THE MONTHLY November 2019

The trade-off in the risk/reward for gold and gold mining equities is improving, as central banks push the current iteration of the post-World War II Bretton Woods financial order towards its limits.

9%+ yield in uncertain times

In this note, we remind investors of Volta’s many attractions, and examine what would be required for the Volta 9%+ yield to be seriously threatened. We note the broad diversification of underlying cashflows, the consistency of income and monthly returns, and the manager’s excellent track record. We also explore the business dynamics in a downturn and how investor sentiment may be less volatile with increased cov-lite documentation. The discount appears anomalous relative to peers given Volta’s track record and the issues identified above.

THE MONTHLY October 2019

Since their privatisation in 1989, the 10 water companies have faced a periodic review every five years; it is undertaken by Ofwat, and prescribes customer prices, along with the investment requirements. As part of the ongoing review, PR19, Ofwat will publish its Final Determination numbers on 11 December 2019; they will apply as from April 2020, although water companies do have the option to seek a reference to the CMA.

THE MONTHLY September 2019

The challenges associated with value creation drive all investors. Any investment professional is eager to make their mark by picking organisations that are able to deliver superior returns. Increasingly investors look into how organisations are governed and how effective the top decision-making bodies of organisations really are. In this white paper, we shed light on research findings and reveal the seven hallmarks of effective boards. The seven hallmarks are proven to create more effective boards and are set to be the next lever in the value creation process. Better Boards has created advanced board evaluation tools designed to motivate and inspire and above all, contribute to superior value creation.

THE MONTHLY August 2019

The introduction of IFRS 2 in 2004 generated considerable debate about the best approach for handling ‘share-based payments’ (SBP). While it is clearly a cost to shareholders, which should be included in the statutory reporting lines through the P&L account, the question arose as to whetherit should be part of our underlying EBIT calculation.

THE MONTHLY July 2019

When advisers first start looking at business relief (BR) products, there is much to take in: the rules governing such products; the investment strategies being used; and what the investment risk is. It is easy to lose sight of the fact that, for non-AIM products, the investment is being made directly into a company or partnership, rather than a fund. It is, therefore, essential that governance is part of the diligence process.

Manager’s Hardman & Co Forum presentation

Serge Demay, from Fund Manager AXA IM, gave an investor presentation at the Hardman & Co 17 June 2019 Forum (video https://www.hardmanandco.com/juneinvestor-forum/). We produced a short note for this event, Volta Finance: 9% yield from diversified corporate loan portfolio. In this report, we address the questions that were raised at both the Forum and in the one-on-one discussions our analyst had with attendees post the event. The bias was on credit and how the portfolio may optimise returns if the expected gentle economic deterioration happens.

THE MONTHLY June 2019

The Monthly May 2019

How small- and mid-cap quoted companies make a substantial contribution to markets, employment and tax revenues.

The Monthly April 2019

Although the focus of Hardman & Co is predominantly on companies in the smallto mid-sized market capitalisation range, when writing research reports, it is important to position them relative to the industry in which they operate. Apart from Japanese companies, all the major global pharmaceutical companies have reported full-year results for 2018 over the past few weeks; therefore, we have taken the opportunity to update our industry database and generate the first cut of global rankings for 2018. For an industry that requires a long investment cycle – it still takes, on average, 10 years from discovery to launch of a new drug – decisions made many years ago have important consequences on current financial results. Therefore, looking back at operational performance over 20 years reveals how different company strategies have panned out.

Manager’s March 2019 presentation

Serge Demay, from Fund Manager AXA IM, gave an investor presentation on 7 March. Key takeaways were: (i) Flexible mandate means it can exploit whichever element of the CLO market offers the best opportunity. This is likely to see further allocations to CLO equity tranches in the near term. (ii) The credit cycle is likely to turn but this should be gentle and create re-investment opportunities. (iii) The flexible mandate means the portfolio can be quickly re-positioned if market conditions change. The management and board experienced the financial crisis.