Compass - May 2021
This month in Compass, we look at the prospects for hospitality and leisure as the UK opens up. Will warehouses or offices be post-Covid winners? Ian Cowie
By Annabel Brodie-Smith
So we have moved to the barn. 12 April was move day and we woke up to see heavy snow falling. Luckily the snow soon stopped, then melted and we got on with moving. I had forgotten how much hassle moving is – it’s been the usual chaos of not being able to find anything… But we love the rural location and the views of the countryside - I wake up to see sheep grazing. The high ceilings and big windows letting in lots of light are a huge contrast to a basement flat in central London.
Have you been out to a pub, restaurant or café yet? This month our UK managers are looking at the hospitality and leisure stocks that could benefit from the UK coming out of lockdown. They are optimistic, with Neil Hermon, manager of The Henderson Smaller Companies Investment Trust, saying: “With household savings at record levels, a highly successful vaccination programme, consumers keen to enjoy the level of social contact that they had pre-COVID and the likelihood of a staycation summer, we expect trade to bounce back strongly on reopening.” We went for a lovely lunch at a local pub but roll on 17 May so we no longer have to shiver outside.
On to another post-lockdown conundrum – warehouses versus offices. You might know that warehouses have soared over the last year with the AIC’s newly created Property – UK Logistics sector (warehouses and distribution centres) up 56% versus 22% for the Property – UK Commercial sector. But will the rise of warehouses continue and what’s the future for the office? We’ve also asked investment company managers in the property sectors for their views on the suspensions of open-ended property funds, as the FCA considers further regulation in this area. They are certainly not mincing their words, with Custodian REIT’s manager Richard Shepherd-Cross saying: “Surely, retail investors will have had their fingers burnt once too often from investing in open-ended property funds. The liquidity promise cannot be met, income returns are not competitive and long-term returns have tended to fall short.”
After last year we’re all aware of the environmental benefits of cutting pollution and reducing carbon emissions. This month, Ian Cowie has delved into the AIC’s Renewable Energy Infrastructure sector. With Biden bringing the US back into the Paris Agreement and even China’s leader Xi Jinping and Russia’s president Vladimir Putin expressing concern about carbon emissions, investing in green energy is top of the political agenda. Ian makes a compelling argument that it should be at the top of individual investors’ agendas too: “Now is the time to notice which way the wind is blowing and invest for a cleaner, greener tomorrow.”
The company structure offers many benefits for investment company shareholders but do you know what a continuation vote is? Experienced journalist Kyle Caldwell explains how continuation votes can be helpful for shareholders and “keep an investment trust’s board on its toes”. This is because “shareholders can come together and demand a vote on whether the trust should be wound up at any time if they are unhappy with the way it is being managed.”
Talking of benefitting shareholders, we have been lobbying for the removal of stamp duty as part of the Treasury’s review of the UK funds regime. Since 2014, most purchases of open-ended funds have been exempt from stamp duty yet investors who purchase most investment companies pay stamp duty at 0.5% on the purchase of their shares. Investment companies already pay stamp duty when they buy their investments so it’s double taxation when investors pay stamp duty on the purchase of investment company shares as well. We think it’s time for a fair tax regime for investors which does not discriminate against investment companies.
Finally, one of the benefits of investing in investment companies is that shareholders have a chance to get their voice heard. They can vote at annual general meetings (AGMs) on topics such as investment strategy and board and management changes. ShareSoc are running a webinar next week for investors to educate them on how to vote their shares. You can find more information and book here.
I hope you all enjoy more freedom over the next month, with more seeing friends and family and less shivering outside!
Communications Director, AIC
UK managers comment on the hospitality and leisure industry post-lockdown
With household savings at record levels and rising consumer confidence, prospects look bright for the UK hospitality and leisure sectors. Many of us will be looking forward to trips to restaurants and pubs with friends, or even a holiday abroad, but with COVID cases still high in many countries around the world, uncertainty remains as restrictions are lifted.
Which travel stocks, hospitality chains and leisure groups have the brightest prospects as the UK emerges from lockdown? The AIC has asked investment company managers about the outlook for companies such as Mitchells & Butlers, Wizz Air and Restaurant Group, owner of Wagamama and Frankie & Benny’s.
Which stocks will benefit most?
Katen Patel, Manager of JPMorgan Mid Cap Investment Trust, said: “We have a number of holdings that should benefit from pent-up demand for hospitality services, including Mitchells & Butlers, a leading UK pub operator, and Rank Group, an operator of bingo halls and casinos – both companies were trading well before the pandemic hit and are attractively valued. National Express, which operates public and school bus services, has already started to benefit from the easing of restrictions including schools and offices reopening. Thanks to a strengthened balance sheet, National Express is also winning new business across the globe.
“Although the easing of international travel restrictions is not clear yet, we would expect Wizz Air and Jet2, both with strong balance sheets, to take market share in the European airline and package holiday space respectively, whilst also continuing to benefit from structural growth in demand for air travel.”
Jonathan Brown, Portfolio Manager of Invesco Perpetual UK Smaller Companies, said: “Gym Group, the low-cost gym operator, should trade well on reopening as their customers are keen to get back into gyms and we believe health has increased as a priority for consumers. Many UK consumers have increased savings as a result of not spending on holidays, eating out and commuting. We believe there is pent-up demand to get back to normal leisure activities and expect strong trading as leisure opens back up.”
Thomas Moore, Investment Manager of Aberdeen Standard Equity Income Trust, said: “Coca-Cola Hellenic has exposure to countries in Southern and Eastern Europe and Africa which will be key beneficiaries of easing lockdowns as vaccines are rolled out. While tourism is unlikely to return to normal levels in 2021, there is scope for a year-on-year improvement. Coca-Cola Hellenic’s volumes were affected by the shutdown in tourism markets in summer 2020 and the recent poor ski season has further impacted sales. This sets the business up for an improvement in growth as these markets gradually return to normal.”
Hospitality and leisure to bounce back strongly
Neil Hermon, Fund Manager of The Henderson Smaller Companies Investment Trust, said: “We are optimistic about the outlook for UK-focused leisure stocks to perform strongly in the near term. With household savings at record levels, a highly successful vaccination programme, consumers keen to enjoy the level of social contact that they had pre-COVID and the likelihood of a staycation summer, we expect trade to bounce back strongly on reopening.
“Additionally, many of the companies we own in the portfolio will emerge stronger from the tribulations of the last year having raised additional capital from investors, as well as benefitting from a likely reduction in competitor activity as many rival businesses have downsized or stopped trading during the COVID-19 pandemic. Our exposure to these themes is provided by investments in Mitchells & Butlers and Young’s, the pub operators; Restaurant Group, the branded restaurant group; Gym Group, the leading operator of low-cost gyms; and Hollywood Bowl, the bowling alley operator.”
Katen Patel, Manager of JPMorgan Mid Cap Investment Trust, said: “Having suffered from over 12 months of severe restrictions, we believe the prospects for the sector on reopening are very positive with strong pent-up demand and considerable amounts of increased savings by consumers potentially waiting to be spent. Large parts of the hospitality industry and domestic travel sector should benefit from consumers spending in their home market. Over the coming months we would expect to see strong trading from pubs, restaurants and other parts of the hospitality sector from cinemas to casinos and beyond.
“We expect international travel to experience a slower return as governments seek to insulate their domestic economies from the risk of imported COVID-19 cases and variants, and vaccine rollouts across the globe occur at differing rates. However, consumers are desperate for foreign holidays and travel and the sector should bounce back strongly when restrictions are eased.”
Jonathan Brown, Portfolio Manager of Invesco Perpetual UK Smaller Companies, said: “The outlook for Gym Group has improved as some of its competitors have closed sites and the company is finding much improved site availability on attractive commercial terms – benefitting from spare retail capacity. This has enabled the group to enter towns where they had been historically struggling to find suitable sites, such as York and Cambridge.”
Emerging markets boosting demand
Thomas Moore, Investment Manager of Aberdeen Standard Equity Income Trust, said: “Coca-Cola Hellenic operates mainly in developing markets where consumption per capita is very low relative to developed markets. This provides ample scope for CCH to grow in the coming years. Their strong competitive position and robust balance sheet allowed Coca-Cola Hellenic to maintain its dividend throughout the pandemic. This will be remembered by investors, driving a valuation re-rating, aided by the cyclical recovery in volumes as tourism returns.”
Katen Patel, Manager of JPMorgan Mid Cap Investment Trust, said: “In recent times there has been a clear trend of increasing demand for experiential leisure, which combined with increasing wealth and the emergence of sizeable middle-class populations in emerging economies, can only be positive for the travel and hospitality sector. We believe a number of our holdings have increased the efficiency of their operations during this period and will undoubtedly have benefitted from capacity coming out of their markets which should mean more resilient and more profitable businesses in the future.”
Thomas Moore, Investment Manager of Aberdeen Standard Equity Income Trust, said: “Coca-Cola Hellenic’s management team has worked hard to control the cost base, paving the way for increased operational gearing once demand returns. They have also been working on new products, such as a ready-to-drink coffee range, following Coca-Cola’s recent acquisition of Costa Coffee.”
Katen Patel, Manager of JPMorgan Mid Cap Investment Trust, said: “As you would expect from any business facing a lengthy period of minimal revenue and no visibility, the priority has been to cut costs and preserve cash. A number of our holdings have chosen to raise money in the equity markets to ensure that they can survive an extended period of uncertainty and perhaps solidify their position as market leaders. Businesses have had to become leaner and more efficient, adapt to the new environment, and this should benefit profitability once restrictions are eased.”
Jonathan Brown, Portfolio Manager of Invesco Perpetual UK Smaller Companies, said: “Gym Group has reopened with alternate machines out of use to enable social distancing. At peak times this has decreased capacity – but the company now shows how busy gyms are allowing customers to visit at less busy times.”
Warehouses versus offices
As the UK unlocks will commercial property stage a recovery?
Warehouses and distribution centres have soared over the past year with the AIC’s Property – UK Logistics sector up 56% versus 22% for the Property – UK Commercial sector. Logistics property has played a critical role in enabling lockdown living, but with restrictions being lifted should investors continue to back the online boom or are there opportunities in retail and offices which now look attractive?
The AIC has spoken to property managers about the prospects for warehouse properties versus wider commercial property, the investment outlook for shops and offices, and the suspensions of open-ended property funds.
Annabel Brodie-Smith, Communications Director of the AIC, said: “The strong performance of logistics investment companies over the past year reflects the crucial role e-commerce has played during the pandemic. Whilst investment companies investing in retail and offices have had a more difficult time, things are looking up with the reopening of retail and a gradual return to the office.
“Despite the challenges of the past year which have had an impact on some share prices, investment companies’ closed-ended structure has allowed investors to buy and sell their shares freely. In contrast, the major open-ended property funds were suspended for most of last year and some are yet to open. Investment companies provide a suitable structure for investors to access a wide range of property from Amazon-style warehouses to accommodation for the homeless.”
Future of logistics – shift to online “inevitable”
Richard Moffitt, Chief Executive Officer of Urban Logistics REIT, said: “We have seen unprecedented growth in the structural adaptation to e-commerce with it providing 50% of all retail sales in June 2020. It is inevitable that this structural shift will continue. All of our warehouses, bar three which closed for a few days at the beginning of lockdown, remained operational during the pandemic. We have received 100% of our rents for the last six months which is a good reflection of the importance of logistics buildings and the sectors our tenants operate in.”
Andrew Bird, Managing Director of Tilstone Partners Limited, investment adviser to Warehouse REIT, said: “Knight Frank Research estimate that the continuing online market penetration will generate demand for an additional 92 million square feet of warehouse space in the UK before the end of 2024. However, supply remains very constrained with the report estimating there is currently only 10 months of available stock. This acute shortage of supply will continue to drive rents from their historic low base (with Warehouse REIT’s prevailing average rent of just £5.50 per square foot). This will ensure the sector continues to outperform throughout the medium term.”
Logistics versus wider commercial property
Richard Shepherd-Cross, Managing Director of Custodian Capital and manager of Custodian REIT, said: “Logistics real estate has been a standout performer over the last few years. There continues to be latent rental growth in portfolios, as the sector meets a new benchmark level. However, all of that rental growth and perhaps too much hope appear to be priced into the market at present. It is no longer the case, as perhaps it was two to three years ago, that investment in logistics is the easy choice.
“I think we need to look more widely to identify value. Correctly priced, out-of-town retail can be a very defensive investment. It is possible to secure large land holdings, close to town centres, with properties let to substantial tenants, paying market rents, at close to double the initial yield of prime logistics assets. Regional offices with strong ESG credentials in cities where highly skilled staff want to live, should remain in strong occupier demand. Again, initial yields offer a significant boost to income compared to prime logistics, and occupier demand should support rental growth to enhance returns over the medium term.”
Richard Moffitt, Chief Executive Officer of Urban Logistics REIT, said: “It feels to me like the traditional real estate cycle is being distorted by this structural shift into e-commerce. The yield compression for bond-type income has been evident, but 78% of our total return has come from asset management not market movement since IPO – we believe the ability of our team to deliver these solutions will underpin future performance. Beds and sheds seem to be the anointed sectors currently but it is more complicated than just buying into the sector. The bond proxy income in any sector simply rises and falls with bond yields and managers don’t have the opportunity to add value in the same way as we do in this sub-sector of the logistics market.”
Prospects for retail and offices very positive
Richard Shepherd-Cross, Managing Director of Custodian Capital and manager of Custodian REIT, said: “The queues outside shops on the day that non-essential retail opened and the popularity of a return to pubs in city centre streets tell us that retail and leisure will continue to draw the crowds. If centres can create footfall, this paints an optimistic picture for high street retail. However, as shops form only part of the customer delivery story, with online sales picking up a share, then we must expect rents to reflect at least some of that lost market share.”
Matthew Howard, Director Property Funds, BMO Commercial Property Trust, said: “The prospects for the retail and office sectors are, in our view, very positive and we’ve seen a clear desire from tenants to move back into these shared spaces once restrictions are eased. We also have a strong conviction the leisure and food and beverage sectors will bounce back quickly and we take great encouragement from that. Since reopening on 12 April 2021, our flagship St Christopher’s Place Estate in London has already seen approximately 70% footfall compared to April 2019, even with ongoing restrictions.”
Out-of-town retail is here to stay
Richard Shepherd-Cross, Managing Director of Custodian Capital and manager of Custodian REIT, said: “Many essential retailers in out-of-town retail parks prospered through lockdown. Food, discounters and DIY all traded strongly. Much of what consumers enjoyed about out-of-town shopping: convenience, free parking, click and collect and easy returns, will be every bit as valid as the economy unlocks and can be complementary to online shopping. However, rental levels will be in sharp focus for occupiers and some of the rental inflation driven by successive consumer booms will need to reverse.”
The future of the office
Matthew Howard, Director Property Funds, BMO Commercial Property Trust, said: “Whilst the office sector is not without challenges, trends like hot desking and flexible working are nothing new and offices have been adapting their spaces accordingly for a number of years. Although there will be more flexible working arrangements moving forward, we still expect the majority of office space to return to near pre-pandemic levels of occupancy during the middle part of the week, plus a greater need from occupiers for more collaboration areas and meeting pods for video conferencing.”
Richard Shepherd-Cross, Managing Director of Custodian Capital and manager of Custodian REIT, said: “No doubt we will see an increase in flexible working, which has been on the rise for a decade, but has now been proved to be both possible and productive. This does not sound the death knell for offices, in fact it makes a good case for having offices, but the occupiers’ priorities will have subtly changed. Rather than simply negotiating rental levels and lease terms, other factors will come to the fore: flexibility of space; flexibility of lease term; environmental performance of the building, from enhanced ventilation through to green energy and low emissions; sustainability of location, access to public transport links; and an acknowledgement that the space must accommodate staff who will combine office time with remote working.”
Suspensions of open-ended property funds
Richard Shepherd-Cross, Managing Director of Custodian Capital and manager of Custodian REIT, said: “Perhaps more important than what has happened will be what happens next. Surely, retail investors will have had their fingers burnt once too often from investing in open-ended property funds. The liquidity promise cannot be met, income returns are not competitive and long-term returns have tended to fall short. Property investment companies should be the natural home for capital looking for real estate returns, over the long-term, accepting there will be short-term volatility. The volatility/liquidity/return trade-off between the two structures should be strongly in favour of the property investment company structure.”
Andrew Bird, Managing Director of Tilstone Partners Limited, investment adviser to Warehouse REIT, said: “It has been well publicised that the open-ended funds have been selling assets to realise capital in order to meet investor redemptions. With a total lack of liquidity in the retail sector and, to a lesser extent, in the office sector, it has been the warehouse assets that have provided the liquidity within these mixed-use portfolios. Having built a track record for speed of executing transactions, Warehouse REIT, through its investment adviser Tilstone Partners Ltd, has benefitted from these willing vendors.”
Richard Moffitt, Chief Executive Officer of Urban Logistics REIT, said: “The dissatisfaction with open-ended property funds is well documented; the appetite from investors for specific specialised vehicles is evident. We are the only pure play in the urban logistics space and that makes us attractive from an investor's standpoint.”
Rent collection – tenants engaging positively with landlords
Richard Shepherd-Cross, Managing Director of Custodian Capital and manager of Custodian REIT, said: “Perhaps the great surprise of the last 12 months has been the extent to which most occupiers engaged positively with landlords to either pay rent or contractually defer rent, despite the government’s moratorium on the eviction of tenants for non-payment. Most landlords of diversified portfolios have recorded rent collection rates of 90% plus, with the majority of the uncollected rent contractually deferred. The challenging sector for rent collection has been retail, in large part due to the prevalent use of company voluntary arrangements (CVAs), aimed squarely at prejudicing the landlords’ contractual position on rent. Happily, there is life beyond a CVA, ideally with a new tenant who respects and values the landlord and tenant relationship.”
Cleaner, greener tomorrow
Ian Cowie dives into the Renewable Energy Infrastructure sector
Green commitments by global leaders to cut pollution and encourage renewable energy could enable investors to clean up and do well by doing good. Like many others who must breathe the air in metropolitan areas, this non-driver sincerely hopes so – but also knows from personal experience how risky green investments can be.
Last month’s Leaders Summit on Climate saw American president Joe Biden fulfil his pledge to bring the world’s biggest economy back into the United Nations (UN) Paris Agreement of 2015, a legally-binding treaty in which 195 other countries agreed to reduce global warming. The summit in April was convened virtually, because of the coronavirus crisis, but its effects could prove real.
Biden noted the “opportunity that addressing climate change provides” to create “millions of good-paying jobs around the world”. He added: “We must ensure that workers who have thrived in yesterday’s and today’s industries have as bright a tomorrow in the new industries.”
China’s leader, Xi Jinping, and Russia’s president, Vladimir Putin, have also expressed concern about carbon emissions and varying views on solar and wind power, to replace fossil fuels such as coal and oil. Coming down from the clouds, investment companies offer individual shareholders the opportunity to make our money matter by investing in cleaner energy.
There are no fewer than 17 different options in the AIC Renewable Energy Infrastructure sector. This has proved one of the most popular investment themes recently. That helped lift constituent companies’ share prices to trade at an average premium of 8.6% to their net asset value after delivering total returns of 5% over the last year, according to independent statisticians Morningstar.
However, performance varies widely. For example, Gresham House Energy Storage (stock market ticker: GRID) delivered total returns of 22% over the last year. NextEnergy Solar (NESF) and Foresight Solar (FSFL) fared less well with a loss of 1% and 0.4% respectively. On a brighter note, NESF and FSFL delivered 34% and 32% positive returns over the last five years, while GRID was only launched in November 2018.
Meanwhile, Ecofin Global Utilities and Infrastructure (EGL), Gore Street Energy Storage (GSF) and US Solar Fund (USF) provide me with exposure to this ecological and economic trend in three different ways. Better still, each enables me to diminish the risk inherent in markets by diversification – or spreading my money over dozens of different assets – with the added advantage of professional stock selection in areas where I scarcely understand the science.
EGL gives global access to solar and wind power, including its most valuable asset, the world's biggest renewable electricity generator, NextEra Energy, alongside more traditional forms of fuel. It has delivered total returns of 26% over the last year, including dividend income of 3.6%, and trades at a small premium of 0.4%.
GSF focusses on Britain and Eire where, with substantial equity backing from the latter's government, it operates industrial-scale batteries needed to smooth out inevitable fluctuations in solar and wind power. Bear in mind we will still want to keep warm when the sun don't shine and the wind won't blow. GSF delivered total returns of 14% over the last year and yields an electrifying 6.7% dividend income.
USF, as its name suggests, focusses on American solar farms and is most likely to benefit from the $1.9 trillion coronavirus relief bill passed by Congress in March and may gain further if Biden succeeds in getting his additional $2 trillion investment in infrastructure approved by the House of Representatives. Either way, USF has delivered total returns of 9% over the last year, including 5.4% dividend income.
Closer to home, Prime Minister Boris Johnson has talked about turning Britain into “the Saudi Arabia of wind”. That would be good for another of my shareholdings, Orsted (ORHE), formerly Danish Oil & Natural Gas (DONG) and now the world’s biggest operator of offshore wind farms. Sad to say, recent news about how the motion of the waves erodes underwater electricity cables has left these shares looking rather sea-sick. Now my modest stake is worth 9% less than I paid.
On a brighter note, ITM Power (ITM), a Sheffield-based hydrogen-maker that uses wind and solar electricity to split this ‘green gas’ out of water, has done better. I first invested a decade ago at 41p per share before selling at 56p in 2011. More recently, shares I bought for £1.25 in January 2020 currently trade at £5.19. Even so, individual companies remain riskier than diversified portfolios with professionally managed stock selection. So most of my investment in renewable energy is via investment companies.
Biden, Jinping, Johnson and Putin don’t agree about many things but all seem to be singing from the same book on climate change. Although some of the concepts are complex, I suspect we will hear more about them as we get closer to the UN Climate Change Conference, COP26, in Glasgow next November. Now is the time to notice which way the wind is blowing and invest for a cleaner, greener tomorrow.
On their toes
Kyle Caldwell explains the importance of investment company continuation votes
A lot is written about the various characteristics of investment companies that enable them to work in the best interests of shareholders; one less obvious but particularly topical is the ‘continuation vote’.
Strategic Equity Capital successfully fended off a continuation vote in late March that had been called by two rebel shareholders, Ian Armitage and Jonathan Morgan. The duo, who own 7.7% of Strategic Equity Capital, called for the company to be wound up, criticising the performance and persistently wide discount.
Shareholders, however, did not side with the rebels. A substantial majority of 82% of votes cast were in favour of the trust continuing. But, while the duo lost the battle, the fact that Strategic Equity Capital’s board granted a continuation vote at their behest highlights why these votes are a good thing for shareholders, and indeed are another structural advantage that sets investment companies apart from open-ended funds.
Continuation votes keep an investment company's board on its toes, as shareholders can come together at any time and demand a vote on whether the company should be wound up if they are unhappy with the way it is being managed.
Unlike funds, investment company boards have the power to sack the fund management group. This is a positive thing for shareholders, as it means boards can actually take action if they are dissatisfied with performance or feel the trust is not being managed in line with its investment objectives.
But if shareholders are disgruntled with performance or another matter, such as the company trading on a persistently wide discount, continuation votes – even if unsuccessful – can force boards into action in order to avoid the prospect of the trust closing down.
Following Strategic Equity Capital’s continuation vote, for example, the board pledged to look into ways to address its wide discount. The company has a continuation vote each year, so its shareholders will no doubt be keeping a close eye on developments.
Continuation votes are a permanent feature for some companies, occurring once a year or every two, three, five or seven years. James Carthew, head of investment company research at QuotedData, points out that many new investment companies are established with continuation votes built into the structure.
This is a useful tool, notes Carthew, given that “investment remits can go in and out of fashion”. He adds: “Normally continuation votes are designed to give the manager and the investment company time to prove themselves before investors think about pulling the plug.”
In other cases, a continuation vote is triggered if a company persistently performs poorly or has traded on a wide discount for long periods. The former, of course, can lead to the latter.
Last year, Aberdeen Japan and India Capital Growth both had continuation votes initiated. Aberdeen Japan's was the result of its wide discount and India Capital Growth's was triggered by performance. In both cases, shareholders voted in favour of the companies continuing.
Continuation votes, asking shareholders if they want the company to continue, are designed to pass or fail on a simple majority. The vote will fail if holders of more than half of the shares want to shut down the trust.
The next step may be a merger with another investment company, the adoption of a new investment remit or a full-scale liquidation, points out Carthew. “Each of these needs another shareholder vote, but while the former two can again be approved by a simple majority, a liquidation vote needs to be approved by holders of 75% of the shares voted,” he says.
While most boards encourage shareholders to keep the company alive, there are past examples of shareholders being urged to vote to wind up the company. JP Morgan Brazil was a recent example last November, and the board had its wish granted as the trust was liquidated.
Carthew concludes: “Continuation votes are generally a good thing and a good way of ensuring that investment companies stay relevant. Sacking the fund manager is not the ultimate sanction for an investment company that is unloved and struggling to perform. A failing investment company also has the option of pressing the self-destruct button – selling off its investments and handing the cash back to investors.”