Barramundi ( BRM )

[SPC]

Beagle stop thinking and have a feed. And a snooze.

[Beagle]

Beagle stop thinking and have a feed. And a snooze.

Coffee and a walk in the park is a much better idea.

Food for thought. Never pay more than a dollar for a dollar's worth of assets.

[Onion]

Be doing a lot of fossicking around for overseas opportunities and it came to my attention very recently again, (I confess I was aware of this years ago but forgot), that Fisher funds also run Australian and Global Growth managed funds and the investments in them appear to ostensibly mirror those in Barramundi and Marlin. Here's the latest quarterly update from Fisher funds regarding their Australian growth fund .... You can see for yourself these investments mirror those of Barramundi.

...

Just putting it out there. You decide what's best for you.

Thanks very much for sharing Beagle. You've caused me to re-evaluate my plans. I haven't worked out the result of the re-evaluation as yet. But your suggestion that the fund eliminates the premium of BRM (etc.) is valid.

Other differences (advantages?) of Barramundi is the Dividend Reinvestment Plan that offers a discount and the occasional warrant gift.

I've compared the two offerings and they have an investment mix that is very similar. Even the commentary in the monthly updates is similar. You might expect that the returns would also be similar but I was surprised to see that the BRM listed fund has higher returns than the Aussie Growth Fund. Note that the "Total Shareholder Return" assumes the investor is using the DRP, and buying all warrants.

Probably the BRM "Gross Performance Return" is the most comparable. The BRM figures are before fees and the fund figures are after fees -- does this fully explain the difference?

I.e.

			1 Month	3 Months	1 Year	3 Years (annualised)	5 Years (annualised)	7 Years (annualised)	Since launch (annualised)
To 31/10/2021	Barramundi	Company Performance
		Total Shareholder Return	-5.50%	-6.50%	23.90%	28.10%	20.50%
		Adjusted NAV Return	-1.60%	6.50%	31.30%	21.80%	16.40%
		Portfolio Performance
		Gross Performance Return*	-1.50%	7.10%	35.10%	25.40%	19.80%
PE 31/10/2021	Australian Growth Fund	Fund Performance**			26.80%	18.80%	14.90%	12.50%	9.00%

* before expenses, fees and tax,
** after fees and before tax

[Beagle]

Hi onion
Apples with apples, they're both PIE's and both investing in the same thing so ultimately must generate a very similar overall result. I haven't drilled down into the fine nuances but I suspect it costs them a bit more to run the listed company, with ongoing NZX listing fees, Computershare fees and annual meeting costs. I see the adjusted NAV return 5 years average of Barramundi in their Sept quarter update is 15.8% per annum so that's the net yardstick after fees http://nzx-prod-s7fsd7f98s.s3-websit...443/357562.pdf Not sure why that's 0.9% different to the unlisted fund.
Issue of warrants is nice and are good to trade if one gets their valuation and timing right but they are NTA dilutive when exercised as we've recently seen. The only possible advantage for shareholders is that some warrant holders let them lapse and this may explain some or all of the difference in average annual return after fees and taxes in the last 5 years.

Total shareholder return is a bit misleading in that it encompasses a period when the share price premium to NTA changed quite a lot.

The way I see it this is basically a very, very close apples for apples comparison and those paying a 15-20% premium for listed investments in Barramundi or Marlin face:-

Firstly having between 15-20% of their investment not working for them, (i.e. they are only getting real returns on 80-85% of their capital which itself is not really a satisfactory situation as who wants 15-20% of their capital to be rendered "lazy" and not getting a return it could otherwise get ?) and secondly and potentially of significantly more consequence they face the distinct prospect at some stage of losing that lazy capital if the listed fund reverts to trading right at NTA and potentially even more loss of capital if the listed funds revert to their long term history of trading at a discount to NTA. This latter point is a real worry and should concern any prudent investor over the medium term because of the listed funds having such an extensive history of trading at a discount to NTA.

Those in the managed unlisted fund face none of those issues and no entry or exit charges and as mentioned before if you have over $500K in their private wealth management service one can design their own bespoke monthly or quarterly dividend plan or if less than that then its easy enough to withdraw 2% per quarter from the unlisted fund replicating the dividends of the listed ones.

Finally I can't help noticing in my research that the Fisher teams performance is well ahead of the market average no matter whether you're in the listed or unlisted investment but they're not the only ones beating the market after fees on average by about 5% a year, see the PIE funds Australian dividend fund performance which averages about 19% per annum since inception 10 years ago https://www.piefunds.co.nz/Investmen...ividend-Growth I'm planning on throwing them a bone too.

I used to think I could justify the Barramundi premium to NTA with the fact that you're buying the investment expertise of the team but clearly there's no need to pay a premium to enjoy the same expertise. PIE funds also has no entry fees and while their base fee is higher at 1.85% per annum they don;t charge performance fees like Fisher funds do. Interestingly PIE funds Australian dividend fund is up just over 50% in the last year. Wish I'd tossed them a bone quite a while back.

Why is all this so important ? Frankly I'm losing a bit of confidence with where we are going as a country and its effects on the NZX overall and the thought of Labour possibly getting another term and us facing 5 more years of woke politics interfering with our capital markets in various ways is a really serious worry. I think its best to have at least 50% of one's capital invested overseas. For what its worth that's what I'm working my portfolio towards.

The irony that a simple smart shares index tracking S&P 500 ETF fund with no research has outperformed any of the above with a 16.7% average annual return over the last 5 years after fees and taxes isn't lost on me https://smartshares.co.nz/types-of-f...-shares/us-500
They'll probably get a bone thrown their way too.

[Rawz]

The thing that has always got me with the premium to NTA is if there was some major event or a period of underperformance you risked the value drop in nta + premium being wiped out. So a double whammy

[Onion]

The thing that has always got me with the premium to NTA is if there was some major event or a period of underperformance you risked the value drop in nta + premium being wiped out. So a double whammy

...potentially even more loss of capital if the listed funds revert to their long term history of trading at a discount to NTA. This latter point is a real worry and should concern any prudent investor over the medium term because of the listed funds having such an extensive history of trading at a discount to NTA.

At a Wellington branch meeting of the NZSA Sam Dickie (manager of the Kingfish fund) was asked about reasons for the premium over NTA (contrasted to the historical discount).

He said he didn't have an explanation for the premium. He didn't have a prediction about whether the premium would persist.

My suspicion is that the 39% tax rate has spurred high income investors to seek out investments that can keep them below the 39% threshold -- such as PIEs. As you say Beagle, the same tax-free "income" can be achieved by selling down units on a regular basis.

Incidentally, the InvestNow platform gives access to the Fisher funds and a couple of PIE Funds offerings too (but not the Dividend Growth one). InvestNow makes it is easy to move money between investments (and to cash out units).

[Charlie38]

Those that have just exercised their "free" BRMWF @ 64cps now have a share with a NTA of $0.8622 cps. A significant discount to NTA!

Further these shares will participate in the Dec dividend (which I calculate to be approximately 1.79cps) which should be announced next week.

[Beagle]

Those that have just exercised their "free" BRMWF @ 64cps now have a share with a NTA of $0.8622 cps. A significant discount to NTA!

Further these shares will participate in the Dec dividend (which I calculate to be approximately 1.79cps) which should be announced next week.

Welcome to the forum and thank you for contributing to the debate. The problem is that in exercising the 1 free warrant for every 4 shares held the NTA of the shares held went down about 6 cps, (was previously over 90 cps) so the free warrant diluted the asset backing of the other shares to the point where the apparent gain on exercise creates no value for the shareholders overall. You can't make money out of nothing just taking the 1:4 free warrants. On the other hand if you buy truck loads of warrants dirt cheap, (once upon a time some dog bought hundreds of thousands of a previous issue at under 1 cent) and the shares subsequently go up a lot then its pay day !! Conclusion: The warrants can be an excellent value creator for people who can value them correctly and take advantage of any mispricing buying them in volume at times but they're not value accretive to shareholders per se.

Good feedback there Onion. Sam was wise to tread a diplomatic and careful line. Thanks for the link. Had a good chat with one of the PIE chaps the other day. Seemed to know his stuff pretty well I thought. He didn't skite about the 50% return in that Australian dividend fund...just let the figures do the talking. They have a European growth fund I am also considering. I'm thinking of spreading my 50% overseas allocation far and wide amongst some interesting ETF's and well proven fund managers.

I agree Rawz - There's a real risk of substantial capital erosion if for example Marlin go from a 20% premium to a 10% discount a whopping 30% of your capital could be wiped out Anyone who's been investing in these things for any real length of time knows they have traded at a material discount to NTA the vast majority of the time.

My own theory for the premium is I think elderly investors got absolutely desperate for yield when term deposits hit 1% last year and couldn't resist the thought of 8% tax free and the vast majority are probably unaware of the risk they're running.

[SPC]

Don't forget Beagle that when the market trades at a discount to NTA you have the opportunity to pick up a bundle of underlying assets at a discount to their value and additionally the distribution plan of 2% AT NTA means you are amplifing the return on those discounted shares.
That's a good time to buy but a bad time to sell.
Share market investments and Unit Trusts are not the same game and shouldn't be compared. The market sets it value on the sentiments of buyers and sellers more often than intrinsic value. Opportunities occur to make over the odds or to fall short.
It's a market. The unit funds are set and forget vehicles for passive investors.
Holders of the listed funds should not treat them like unit trusts or try to compare returns. They require a degree of trading at key times to return the best value. That has been my experience and it has worked well.

[Beagle]

Don't forget Beagle that when the market trades at a discount to NTA you have the opportunity to pick up a bundle of underlying assets at a discount to their value and additionally the distribution plan of 2% AT NTA means you are amplifing the return on those discounted shares.
That's a good time to buy but a bad time to sell.
Share market investments and Unit Trusts are not the same game and shouldn't be compared. The market sets it value on the sentiments of buyers and sellers more often than intrinsic value. Opportunities occur to make over the odds or to fall short.
It's a market. The unit funds are set and forget vehicles for passive investors.
Holders of the listed funds should not treat them like unit trusts or try to compare returns. They require a degree of trading at key times to return the best value. That has been my experience and it has worked well.

Yes x 2. This is a time to sell and invest in managed funds instead which can easily be exchanged for cash in due course when the time is right and shares bought on market again.