BR Report 2019

19 18 SECTOR ANALYSIS STATISTICAL ANALYSIS OF OPEN BR OFFERS As of 13 March 2019, there were 60 open BR offers. With 62 open offers in March 2018, the market has remained stable. In the year to March 2019, four new BR offers launched. Capital preservation stands firm and growth grows The proportion of offers including a capital preservation element remains at 45%, the same as offers open in March 2018. The proportional drop in capital preservation and income offers from 12.9% to 8.33% means that almost 92% of offers (a 5% increase) now have a growth element. Generalist growth The BR market is slowly moving away from specific industry sector focus. While this can partially be attributed to the growth in AIM-based offers over recent years, this year, the balance between AIM and non- AIM offers (52% AIM and 48% non-AIM) largely mirrors last year. Perhaps having a broad range of investment opportunities reflects the need for diversification in uncertain times. Financial services offers remain a strong sector with 16.7% of the market, an increase from 14.5% last year. These companies are mainly involved in making loans, usually with asset-backing. It’s possible that, in the current turbulent times with increasingly risk averse banks, this could continue to be an expanding BR sector. On the other hand, the presence of offers specifically targeting energy generation and industry and infrastructure has dropped, from 6.5% to 3.3% and 11.3% to 1.7% respectively. CHARGES BR fees and charges may not all be immediately obvious and, as well as the level of fees charged, the type of fees themselves varies. This makes it important to consolidate all fees and charges to get a clear picture of overall charges and to achieve like- for-like comparisons. Questions advisers should know the answers to before recommending a particular BR offer to their clients include: How much of the subscription amount is going to underlying companies and is available for BR tax relief? How much of the subscription amount is going to underlying companies to generate growth and income? Are some fees being charged to underlying companies rather than investors? Small shifts in one area compensated by adjustments in another While the proportion of offers charging each of the different fees has remained similar to last year, where there is a change in one category of fees, it is often offset by a shift in another. For example, the proportion of offers applying an initial charge has dropped by 3% since last year. But the proportion charging an initial deal fee has increased by 3% in the same period. A more meaningful change has taken place for exit deal fees. 55% of offers applied these a year ago, whereas only 48% do today. But, the percentage that apply the other potential exit charge - the exit performance fee - is unchanged. CAPITAL PRESERVATION & INCOME CAPITAL PRESERVATION & GROWTH GROWTH GROWTH & INCOME OPEN OFFERS BY INVESTMENT STRATEGY For more analysis of the underlying sectors BR managers are investing in, go to the Sector Focus section of Considerations for investment on page 30. GENERALIST BR OFFERS AS % OF THE MARKET NUMBER OF OFFERS THAT CHARGE EACH FEE TOTAL INITIAL CHARGE TOTAL INITIAL DEAL FEE TOTAL AMC TOTAL PERF FEE ANNUAL PERF FEE ANNUAL PERF HURDLE EXIT PERF HURDLE EXIT DEAL FEE TOTAL ANNUAL ADMIN FEE 63% 43% 98% 8% 5% 15% 0% 48% 32% 0 30 10 40 60 20 50 70 “Advisers are rightly questioning the level of underlying holdings that a provider has and how this translates to liquidity should substantial withdrawals be necessary.” — BELINDA THOMAS, HEAD OF SALES AND INVESTOR RELATIONS, TRIPLE POINT 2017 2018 2019 77% 66% 63% 33.33% 21.67% 8.33% 36.67% Data provided by MICAP.com Market Update / Sector Analysis