BR report 2018

48 49 WHERE ARE YOU INVESTING? HOW STRONG IS YOUR DEAL PIPELINE AND WHAT ARE THE MOST INTERESTING AND EXCITING INVESTMENTS IN YOUR PORTFOLIO? DB: We’re investing in property development lending, asset-backed lending and bridging finance. Another sector we are investing into is renewable energy, including solar and wind energy. Our investments are UK based and we’ve got a strong pipeline through our relationships with brokers and developers around the country. We’re looking to ramp up the volume in 2018. Recently, we’ve agreed terms with a large wind farm which is operational, and it’s already evidenced a really strong level of risk adjusted return. Probably the most exciting project, where we’ve worked with a strong developer in the north of England, is a historic building which is being converted into a hotel. What was so appealing to us was that the local authorities were really supportive of the development, because it’s creating jobs and revenues for the local economy. SH: We are primarily focused on asset backed lending. Ingenious is known for being a leader in the creative industries and our media team is well renowned. Whilst equally strong and experienced, our Infrastructure and Real Estate teams have kept a lower profile but that is about to change with Ingenious Real Estate recently nominated for Residential Financier of the Year at the RESI Awards 2018 alongside two banks who are well known globally. The teams’ deep sector experience, combined with the scale of Ingenious, enable them to work with the highest calibre partners and source strong deals in each of the areas we work. A great example of this would be ‘Britannia’, a very high profile series recently aired on Sky, and a joint venture between Sky and Amazon. The media team provided a loan for the production of the series. This was a successful project for Sky and Amazon and it has now been commissioned for a second series. A minor holding in real assets can be useful, particularly in the renewables space where long term revenues can add value to the portfolio. However, volatility in wholesale energy prices in turn can lead to fluctuating asset values, which isn’t great for those looking to preserve wealth for their beneficiaries, so the Infrastructure team are leading the way by looking towards Power Purchase Agreements to provide more stability, and move away from the typical subsidies driven renewables model used by others. SM: On the unlisted side, we are the trading adviser to a company called Puma Heritage, which is a first- charge lender and its trading strategy is lending only. Heritage lends only against real estate assets. Puma Heritage’s pipeline is very strong at the moment – so strong that in the first three months of 2018 we turned down over £500m of new lending opportunities. The fact that Puma Heritage’s lending is first charge only at conservative loan-to-value ratios makes it hard to say that its trade is anything other than simple and unexciting! It has just been repaid on a loan to finance INDUSTRY ROUNDTABLE MARKET DISCUSSION ATTENDEES MODERATOR: JOHN SCHAFFER INTELLIGENT PARTNERSHIP JOHN SCHAFFER INTELLIGENT PARTNERSHIP DOMINIQUE BUTTERS (DB) BLACKFINCH LAURENCE CALLCUT (LC) DOWNING SIMON HARRYMAN (SH) INGENIOUS SAM JERMY (SJ) TIME INVESTMENTS BELINDA THOMAS (BT) TRIPLE POINT SAM McARTHUR (SM) PUMA INVESTMENTS JESSICA FRANKS (JF) OCTOPUS INVESTMENTS “One of the most exciting elements to our AIM service is that it is listed on three of the leading wrap platforms, and has been for quite a while now. We believe that an increasing number of advisers want to keep their clients’ assets on platforms, which is where a lot of people’s pension assets are already.” — SAM McARTHUR, PUMA INVESTMENTS the development of a new Ibis Budget hotel at Luton airport – one of the closest to the terminal building. On the quoted side, we run an AIM IHT service, whereby we have a model portfolio of around 20 BR qualifying stocks, and clients can access via the Investment Director’s model portfolio. Clients have their own accounts, and they get the same stocks in the same proportion as the model portfolio. If the Investment Director’s model portfolio trades out of one position, then everyone trades out of the same position. One of the most exciting elements to our AIM service is that it is listed on three of the leading wrap platforms, and has been for quite a while now. We believe that an increasing number of advisers want to keep their clients’ assets on platforms, which is where a lot of people’s pension assets are already. SJ: Our asset focused BR service is spread across seven different sectors which include renewables, property lending, storage and forestry. The deal flow is strong across the board. We are conducting due diligence in all seven sectors and typically turning down four out of five deals that we’re reviewing. From the perspective of what’s exciting, we have a biomass plant which is becoming operational in 2018 located in Perthshire, Scotland, which will use locally sourced wood as fuel to generate heat and power. It’s a base load power plant, meaning it generates power continuously. We view this as a really strong complement in terms of diversification across renewables assets, which also include solar, wind and hydro within the portfolio. We launched our AIM service in November 2016. It’s a unique proposition in the market as it uses a smart passive stock selection process. It runs on quantitative filters and screens the AIM universe, filtering out any companies that don’t qualify for BR, but also specifically focused on companies that exhibit lower volatility. It’s effectively a low beta investment philosophy. We typically invest into 30 stocks, so it’s well diversified and we are targeting the largest businesses by market cap (that fit the criteria). Our unique approach enables us to offer this service at around half the annual management fee of many of the traditional AIM BR fund managers. BT: It’s been the same since 2006 when we started investing. We are leasing and lending specialists. Our Estate Planning Service gives access to two companies; TP Leasing Ltd, which carries out leasing, lending and infrastructure financing within the public sector and corporates. And Navigator Trading Ltd, which is a leasing and lending business to a wide range of UK based SMEs, lending against business critical assets such as credit card terminals, some residential property, but also providing short-term working capital and other loans to businesses. The deal pipeline is particularly strong, we recently carried out a rights issue, as both companies had interesting opportunities being presented to them, and they didn’t have sufficient capital to take them up. We have many interesting and unique holdings in our two companies, a highlight for me in TP Leasing Ltd, is the leasing of mammography equipment. This benefits from being with an NHS Trust, a strong, credit worthy counterparty. The equipment is required to deliver an essential service enabling a higher number of patients to be seen, but also as the resolution on the x-ray is clearer, they’re able to give a far more accurate diagnosis. One of the more interesting holdings in TP Leasing Ltd is the leasing of mammography equipment. This benefits from being with an NHS Trust, a strong, creditworthy counterparty. The equipment is required to deliver an essential service enabling a higher number of patients to be seen, but also as the resolution on the x-ray is clearer, they’re able to give a far more accurate diagnosis. JF: For our Octopus Inheritance Tax Service, there is little new to report – typical for this product. What we’re targeting is sectors capable of delivering long- term, predictable growth. Therefore, we only invest in sectors that we understand really well, where we can build a large, experienced, sector focused team that are experts in their field. Our portfolio team currently deploy funds that are managed by our energy team, property lending team, or our healthcare property team. We have around 50 sector specialists JOHN SCHAFFER DOMINIQUE BUTTERS LAURENCE CALLCUT SIMON HARRYMAN SAM McARTHUR JESSICA FRANKS BELINDA THOMAS SAM JERMY “The higher proportion of the business is going into our unquoted product, the Downing Estate Planning Service. We believe that’s because people perceive it as being a less volatile than an AIM portfolio. It’s the steadier returns that are attractive to people.” — LAURENCE CALLCUT, DOWNING