How to drive up your share price

aroominyork

[FONT=&quot]1) [/FONT]Launch an investment platform, let’s call it Bargeaves Handsdown
[FONT=&quot]2) [/FONT]See one of the country’s biggest name investors, let’s call him Mick Grain, make your platform one of the top holdings in his UK Equity fund
[FONT=&quot]3) [/FONT]Display an ‘ongoing saving’ on the fund’s AMC, telling your customers you have “negotiated exceptionally-low ongoing fund charges” for your clients although the same class is available on other platforms with the same lower AMC
[FONT=&quot]4) [/FONT]Promote Mick on your home page as “the UK’s answer to Warren Buffett”

What could be easier!

bowlhead99

I doubt that having a manager bio of Train or Woodford or anyone else from time to time is going to 'drive up your stock price'. However, it would be true to say that as they have been doing such advertorial for years, if they suddenly stopped it and made customers do their own 'research' while still charging almost half a percent of assets per year for looking after their customers' funds, they would probably see outflows and a consequential share price decline.

aroominyork wrote: »

[FONT=&quot]1) [/FONT]Launch an investment platform, let’s call it Bargeaves Handsdown

What could be easier!

The difficult part is really step 1 - launch an investment service and grow it into the biggest DIY platform over a period of thirty plus years. I expect a lot of things could be easier than doing that.

aroominyork wrote: »

[FONT=&quot]3) [/FONT]Display an ‘ongoing saving’ on the fund’s AMC, telling your customers you have “negotiated exceptionally-low ongoing fund charges” for your clients although the same class is available on other platforms with the same lower AMC

For your point 3, what proportion of online DIY platforms carry the lower-fee class D? How many can you list?

They do indeed have a lower charge than most, for that particular fund which they promote; it's their reward for being able to offer LT a reliable flow of new investor money, and helps their investors be able to stomach the high HL platform fees. Cannier investors with larger amounts invested might prefer to use a platform charging less for administration so they could afford the 0.2% extra on the fund fees on that particular holding and make overall savings on their portfolio from the other funds they hold which have no price differential.

Other funds with successful managers at the helm don't use HL to promote themselves so much, as they feel the mechanics of giving HL customers a nice exclusive discount is just handing over their hard-earned management fee for generating the actual profits, to allow HL to get away with a big fee for placement and administration.

e.g. Terry Smith of Fundsmith likes to hold a relatively concentrated portfolio with low churn (like Train and Buffett) and is as outspoken as Buffett. When asked at his annual investor meetings about the merits of raising funds that way, he says that demands from such platforms swing the fee income too far towards the administrator / distribution channel and away from the investment decision makers. So, he doesn't give them a discount and doesn't get the nice reviews and inclusion in the marketing lists etc.

aroominyork

In his interview on the HL site, Train talks about brands with decades or preferably centuries of history and where there are strong barriers to entry. It’s interesting that Train see HL as fitting these criteria (though I hear what you say about 30 years) and being set up to have the kind of long-term market domination he looks for in his holdings. FWIW, HL’s share price peaked at the end of 2013.

bowlhead99 wrote: »

what proportion of online DIY platforms carry the lower-fee class D? How many can you list?

I only checked a couple; it is on iii.co.uk. How does this work? Does the fund manager have to agree to a platform selling a specific class? I assumed any platform could sell any class of any fund.

greenglide

Is the discount not paid to the platform and then credited to the investors account rather than discounting the fees directly?

I noticed this in Fidelity whereby the "fund managers discount" is showing as a credit against the platform fees. Having said that I havent managed to work out which fund the discount is from - Fidelity doesnt tell you!

aroominyork

This is where HL are not transparent until you read the caveats and small print. It's not a discount on a standard unit; it's a lower charge unit which HL and some other platforms (eg iii - see above) sell. I hold four funds with HL where there is a so-called discounted rate; for only one of them (Baring Europe Select) is it a 'genuine' discount which is credited to my account.

Is it credited to the platform and then passed to the investor? I assume so but do not know.

ColdIron

Depends on the fund and platform. For instance HL carry the B class of EdenTree Higher Income with an OCF of 0.79% but have a discount (loyalty bonus) of 0.35% which is credited to your account as cash so the net charge is 0.44%. Others such as Woodford's Income Focus are a mixture of a loyalty bonus of 0.05% on top of the Z class at 0.65% to give 0.60%. Other platforms may offer his C class at 0.75% OCF

bowlhead99

aroominyork wrote: »

In his interview on the HL site, Train talks about brands with decades or preferably centuries of history and where there are strong barriers to entry. It’s interesting that Train see HL as fitting these criteria (though I hear what you say about 30 years) and being set up to have the kind of long-term market domination he looks for in his holdings. FWIW, HL’s share price peaked at the end of 2013.

I thought HL's share price was higher than end of 2013 during 2014 and 2015 when it went over £15? Still, it has paid the best part of a quid of dividends since 2013, possibly more than a quid once the next divi (currently embedded in the price) is paid.

They mentioned recently that they won't pay a special dividend this year because they are looking at regulatory capital requirements which have increased over the years with regulations and their assets under management. They're going to retain an extra fifty million quid for it. That's an example of a barrier to entry and why you aren't going to set up a competitor with a huge customer base overnight. Of course there will always be threats in any industry and HL aren't impervious.

I only checked a couple; it is on iii.co.uk.

I don't think you've seen the special D class with the 0.2% lower management fee available on iii. I just clicked 'Fund search' then 'By Fund manager' and you only get the normal clean retail versions of the Global and UK funds.

If you do a general search on ii or trustnet then yes you can find the D class. But that's because they are listing it along with other things they don't offer, for research purposes. iii was a research and discussion site long before they had a competitive credible platform to buy via their own site. There isn't a button to buy or sell (well, there is, but it's greyed out, unlike the normal / class B version of the fund).

How does this work? Does the fund manager have to agree to a platform selling a specific class? I assumed any platform could sell any class of any fund.

No, any platform can't in practice sell any class of any fund. To exclude small ticket investors or platforms, the manager can specify minimum criteria for holdings and top ups, eg an arbitrary minimum £2m or £100m or whatever, to be able to buy into the class - and perhaps then waive some of the limits at his discretion to preserve access for the groups with which he's negotiated a special deal.

aroominyork wrote: »

This is where HL are not transparent until you read the caveats and small print. It's not a discount on a standard unit; it's a lower charge unit which HL and some other platforms (eg iii - see above) sell.

In the case of the LT fund it is indeed a lower charge unit. You simply have access to a fund class which is not so costly to run (due to lower manager fees) and has a lower OCF. Which you don't get by going to ii, TD, AJB, Fidelity, Halifax etc. To all intents and purposes it's a discount on a standard unit that you've got by going to HL.

You could instead go to Fidelity who offer a lower discount (likewise promoting the LT UK fund within their "select 50" marketing list) but they have a lower platform fee so total price is almost as good; or AJB who offer just the standard class without discount but have an even lower platform fee so total price is just as good as HL; or someone else who offers no discount at all but a flat platform fee so can be cheaper all in.

Is it credited to the platform and then passed to the investor? I assume so but do not know.

If it is a cheaper class then your fund assets take a lower reduction for operating costs and end up with a better NAV, and nothing needs to be passed on. If it's a straight marketing discount offered by the platform, you pay full price for the fund in terms of NAV-based charge per unit, and suffer the same expenses within the fund as the other investors on that standard published pricing, but the platform operator will just pay you your rebate or kickback or bonus as an income on the side. If it's a mix, as Coldiron mentioned for Woodford via HL, it's a bit of both.

aroominyork

As ever, reading bowlhead makes me realise how little I know. Which is quite scary for a newbie DIY investor!

badger09

aroominyork wrote: »

As ever, reading bowlhead makes me realise how little I know. Which is quite scary for a newbie DIY investor!

Sounds like you've reached stage 2: Conscious Incompetence. :T

https://en.wikipedia.org/wiki/Four_stages_of_competence#/media/File:Competence_Hierarchy_adapted_from_Noel_Burch_by_Igor_Kokcharov.svg

Onwards & upwards:p

aroominyork

badger09 wrote: »

Sounds like you've reached stage 2: Conscious Incompetence.

Donald Rumsfeld was ridiculed for talking about unknown unknowns, but it was possibly the most sensible thing that came out of his mouth.

Anyway, I've now had c.£200k invested for about a month and it's gone up about 1.5% so what could possibly go wrong :rotfl:

Malthusian

aroominyork wrote: »

Donald Rumsfeld was ridiculed for talking about unknown unknowns, but it was possibly the most sensible thing that came out of his mouth.

Yes, it's up there with "when the seagulls follow the trawler, it's because they expect sardines to be thrown into the sea" - an excellent aphorism which snobs dismiss as the ramblings of an idiot purely because of who said it, betraying their own idiocy.