“Remind me of your ‘strategy’ again?” I whispered to the chairman of the insignificantly sized investment company TwoHoots Asset Management, when I saw him at The Lang Cat’s conference the other day. We were hiding in the gallery above the main auditorium where most of the other delegates – segregated into two camps, depending on whether they were ‘adviser’ or ‘industry’ – were involved in a protracted game of heads-or-tails.
“Don’t think I didn’t hear those inverted commas in your sneery tone,” he whispered back. “My strategy is, very simply, to put a reassuring arm around the collective shoulder of His Majesty’s investment trust sector and gently usher it into the 21st Century.” “By buying big stakes in a bunch of random trusts and suggesting their assets end up in your new open-ended fund?” I said. “What’s it called – Azbo?”
“You’re sneering again,” the chairman sighed. “I’ll have you know that name is appropriately disruptive and edgy. Or ‘kick-az’, which seems to amuse the TwoHoots marketeers. And I’ll also have you know there is nothing random about my choice of targets – they were strategically chosen as very much the first trusts in which my brokers could build up near-but-not-quite-controlling stakes.”
“So in no way is this an azzet … sorry, asset-grab for your nascent business?” I asked. “How dare you!” the chairman exploded – attracting disapproving looks from nearby conference delegates, who were still absorbed by the heads-or-tails drama playing out below us. “Just what is going on down there?” the chairman hissed irritably. “I believe it’s got something to do with the conference’s theme of ‘Divide and conquer’,” I replied.
“I’m just not entirely convinced that charging in like a toddler mainlining Sunny Delight – while admittedly very zeitgeisty – is the way to go.
NAV-shaming
“Everybody stands up, indicates their choice of ‘heads’ or ‘tails’ by placing their hands accordingly, a coin is tossed on-stage and anyone who calls wrong sits down. While we have been chatting, a positively Stoppardian run of ‘heads’ has whittled the audience down to the current handful and I believe a representative from each of the ‘adviser’ and ‘industry’ camps will ultimately face off on-stage for the prize of a bottle of decent scotch.”
“How extraordinary,” said the chairman, shaking his head. “And what will that prove exactly?” “I’m not sure,” I shrugged. “Aside from what we’ve known for years – that people in this business will do anything for the chance of free booze. Moving back to your Azbo project, though, now all your target trusts have voted down your proposals, will you be having a rethink?”
“Oh, it’s like we’ve never met,” the chairman sighed theatrically. “No – the only thing I’ve yet to decide is whether I go back to the original trusts with new proposals or, since they clearly don’t know a good thing when it hits them in the face with a requisition notice, spread the love elsewhere.” “So let me get this straight,” I said. “You’ve been NAV-shaming these trusts and their boards for poor value and chunky discounts, right?”
Tough love
“It’s merely the truth,” the chairman smiled piously. “OK,” I nodded. “But then you distract them with expensive and time-consuming EGMS and, now things haven’t gone your way, you may end up selling your stakes, pushing up the discounts and hobbling performance?” “Tough love,” the chairman sighed. “Just out of interest,” I said, “whenever you say you want to wind up a trust, what exactly do you mean by ‘wind up’?”
“Yes, yes – very funny,” replied the chairman. “Look – are you seriously suggesting the investment trust sector couldn’t stand to up its game a little?” “Of course not,” I conceded. “I’m just not entirely convinced that charging in like a toddler mainlining Sunny Delight – while admittedly very zeitgeisty – is the way to go. Still, perhaps you’ll end up provoking some change after all – even if it’s not necessarily what you intended.
“I mean, forget ‘Divide and conquer’ – you seem to have pulled off ‘Aggravate and unite’. Oh look – the lady representing the adviser camp just won the bottle of scotch.” “Interesting,” nodded the chairman. “Both she and the chap representing the ‘industry’ wanted to call ‘heads’ but he gallantly let her have her call. So, let’s see … industry lets advisers have their way and ends up with nothing. Tell me, what should we be reading into that?”
