKline and GKN feature in both of their top-10 holdings. However, due to factors such as a narrowing discount and the closed-ended fund’s ability to gear up, or borrow, Lowland has massively outperformed the open-ended vehicle over recent years. Henderson has managed the Henderson UK Equity Income & Growth fund since January 2005. It has beaten the FTSE All Share over that time with returns of 133.53 per cent. Over that same period, his trust has outperformed by close to 75 percentage points.Performance of funds vs trust and index since Jan 2005Source: FE Analytics This outperformance isn’t just limited to Henderson’s portfolios either. According to FE Analytics, the average closed-ended UK equity income fund has beaten the average open-ended UK equity income fund over one, three, five and 10 years. Henderson says this shouldn’t come as any real surprise as the structure of investment trusts does help them to outperform over the long-term and in strongly rising markets. However, he says that the price paid for an investment is one of the biggest drivers of returns and at the current valuations of trusts, the odds are now stacked against you. “They will go back to discounts one day, they always do. I love investment trusts dearly, but they are expensive,” Henderson said. The manager also points out that the new charging structure of open-ended funds, after RDR, makes them more attractive than they have been in the past. “The other thing to say on that is that in the past when people would say that Lowland was better than Equity Income, this was when Lowland’s charges were much lower than the fund's. However, under the new I-class which we are selling now, the fund’s charges are the same as Lowland’s.” “The charges are the same and so the major difference is that Lowland has gearing, it is currently geared at 12 per cent, so in a rising market that will give it a bit more. However, those premiums on investment trusts won’t last,” he added. There are a number of advantages with using income-producing investment trusts over an equity income OEIC or unit trust. One of the main benefits is that trusts have the ability to “smooth” their dividend, as the manager or board only has to pay out 85 per cent of their earnings each year, while open-ended vehicles have to pay out everything. That means that trusts can hold back up to 15 per cent of their earnings each year to cover the dividend in falling markets. It has helped some trusts, such as Bankers IT and City of London IT, to raise their dividend in each of the last 47 years. Lowland has delivered 38 years of dividend growth, though it did freeze it in 2009. While the yield is only 2.4 per cent, it has delivered 6.3 per cent dividend growth over the last five years, according to the AIC. The manager's Henderson UK Equity Income & Growth fund – which yields 3.2 per cent – has increased its net distribution in each of the last three years. Charles Cade, head of research at Numis Securities, rates Henderson as a manager. While he thinks that Lowland will perform well over the long-term, he agrees that investors are taking a big discount risk if they buy it now. “I would agree. The risk is only one way in a sense, it is trading at something like a 6 per cent premium and even if it were to move back to asset value, that is a significant hit. The bigger risk is that it goes out to discount,” he said. “James is a very good manager but he does have a bias towards small and mid caps. If there were to be a set-back in the market, they are the sort of areas likely to be the worst hit.” “If you were taking a long-term view, then small movements in the discount won’t have too much of an effect on the overall return.” “However, anything shorter than that, then I would certainly say that the open-ended fund is a more attractive proposition,” he added. Lowland has ongoing charges, including a performance fee, of 0.9 per cent. Henderson UK Equity Income & Growth has an ongoing charges figure (OCF) of 1.75 per cent and requires a minimum investment of £1,000.
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Ros Altmann: A healthy economy promotes saving

April 12th, 2014
Relax the rules for annuity purchase to allow £10,000 or even £18,000 to be taken as a lump sum. The financial services regulator, FCA, recently highlighted what terrible value current annuity purchasers often receive and this applies particularly to smaller pension funds.

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Ex-CalArts Instructor Baldessari Releected to MOCA Board

April 9th, 2014
Maria Seferian recently served as the Interim Director of MOCA during which time she provided administrative and strategic leadership to the museum and successfully led MOCA through an historic $100 million endowment campaign, international director search, and long‐term strategic planning process, among other initiatives. Prior to that time, Ms. Seferian acted as outside legal counsel to the museum.

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Posted by Interim Partners, Interim Health management specialists.

Tuscaloosa City Board of Education members react to chairman's changes to comments policy

April 2nd, 2014
<p>At Tuesday's Tuscaloosa City Board of Education meeting, board chairman Lee Garrison announced that he's changing the rules on what the public can speak about at board meetings.</p><p>“At this time the board will entertain public comments related to board policy, curriculum, finance, facilities or achievement data as they pertain to the system as a whole ...,” Garrison said. “No actions will be taken at this meeting. Instead, the superintendent and or his designee, will provide a formal response to the speaker if necessary following appropriate review and investigation.</p><p>“Public comment will not be allowed on matters pertaining to day-to-day operations of the school system, individual statements, or staff members, specific personnel matters, and or student disciplinary issues. Matters such as these are the purview of the superintendent and his staff requiring thorough review and consideration impossible in this forum. These concerns should be directed to the superintendent or appropriate staff members during school hours.”</p><p>Some board members, however, objected to Garrison making changes to how public comments are made without seeking their approval first. They said Garrison didn't inform them of his plans or the specifics of the changes he's trying to make.</p><p>They said the board has to approve policy changes on how public comments are made. Garrison cannot do that by himself, they said.</p><p>“Recommendations come from the superintendent, and the board should be able to discuss and talk about them,” said Marvin Lucas, a school board member. “You don't walk into a meeting, bring in a hand-written plan and announce changes that we haven't seen. I can't approve or vote on something without knowledge of what I'm doing.</p><p>“He had a hand-written piece of paper and whatever he was reading hadn't been circulated before the board. We didn't have time to discuss or talk about it. Plus, we've already approved how we would do public comments last year in March.”</p><p>Board vice chairwoman Earnestine Tucker said that Garrison, as the board chair, does not have the power to make unilateral decisions to change board policy.</p><p>“Lee has to understand the process,” Tucker said. “Instead of him saying we're going to implement it tonight, he needs to talk to us. We are a board. He is not the mayor of the school board. He has an opinion, and he has one vote. He can work with the superintendent and set the agenda, but things like that have to come to the board.”</p><p>Garrison said he's not perfect, and because he's a new board chair he's going to make mistakes — he started his term on the school board Nov. 4, 2013, after leaving the Tuscaloosa City Council. He said he should have run his proposal before the board before trying to implement it. He also said he'll send the board copies of the changes he's going to make to public comments once board attorney Dave Ryan makes some revisions to them.</p><p>However, Garrison said it is within his authority as board chair to make changes to how public comments are conducted without the other board members approval. And though he said he wants the board to support this, he will move forward on it without their approval.</p><p>“Whether the board members like it or not, that's my job,” Garrison said. “We're not going to have student hearings in public like we had last night again. Some people have attacked me saying I'm trying to shut people up. I'm not trying to do that. ...It's just a circus, and it's not going to be that any more. I'm not trying to restrict anybody's comments. I'm just trying to restrict public involvement. Dave (Ryan) told me that there's no constitutional right for people to speak at a public meeting. The chair runs the meeting, and I have the authority to run the meeting the way it should be run.</p><p>“We have talked as a board how we want to run our meetings better ... We want to respect everyone and the public. We've had various situations occur in these public settings that probably should not be done in a public setting. That's all I want to control, which is not to discuss things that should not be discussed at public meetings.”</p><p>Ryan said the responsibilities of the chair of the Tuscaloosa City Board of Education include the following:</p><p>Set the board meeting agenda in consultation with the superintendent.</p><p>Enforce the quorum with Robert's Rules of Order.</p><p>“The statute gives him the right to set the agenda and then keep order,” Ryan said.</p><p>Ryan declined to comment on whether changing the rules on public comments specifically falls within the chair's authority.</p><p>Sally Howell, executive director of Alabama Association of School Boards, said the board chair is the presiding officer at a school board meeting, and as such, he or she can move the meeting along and make sure that people are making appropriate comments. Issues that address specific students and personnel aren't appropriate and the chair can stop those, she said.</p><p>But any changes made to a policy need to go through the formal adoption process, she said.</p><p>“A policy adoption is governed by state law and requires the recommendation of the superintendent and approval by the board,” Howell said.</p><p>Reach Jamon Smith at jamon.smith@tuscaloosanews.com or 205-722-0204.</p><h3>'Approved Resolution Rules of Board Meetings'</h3> <p><i>Section 5. Public Input</i></p><p>General comments: Persons wishing to bring general comments about items not on the agenda should sign up on the list provided prior to the meeting and check the “general comments” section. Issues related to individual schools or students and not to policies of the board should be discussed with school and central office staff and the superintendent for a possible resolution prior to coming to the board.</p><p>Public advisory: The presiding officer may, if deemed necessary, prior to that time on the agenda when the public has the right to address the board, advise the public of the rules for addressing the board and may otherwise limit comments if necessary to meet time constraints or to allow the board to complete its business.</p><p>Manner of addressing the board/time limitation: Each person addressing the board, when called by the presiding officer, shall step up to the podium/microphone, shall give his/her name and address in an audible tone of voice for the record and, unless further time is granted by the presiding officer with consent of the board, shall limit remarks to five minutes. All remarks shall be addressed to the board as a body, and not to any member thereof. No person, other than members of the board and the person having the floor, shall be permitted to enter into any discussion, either directly or through the members of the board, except as otherwise provided herein. No question shall be asked of board members, except to the presiding officer. No comments shall be made referencing specific personnel. No comments shall be made about personnel matters that are currently being considered and/or that are part of a pending litigation. </p><p>Personal and slanderous remarks: No person shall make derogatory statements that are personal, impertinent, or slanderous. Persons who become boisterous, while addressing the board, shall be barred by the presiding officer from further audience before the board for that meeting.</p>

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Posted by Interim Partners, Interim management specialists.

Nominees for 3 boards headed to full Senate

March 27th, 2014
The nominations of Roberto Cintron to the V.I. Port Authority board and Johann Clendenin to the V.I. Public Services Commission, along with the renomination of Keith O'Neale Jr. to the Public Finance Authority board all passed a committee vote on Monday and will be forwarded to the full Senate for further consideration.

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Posted by Interim Partners, Interim legal advisor specialists.