By Annabel Brodie-Smith
The sunny days of summer have arrived but it feels like we’re heading for crunch time for Brexit as the political debate over what sort of deal Brexit deal we pursue reaches fever pitch. Two years after the EU Referendum, with concerns about Brexit and an economic slowdown ever present, investor sentiment towards the UK is subdued despite the FTSE 100 reaching an all-time high in May.
Do watch the video where I talk to UK fund managers Alastair Mundy from Temple Bar, Georgina Brittain of JPMorgan MidCap and Neil Hermon of Henderson Smaller Companies about Brexit’s impact on Blighty’s prospects. Or you can read the article exploring these issues and opportunities in the UK including views from Simon Gergel of Merchants, Jean Roche of Schroder UK Mid Cap and Dan Whitestone, BlackRock Throgmorton Trust.
Click below to watch the video.
Our esteemed investment journalist, Ian Cowie, gives us his thoughts on Brexit, valuations and the UK investment company sectors which are trading at wider discounts than the average investment company.
He explains, “While we wait to see how Brexit will affect the economy after Britain leaves the EU next year, it can be said with some confidence that uncertainty has already depressed many share prices today and – while there are no guarantees of success - the first step toward making a profit is often to buy low.”
Another headache for the AIC is the KID - Key Information Document. This is a European regulatory requirement for investment companies. You may have seen them on
platforms as before you buy an investment company you now must prove by ticking a box that you have seen the KID. We are very concerned about the highly misleading performance scenarios and risk indicators on investment company KIDs.
Please read Ian Sayers’ views: “I cannot remember a time when consumers, directors, managers, analysts, trade associations and media commentators were so united in their criticism of a piece of regulation. Only regulators appear to have failed to spot what is obvious to everyone else, that basing future projections of risk and performance on the recent past was doomed to failure, and so it has turned out.”
Our final article looks at how investment companies are going green by providing investors with the opportunity to invest in businesses that are helping to tackle the environmental challenges we are facing. If you watched Blue Planet II, which highlighted the impact of plastic waste on wildlife, you’ll realise the critical nature of this and many other environmental issues.
This summer I’m looking forward to a holiday in France and a radical move from central London to Oxfordshire. I‘d like to wish you all a wonderful summer and Compass will be back in September.
Communications Director, AIC
The UK before Brexit
Investment company managers comment on opportunities and risks
Two years after the EU Referendum, investor sentiment towards the UK is subdued despite the recent stock market highs.
Concerns about Brexit and a UK economic slowdown are always present, but is this investor uncertainty justified or are there attractive opportunities for active managers?
On 19 June, the AIC held a media roundtable with investment company managers of large, medium and small-cap strategies investing in the UK. Alastair Mundy, Portfolio Manager of Temple Bar, Georgina Brittain, Co-Manager of JPMorgan MidCap and Neil Hermon, Fund Manager of Henderson Smaller Companies discussed Brexit’s impact, where they see opportunities and risks, and their outlook for the UK.
Their views have been collated alongside those of Simon Gergel, Portfolio Manager of Merchants, Jean Roche, Co-Manager of Schroder UK Mid Cap and Dan Whitestone, Portfolio Manager of BlackRock Throgmorton Trust.
Watch Alastair Mundy, Temple Bar, Georgina Brittain, JPMorgan MidCap and Neil Hermon, Henderson Smaller Companies, discuss the outlook for UK markets. Click below to play the video.
Neil Hermon, Fund Manager of Henderson Smaller Companies said: “With the UK economy showing one of the slowest economic growth rates in the G7 it is hard to argue that Brexit is not having an impact. The uncertainty caused by the drawn-out negotiations is causing consumers to rein in spending with weakness noted in areas such as the second-hand housing market and big ticket purchases such as cars, furniture and carpets. On the other hand, manufacturers are benefiting from the weakness in sterling with exports much more competitive compared to foreign competition. In general, most UK corporates are carrying on and investing for the future, recognising that Brexit carries substantial risks, but aware that life goes on and the world will still keep on turning.”
Georgina Brittain, Co-Manager of JPMorgan MidCap said: “As we had anticipated, the two immediate impacts of the Brexit vote in June 2016 were a rise in inflation and sterling weakness. We positioned ourselves accordingly by emphasizing exporters and overseas earners in the portfolio and going underweight on exposure to the UK consumer. Some two years later both of these themes remain in the fund.”
Alastair Mundy, Portfolio Manager of Temple
Bar said: “Two years on from the surprise EU Referendum result UK equities remain very out of favour, particularly with overseas investors. However, difficult as it may be, we have to look beyond any bad news and avoid obsessing over noise and babble. Instead we need to determine (approximately) what the picture will look like when we come out the other side and try to capitalise on the longer-term opportunities.”
Simon Gergel, Portfolio Manager of Merchants said: “The uncertainty around the Brexit process may be partly to blame for weak UK economic growth in the first quarter of 2018, as companies and individuals may be more hesitant with their spending, although the economy has performed reasonably well since the referendum. In sentiment terms, Brexit seems to be having a depressing effect on the UK stock market, with UK equities one of the least popular asset classes amongst investors according to Bank of America Merrill Lynch. This is leading to many shares in the UK stock market trading at attractive levels, particularly when compared to their international peers.”
Opportunities and risks
Jean Roche, Co-Manager of Schroder UK Mid Cap said: “We see an ever-faster pace of disruption amongst UK plc, and nowhere is this more keenly felt than on the high street. Companies which are not carrying out the disruption or adapting to take account of this disruption will themselves be ‘carried out’. There are opportunities for management teams which are nimble and creative to take advantage of disruptive trends. The economy can support this because companies and households continue to spend. And mid-cap UK companies, being smaller by definition than large companies, are most likely to be able to adjust to the new normal – elephants rarely gallop.”
Dan Whitestone, Portfolio Manager of BlackRock Throgmorton Trust said: “Our investment philosophy focuses heavily on industry change. We believe nearly every industry is undergoing change right now, often disruptive change, and any industry in flux creates opportunities both from a long and short perspective.
“One aspect of industry change we are drawn to is changes in distribution. The apps on your smartphone illustrate many industries that have been disrupted through changes in distribution, creating pressures for legacy incumbents as well as revealing a wave of exciting emerging companies.
“The power of change within distribution is generally price deflationary and it necessitates incumbents to adapt their business models or risk being left behind. It can also fundamentally change one’s behaviour as a consumer, for example from ordering take-away food, to binge-watching box-sets, to auto re-ordering food or household goods. We continue to find many opportunities, both long and short, from changes within distribution across consumer services and consumer goods.”
Georgina Brittain, Co-Manager of JPMorgan MidCap said: “We continue to avoid leisure companies such as pub companies and general retailers - with certain exceptions such as a large position in JD Sports Fashion.
“However, we do find pockets of significant value in certain domestically-exposed areas such as the challenger banks and the brick companies, and we also favour technology companies such as Sophos. We continue to find opportunities in the Mid Cap arena to invest in companies that are exposed to growth areas, or are making their own growth prospects, regardless of the bigger UK picture.”
Neil Hermon, Fund Manager of Henderson Smaller Companies said: “One important source of new investment opportunities is the IPO market where we see a steady stream of
"In 2018 we have invested in Integrafin, a B2B platform for IFAs, and Team17, a software games developer"
Neil Hermon, Henderson Smaller Companies
interesting companies. In 2018 we have invested in Integrafin, a B2B platform for IFAs, and Team17, a software games developer, both of which have risen to substantial premiums to their IPO price.
"The best value, though, is among the domestic companies in sectors such as leisure, financials and real estate"
Simon Gergel, Merchants
“In terms of what we don’t like, we typically shy away from those ‘value trap’ type areas such as food producers and industrial transportation. We are also conscious of the structural pressures that legacy companies in areas such as the UK high street are suffering from. The move to online and high property costs are proving major headwinds, as evidenced by recent announcements from companies such as House of Fraser, Carpetright, Mothercare and New Look.”
Simon Gergel, Portfolio Manager of Merchants said: “It is important to note that most of the revenues and profits of quoted UK companies come from abroad, and a broad aversion to the UK stock market has led to several multinational companies quoted in the UK being lowly priced on a global basis.
“The best value, though, is among the domestic companies in sectors such as leisure, financials and real estate, where we are finding opportunities to buy business with strong franchises at attractive prices.”
Alastair Mundy, Portfolio Manager of Temple Bar said: “Our focus, as ever, remains on searching for out of favour stocks which have been over-sold. The portfolio has certainly taken on a more UK centric feel in the last 12 months, but as usual retains its strong value bias.”
Outlook for the UK
Neil Hermon, Fund Manager of Henderson Smaller Companies said: “The UK equity market is good value, especially compared to international markets. It is unloved by international and domestic investors who are very underweight the UK. Although the reasons for this position are clear – slow economic growth, Brexit and political instability – any change of sentiment to this position could see the UK equity market rally sharply. In general, UK corporates are performing well and earnings growth is robust.
“Additionally, balance sheets are strong and there is a steady stream of M&A activity, especially from foreign companies, which is supporting equity valuations. We have a positive medium-term outlook for the UK equity market and especially our portfolio.”
Simon Gergel, Portfolio Manager of Merchants said: “The combination of a reasonable overall valuation for the UK stock market and pockets of very attractive valuations, is supportive for the prospects for UK equities, especially in a context where several other asset classes are highly valued.”
Dan Whitestone, Portfolio Manager of BlackRock Throgmorton Trust said: “The outlook for the UK domestic economy remains challenged and the recent evidence would suggest it is deteriorating. This has had a notable impact on the share prices of many domestic companies with several market participants highlighting the value on offer.
“However, whilst many of these UK consumer shares may appear cheap on valuation metrics like ‘price to adjusted earnings’, this fails to take into account the levels of debt and poor cashflow some of these companies exhibit. In many cases these same investments are also exposed to cyclical pressures (weakening demand, or rising cost pressures impacting corporate profit margins), and/or structural pressures (digital disruption, or competition from
"We think the UK is home to many compelling investment opportunities where the revenues and profits are generated outside the UK and the companies have a leading differentiated competitive offering"
Dan Whitestone, BlackRock Throgmorton Trust
low cost or specialised formats).
“As such we remain cautious on UK domestics in general (there are exceptions!) but remain very positive on the outlook for UK plc. We think
the UK is home to many compelling investment opportunities where the revenues and profits are generated outside the UK and the companies have a leading differentiated competitive offering. The outlook for these investments is tied to the global economy which remains robust. Our universe is well diversified by sector and geography and there are ample opportunities to find well managed, dynamic, differentiated companies that are market leaders competing on a global basis.”
Annabel Brodie-Smith, Communications Director of the Association of Investment Companies said: “It’s good to hear that there are still many attractive investment opportunities in the UK despite the negative headlines. Clearly there are areas which are experiencing challenges, but one of the biggest benefits of active management is to be able to adapt portfolios accordingly, backing the winners and avoiding the areas under pressure. Despite the potential risks posed by Brexit, it appears to be business as usual for UK investment companies.”
Two views make a market
Ian Cowie explores the opportunities presented by bearish sentiment on the UK
More than two years after Britain voted by a single-digit majority to leave the European Union, it remains unclear whether Brexit will prove a blessing or a curse for the economy. Either way, it could be good news for investors seeking bargains who are willing to accept some degree of risk in pursuit of substantial rewards.
Many stock market participants hate uncertainty but others love the opportunities it can create. This paradox may explain why, since June 23, 2016, the United Kingdom has been shunned by many international investors but others continue to find value in specific shares and investment trusts listed in London.
Put another way, what one person – perhaps a seller - perceives as bad news can mean much the same thing by the time it is reflected in the market price as what another person – perhaps a buyer - believes is a good bargain. Or as stockbrokers sometimes say, two views make a market.
Whatever Brexit may mean in future, it seems likely that uncertainty has depressed British share prices and stock market returns recently. For example, independent statisticians Morningstar calculate that the total return from the FTSE 100 index of Britain’s biggest shares has been 9% over the last year, compared to 16% from the Dow Jones index of American blue-chip stocks or 22% from the NASDAQ benchmark of technology shares in New York.
Another way of measuring how Britain has fallen from favour among many international investors
"Whatever Brexit may mean in future, it seems likely that uncertainty has depressed British share prices and stock market returns"
is to express share prices as a multiple of corporate earnings. When this price/earnings ratio is tweaked to take account of the economic cycle, it is known as the cyclically adjusted P/E or CAPE.
CAPE can give an idea of whether shares are expensive or cheap, although there is no guarantee that this measure of value – or any other – will lead to profits or avoid losses. Even so, the international comparisons are eye-stretching. American shares are currently trading on an average CAPE ratio of more than 30; Japan is on a CAPE of 27; Germany is on 20 and the UK is on 17, according to calculations by Star Capital.
To put British shares’ lowly rating in perspective, the same calculation gives emerging markets such as India a CAPE of 22 and China a CAPE of 19. While the latter is now reckoned to be the second-largest economy in the world, few stock market investors would argue that Shanghai or Shenzhen offer the same standards of corporate governance or regulations to protect investors that provide statutory safety nets in London.
Investment companies have been helping to diminish the dangers inherent in stock markets by diversification and other built-in risk reduction features for 150 years but they are not immune
"The companies that comprise the FTSE 100 generate 70% of their revenues overseas"
to the uncertainty surrounding Brexit. This may explain why the average conventional investment company, wherever it is invested around the globe, is currently trading at a discount to net asset value of -2.8% but the average investment company in the UK All Companies sector trades at a discount to NAV of -7.8%.
That pricing gap shows that ‘plain vanilla’ investment companies focussed on Brexit Britain are offering typically twice as big discounts to bargain-hunters as the global average. This discrepancy is all the more remarkable because, according to the London Stock Exchange, the companies that comprise the FTSE 100 generate 70% of their revenues overseas.
Whatever form Brexit eventually takes – whether it is ‘hard’, ‘soft’ or somewhere ‘in between’ – it is unlikely to affect British companies’ overseas earnings. Indeed, if sterling weakens – as it has done since the Brexit vote – then this will tend to increase the value in pounds of any earnings in dollars, euros and other foreign currencies.
Investment companies in the UK Smaller Companies sector are trading at an even bigger discount to NAV; an average of -9.1%. While it can be argued that the domestic focus of many smaller companies means they may be more vulnerable to the risk that Brexit might go badly, because many smaller companies rely on British consumers rather than revenue from exports, share price returns from this sector remain robust.
For example, the average UK Smaller Companies investment company delivered a share price return of 20% over the last year, compared to 13% from the average UK All Companies investment company and just over 11% from the overall investment company industry average. Over the last five years, the respective average returns from these sectors were 114%; 79% and 89%, according to Morningstar via the AIC.
It is, of course, important to remember that the past is not a guide to the future and cheap is not necessarily the same thing as good value. While we wait to see how Brexit will affect the economy after Britain leaves the EU next year, it can be said with some confidence that uncertainty has already depressed many share prices today and – while there are no guarantees of success - the first step toward making a profit is often to buy low.
Ian Cowie is a columnist at The Sunday Times.
Down with the KIDs
AIC analysis demonstrates why the FCA needs to act now over Key Information Documents to protect consumers
The AIC has published further research demonstrating why consumers are being misled by Key Information Documents (KIDs) and why the FCA needs to act now to protect consumers.
The research looked at 56 investment company KIDs and then compared their Summary Risk Indicators to the Summary Risk and Reward Indicators in the Key Investor Information Documents (KIIDs) produced by their ‘sister’ open-ended funds. A ‘sister’ fund is a fund which shares the same manager, has the same overall investment strategy and a significant overlap in terms of portfolio. Both KID and KIID indicators grade risk on a scale from 1 (low) to 7 (high), but they are calculated in different ways.
Given the existence of discounts and the possible use of gearing, the accepted view is that the investment company would be more volatile than its sister fund and therefore should, if anything, have a higher risk indicator. In fact:
- None of the 56 investment companies has a higher risk indicator than its sister fund
- Just 3 investment companies have the same risk indicator as the sister fund
- 40 investment companies have a risk indicator one lower than the sister fund
- 13 investment companies have a risk indicator two lower than the sister fund
Commenting on these findings, Ian Sayers, Chief Executive of the Association of Investment Companies (AIC) said: “Imagine consumers choosing between an investment company and its sister open-ended fund. They have done their research, chosen an investment strategy and manager they like, so all they have to do is decide whether to buy the investment company or open-ended version. The investment company KID is showing stellar returns in ‘moderate’ markets, and healthy returns even in ‘unfavourable’ markets.
“Prudent investors might then check to see whether these returns are being obtained at the price of much higher risk by comparing the risk indicators of the two funds. Imagine their
"None of the 56 investment companies has a higher risk indicator than its sister fund"
delight to discover that they can have these fantastic returns with lower risk.
“Of course, this is all nonsense. It reflects the reckless decision to allow competing products to produce seemingly identical information but calculated on a different basis. Any suggestion that consumers will appreciate the subtle difference in methodology between the two risk indicators, when they are called virtually the same thing and presented in exactly the same way, is laughable.
"I cannot remember a time when consumers, directors, managers, analysts, trade associations and media commentators were so united in their criticism of a piece of regulation"
Ian Sayers, AIC
“I cannot remember a time when consumers, directors, managers, analysts, trade associations and media commentators were so united in their criticism of a piece of regulation. Only regulators appear to have failed to spot what is obvious to everyone else, that basing future projections of risk and performance on the recent past was doomed to failure, and so it has turned out. They cannot say they were not warned. The AIC argued against the proposed Summary Risk Indicator back in 2010 for precisely these reasons, and we were not alone. However, repeated warnings over the next eight years fell on deaf ears.
“Though we welcome the FCA’s decision to gather evidence, this should not be an excuse for further delays. The evidence is all out there and has been for six months. Though a longer-term solution will need to be carried out at the European level, the FCA should take steps today to protect consumers. A good start would be to acknowledge how bad this regulation is and then warn investors not to rely on these disclosures when making investment decisions.”
Backing a greener future
The investment companies helping to tackle environmental issues
Investment companies have been adapting to meet shareholders’ needs for 150 years and today’s investment companies are providing investors with the opportunity to invest in businesses that are helping to tackle the environmental challenges we are facing.
At the start of the year, the UK Government announced its 25 Year Environment Plan to help improve the environment for the next generation, while the documentary series Blue Planet II has highlighted the impact of plastic waste on the environment. Clearly, the desire for change when it comes to our impact on the environment continues unabated. This is supported further by the recent news about the planned launch of The Global Sustainability Trust, which will “offer investors strong risk-adjusted returns through impactful investments designed to accelerate the delivery of the UN Sustainable Development Goals”.
Sector Specialist: Environmental and Sector Specialist: Infrastructure – Renewable Energy are two AIC investment company sectors focused on environmental and alternative energy, and renewable energy infrastructure investments, respectively. In addition, GCP Infrastructure in the Sector Specialist: Infrastructure has a 64% portfolio allocation to renewables as at 29 March 2018.
Jon Forster, co-manager of Impax Environmental Markets said: “There is real global commitment to addressing climate change and this is driving growth. President Trump’s withdrawal from the Paris Agreement may have grabbed headlines and suggested that the US has stepped back but beyond Trump, at a state, city and corporate level, decision making is far more supportive. Then there is also the step forward from regions like India and China that have a significant impact. This commitment makes itself felt in any number of areas, from recycling targets to regulations that dictate water treatment standards and building codes for energy efficiency. Momentum is not only there, it is continuing to build.”
Charlie Thomas, manager of Jupiter Green Investment Trust said: “Historically, there have been three trends which we condense environmental investing down to; firstly, policy; secondly, progress and the development of technology; and thirdly, people (in terms of population growth). A lot of environmental issues were highly dependent on policy and this has historically been very important, however this can fluctuate.
“The cost of solar technology has gone down by 80% over the last 10 years and will continue to fall as the technology developments in this area continue. Government subsidies for renewable energy are becoming fewer though, as we’re seeing a gradual shift from early stage technology dependent on subsidies being superseded by the pace of technological advances.
“In Europe, there is quite a big drive from incentives towards tackling environmental issues. There’s political legislation encouraging more money to come in to sustainable funds, which could be significant to the industry as a whole.”
Richard Crawford, manager of The Renewables Infrastructure Group (TRIG) said: “In the UK we see strong support for decarbonisation and tackling climate change. This is cross-party – there are detail differences but the fundamentals are consistent. The Climate Change Act 2008 sets ambitious decarbonisation targets. The legislation was brought in by a Labour government and has been supported ever since through a series of Climate Change budgets. This is important as it illustrates the UK’s commitment over and beyond that coming from Brussels. The extent of the worldwide commitment to climate change is seen by the accord reached in Paris in 2015.”
Ben Goldsmith, CEO, Menhaden Capital Management LLP, portfolio manager of Menhaden Capital PLC said: “Businesses across industrial sectors are increasingly awake to the fact that using energy, water, raw materials and other resources more efficiently is a substantial money saver. So irrespective of who is in the White House, or what governments are doing to encourage investment into efficiency, it’s happening, and on a huge scale. For us, this represents the investment opportunity of our time.”
Jon Forster, co-manager of Impax Environmental Markets said: “We think that the Electric Vehicle market (EV) is exciting. If you consider your own circle of acquaintances there was little likelihood of anyone you knew owning or considering owning an EV a decade ago. That isn’t the case today and we think that trend will, if you excuse the pun, accelerate in the next ten years and beyond. It is tempting to look at car brands like Tesla if you are interested in investing in EVs. At Impax Environmental Markets we believe it is difficult to know who the brand winners and losers will be. For that reason, we invest in critical components like materials which are used within EV batteries and power electronics for the drive train** and charging infrastructure. We like both for similar reasons; the need for them will increase as the EV market grows.”
“The BBC’s Blue Planet II helped to put the case for reducing plastic packaging to homes in
"The EU has a target to recycle 90% of plastic bottles by 2025"
Jon Forster, Impax Environmental Markets
the UK. Around the world public awareness has increased. This combined with China’s recent bans on imported contaminated recyclables is forcing governments to react. The EU has a target to recycle 90% of plastic bottles by 2025 and the UK Government is in advanced discussions to introduce a deposit scheme for drink containers. Impax Environmental Markets sees a number of investment opportunities, including recycling infrastructure, fibre based packaging and new materials such as bioplastics made from biodegradable materials.”
Charlie Thomas, manager of Jupiter Green Investment Trust said: “When it comes to finding opportunities, we look for tipping points which are typically unpredictable and lead to a change in policy. For example, the documentary series Blue Planet has tipped the public perception of plastics. While images of marine life surrounded by plastic waste is emotive, what we think is different this time and will keep this issue at the fore are the health implications, which will make policy makers pay attention.
“The trend is that environment is becoming a more mainstream issue. When I took over the helm of Jupiter Green in 2003, we identified 312 environmental solution companies. In 2018, there are around 1,200, emphasising how much this space has expanded and become mainstream.”
Richard Crawford, manager of The Renewables Infrastructure Group (TRIG) said: “Investment companies like TRIG are investing in clean electricity generation. This is a growth sector not only as we strive to combat climate change but also as falling costs make renewables one of the cheapest forms of generation. To add to this, its non-reliance on imported fuels makes it one of the most secure forms of generation. As well as decarbonising industrial and consumer energy currently met by electricity, this looks likely to extend into the transport sector with electric vehicles.
“Given the momentum in the sector, we can expect to see continuing attractive investment opportunities in this space.”
Philip Kent, director at GCP Capital and lead adviser of GCP Infrastructure said: “The Climate Change Act is 10 years old this year, having set out binding obligations on the government to reduce carbon emissions to 80% of a 1990 baseline by 2050. This has prompted the implementation of support mechanisms that have led to significant growth in renewable electricity generation. Renewables accounted for 30% of the UK’s total electricity generation in Q1 2018 and GCP Infrastructure has invested over £620m across wind, solar, biomass and hydro technologies.
“Whilst government support for new renewable electricity has largely fallen away, current areas of support include renewable heat and clean transport. There remains more to do in these areas, with the Climate Change Committee recently reporting net increases in emissions from transport and only minor reductions in farming emissions in the period from 2012 to 2017. The competitive tension between energy cost, security of supply and the green agenda will continue to challenge support mechanisms targeting all forms of renewable energy.”
Chris Tanner, director of John Laing Capital Management, manager of John Laing Environmental Assets Group said: “As an investor in environmental infrastructure, we hold a diversified portfolio of assets that capitalise on a range of opportunities. These include generation of renewable electricity, recycling and resource recovery from waste, treatment of wastewater and the use of renewable heat. Although regulatory change can impact new projects, we deal with this by investing in established projects that are less exposed to such changes.”
Delivering for shareholders
Ricardo Pineiro, Partner at Foresight Group, Manager of Foresight Solar Fund Limited said: “As both developed and emerging economies are transitioning their energy systems away from traditional fossil fuel-based energy systems, Foresight Solar Fund Limited (FSFL) is at the forefront of that transition, investing in ground based solar generation assets.
“FSFL takes a disciplined approach to investments, acquiring only those assets that meet return requirements on a risk adjusted basis. We target assets which strengthen the fund’s diversification which can be by geographical location, panel manufacturer and Engineering Procurement Contractor / Operations & Maintenance counterparty, and last year acquired our first overseas assets – four sites of net 146MW under construction in Australia.
“ESG considerations are incorporated into all our investment processes and asset management procedures. Together, this disciplined approach to investment has seen FSFL meet all dividend targets since IPO in 2013, and we are currently on target to deliver an annual dividend of 6.58p per share in 2018”.