Why I excercised my Warrants Today.
Latest NTA is over $1.00, $1.0061 to be more accurate.
Exercise price was 75 cents so a no brainer to exercise warrants.
Much has been debated about Marlin and their fees and in particular some take exception to the basis upon which the performance fee is calculated, being a function of the 90 day bank bill rate plus 5% per annum.
Nothing has been made of the scalability of their fees which at a base rate of 1.25% less 0.1% for every 1 % of underperformance can go down to 0.75% per annum. I think this is pretty attractive relative to other managers.
I also think the discount to NTA is excessive and even if all shareholders, (unlikely) exercise all warrants the diluted NTA next week will be 95.5 cps, adjusted for subsequent movements in the fund from latest valuation just released to the market this afternoon.
I must say that at 84 cents one is facing the rather delightful prospect of receiving a PIE tax exempt quarterly dividend of 8% per annum based on NTA = approx. 7.64 cps per annum paid quarterly. 7.64 / 84 = 9.1% tax free in one hands which for a taxpayer on a marginal tax rate of 33% (anyone earning over $70,000), this = 9.1/0.67 = 13.58% gross.
I really like their PIE investment structure and their dividend policy which suits me.
They take care of all the FIF paperwork too and there's a dividend reinvestment scheme whereby shares are issued in lieu of dividend at a 3% discount so those that take shares can boost their actual gross return to 13.58 / 0.97 = Gross effective yield = 14% per annum !
Latest quarterly newsletter is here https://marlin.co.nz/assets/Investor...March-2019.pdf
They have beaten the global small cap benchmark index over the last 3 years, see here https://marlin.co.nz/investor-centre...o-performance/
Easy way to shift some assets offshore and let them do all the hard work...no work, research or paperwork required.
Any fall in the $Kiwi will of course benefit Marlin shareholders with their assets offshore.
Disc: Significant sized holding.
Query to Marlin regarding currency hedging got this response today.
Good afternoon Beagle,
Thank you for your email query.
As you’re already aware, Marlin Global Limited (Marlin) holds investments & cash denominated in international currencies and is exposed to currency risk as the value of those assets fluctuate with changes in the relative value of the New Zealand dollar. Marlin mitigates this risk by entering into forward foreign exchange (FFE) contracts as & when the Manager (Fisher Funds Management Limited) deems it appropriate.
As at 31 March 2019 the Marlin portfolio has FFE hedges in place that hedge approximately 45% of the Marlin portfolio. (Please note that the level of hedging can change through the year, as & when the Manager deems it appropriate).
Barramundi Limited (Barramundi) holds investments & cash denominated in Australian dollars and is exposed to currency risk as the value of those A$ assets fluctuate with changes in the relative value of the New Zealand dollar. Barramundi mitigates this risk by entering into forward foreign exchange (FFE) contracts as & when the Manager (Fisher Funds Management Limited) deems it appropriate.
Kind regards
Wayne
Wayne Burns
Corporate Manager