Download - Pristine Advisers Investment Quarterly Newsletter · 2017-04-04 · 10 Pristine Advisers Investment Quarterly Newsletter Mexico’s Emerging Market More Attractive Than You Think

In this Issue: July 2016 Equus Total Return Fund Investment Approach

Aberdeen: Global Emerging Markets: Broad Universe, Bright Poten al Brookfield: A Case for Global Listed Infrastructure Video Collec on Mexico’s Emerging Market: More than you think Hedging Global Water Risk Asia Pacific Stocks Rise This Week as U.S. Growth Outlook Con nues to Look Solid Great Fund Managers Know the Power of Being Great Explainers Webinar Recap: Let’s Talk About IR & PR in the Investment Community China Region Stabilizes, CEF JFC Reaps The Rewards Inves ng In China, Easier Said Than Done Closed End Fund ‐How to Invest & How to Educate Investment Community Closed‐End Equity Funds: Unlocking Value Through Shareholder Ac vism Prospect Capital Corpora on Past Webinars SAVE THE DATE Client Recogni on Pris ne Advisers: Award Winning Services Best Investment Fund Marketer

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Equus Total Return Fund Investment Approach

The approach Equus Total Return Fund takes is pre y basic. The goal is to invest

in small and midsized companies that have poten al. However, the Fund has

had to endure a trying period in recent years. In 2011, a move to invest in

Energy especially oil and gas seemed to be a wise decision but then the prices of

oil plummeted. There has been a sudden improvement with prices hovering

above the $50 a barrel but it’s not easy to discount the impact plumme ng oil

prices have had on Equus Total Return Fund.

A merger with MVC Capital LLC was also ini ated in 2014 but with the collapse

of the private equity market, the deal stalled. All this is simply down to bad luck

but the great thing is that these investments can s ll pull through. Oil and gas

prices are definitely on the rise and there is hope they will con nue the

trajectory. The Funds current stock price is trading at a significant discount to

NAV so there is s ll a lot of upside poten al. In addi on to this, financial results

for Pallet One, Inc on a 12 year range were significantly improved. All this

factors provide a ray of hope for the Fund and clearly things are looking up.

Final Thoughts……

Equus Total Return Fund is an investment vehicle primarily designed for value

investors. The company’s investments so far are looking like they will pay of

especially Equus Energy and Pallet One. But if you are looking for long term

gains while inves ng in high poten al asset rich companies, Equus Total Return

Fund is the perfect vehicle to unlock this value.

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Follow the link below to continue reading

sections II and III

A Case for Global Listed Infrastructure

CONTACT US

Telephone: 1-855-777-8001

Email: [email protected]

Or visit our website at www.brookfieldim.com

© 2016 Brookfield Investment Management Inc.

#CEF IPOs are evolving to help manage discounts and a ract #investors

VIDEO: h ps://www.youtube.com/watch?v=ouyYnvXA3ZE

Retail investors con nue to account for most of the ac vity in the closed‐end fund market, say industry professionals

VIDEO: h ps://www.youtube.com/watch?v=4zjwxUZCJUo

CEF discounts have narrowed but remain rela vely a rac ve, especially in some areas, according to industry professionals.

VIDEO: h ps://www.youtube.com/watch?v=i‐wK31Px_Rk

https://www.brookfieldim.com/_Global/49/img/content/A%20Case%20for%20Global%20Listed%20Infrastructure%20-%20%20June%202016%20-%20website%20version.pdf

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Pristine Advisers Investment Quarterly Newsletter Mexico’s Emerging Market

More Attractive Than You Think

Emerging markets are an a rac ve investment as they can offer the possibility of greater returns over me when

compared to more established markets. They also offer more risk but this does not mean they have to be risky. Many

emerging markets have been able to weather the storm of slow global growth and geopoli cal turmoil and Mexico is

one of them. This may seem counter intui ve, the media likes to portray the country as a hot bed of drug trafficking

and poverty, but reforms made since the elec on of Enrique Pena Nieto have gone a long way towards establishing the

country as a rising star in the global economy. Along with changes in how the energy and telecommunica ons are run,

trade agreements with more than 45 countries and a higher rate of produc vity than seen in other parts of the world

are eleva ng the slogan “made in Mexico” to a posi on of prominence. Along the way improving labor condi ons and

a growing wage base are driving a thriving and growing consumer segment.

Unlike some other investment markets, foreigners are welcome to invest directly in the Bolsa Mexican de Valores, the

Mexican stock exchange. It is also possible to invest in ADR’s on the US exchanges. While both avenues are a rac ve

inves ng in a managed fund may s ll be the best choice. The Mexican economy itself is rela vely stable but the stock

market can see some wicked vola lity making it a tricky environment for the average investor.

One such fund is The Mexico Fund. This is a non‐diversified closed‐end fund focusing on the Mexican stock market and

companies with opera ons in Mexico. The fund was started in 1981 and has been a steady distributor of dividends in

that me. The funds objec ve is long term capital apprecia on, the por olio is typically 80% equi es with 20% fixed

income investment but these numbers may fluctuate due to market condi ons or defensive posi oning as manage‐

ment deems prudent. The investment adviser is Impulsora del Fondo Mexico, S.C. headed by by Mr. Albert Osoria, the

controlling shareholder. Mr. Osorio is also the president and principal execu ve officer of The Mexico Fund, having

risen to that posi on from his former roles as treasurer and senior VP.

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Pristine Advisers Investment Quarterly Newsletter While technically a “non‐diversified” fund The Mexico Funds holdings are fairly well diversified across a number of

sectors focused on prime growth areas in the country. The top five are industrial, consumer discre onary, real

estate, banks and insurance, comprising 66% of por olio value. Rounding out the remainder of the por olio are

investments in energy, informa on technology, u li es and REITS. The top 10 holdings make up just over 60% of

por olio value and include names like Wal Mart de Mexico, Kimberly Clark de Mexico, America Movil (telecom),

Fomento Economico (mul na onal beverage, makes the real sugar Coca Cola) and Cemex (building materials).

The fund pays an annual dividend, distributed quarterly, according to its Managed Distribu on Plan ini ated in 2008.

For those not familiar, an MDP is one of two methods a CEF may distribute dividends. It is a formulaic method which

pays a percentage of income, the other method being a simple flat rate. The Mexico Funds MDP states it will pay a

dividend equal to 6% of the prior years net asset value. So far in fiscal 2016 there have been two distribu ons equal

to an annualized rate near 7% at today’s prices. Distribu ons may come from net investment income, capital gains or

return of capital which is a small worry. As of the most recent fund report directors and managers say there are “no

reasonably foreseeable circumstances that might cause the termina on of the MDP”. To put the dividend into

perspec ve, the fund has paid $50.87 per share in distribu ons since it’s incep on. More than half, $27.25, since the

MDP was adopted.

Net asset value is always important but even more so considering the dividend is ed to it. Historically, NAV for this

fund runs in the range of $18 to $21 depending on market condi ons. As of last repor ng NAV was $18.68, down

from a peak above $30 in 2014 but rela vely steady compared to the life of the fund. The discount to NAV is more

important, it is currently running about ‐12%, well above the 3 year average discount of ‐4% and offering a

substan al savings for new investors seeking to get into the Mexican market. The discount hit a high, above ‐12%,

earlier this year and has been recovering from that peak in recent months so this deal may not last much longer. If

performance holds true to historical trends we can expect the discount to con nue narrowing into the medium and

long term.

Mexico does not get the credit it deserves, at least not when it comes to inves ng. Sure, there are lots of issues

present but when you look beyond the stories media outlets prefer to pursue you will find a vibrantly growing

economy and one bolstered by ongoing reforms. Much of the changes in recent years, if not all, can be laid at the

feet of President Nieto and are expected to last long into the future. These reforms are altering the business and

inves ng environment, allowing more private businesses to enter the market, enhancing compe on between new

and exis ng business, improving global compe veness and strengthening the consumer segment. If you are looking

to get invested in Mexico The Mexico Fund is a great way to do it. The fund outperforms its benchmarks in the short

and long term, it pays a nice dividend and all at an historically substan al discount to NAV. Taken together this

provides an opportunity for capital apprecia on, a narrowing discount and distribu ons to power total returns into

the coming months and years.

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Pristine Advisers Investment Quarterly Newsletter Thomas Schumann Thomas Schumann Capital Water Security Fund

Hedging Global Water Risk

Water is presen ng ever greater risks, along with unprecedented opportuni es, for businesses and for investors that embrace

social and environmental responsibility and long‐term capital apprecia on.

How might investors tap into this a rac ve, emerging, long‐term investment theme?

Water is everywhere but o en not where people need it the most. This presents obvious risks to business, to economies and to

the global market at large. By extension, those risks flow through to investment por olios exposed to business through their

equity exposures, and which are naviga ng an o en vola le economic and market seascape. However, water also presents an

opportunity for investors to mi gate the risks and capitalize opportuni es by inves ng in ini a ves and businesses focused on

water supply, quality, and efficiency.

The World Economic Forum 2016 Global Risks Report iden fied ‘Water Crisis’ as the risk of greatest concern to business leaders

looking at a 10‐year horizon. Five of the top 10 risks for the coming decade are linked to water.

Water impacts investments across asset classes, from stocks across sectors, to real assets such as property and infrastructure, as

well as fixed income such as corporate and government bonds. It impacts infrastructure, in which an es mated $12 trillion of

investment in water will be required over the coming 20 years. Water represents the largest component of global infrastructure

spending over that me period ‐ more than roads, railroads, seaports, and power combined. Water technology, focused on

mee ng the mul tude of needs across the water cycle (including filtra on, disinfec on, metering and tes ng) is set to give rise to

new ventures that will be household brands in the future as they succeed in freeing up supply and addressing demand

Trustee boards must be educated and unified, sharing an agreed belief on how to manage qualita ve risks related to water,

climate change and other environmental impacts. I believe it’s sensible to have a framework for addressing water risks. At the

por olio level, you need to iden fy specific risks/scenarios that threaten a ainment of objec ves and poten ally take ac on to

mi gate. At the strategy level, you need to thoroughly review and monitor exis ng alloca ons for exposure to water risk, then use

the results to engage where necessary. For example, you might review real assets exposure to flood risk. You might also allocate to

high quality strategies focused on the investment opportuni es in water such as:

• Ins tu onal‐quality global equity funds focusing exclusively on water, or on water as one of several key environmental themes

• Hedge funds with proprietary strategies that hedge water risk and adhere to ethical, socially and environmentally responsible

prac ces while producing outperformance.

Just as oil was to the 20th century, water is fast becoming the defining resource and global investment opportunity of the 21st

century with the dis nc on that water is irreplaceable.

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Great Fund Managers Know the Power of Being Great Explainers

Patricia Baronowski‐Schneider President + CEO of Pris ne Advisers

Award Winning ‐ Published ‐ IR/PR, Media Rela ons, Social Media, Capital Raising ‐ 450k contacts and growing

Great Fund Managers Know the Power of Being Great Explainers Is there a subject more complex than astrophysics or its theore cal counterpart? Is there a discipline more dependent on sophis cated mathema cs — equa ons of great length and intricacy — that requires the prac oners of this science, the high priests of this elite order, to translate the symbols and numbers of one language into intelligible material for the masses?

If physicists can do this, and the best among them can do this with ease and eloquence, then why are so many fund managers unable — or unwilling — to do likewise on behalf of the investors they serve and the clients they seek?

In so many words, the answer is hubris.

I write this fact free of malice, and with charity for all, because I want to help these professionals act as the great explainers they can be; the great explainers they must be.

Look no further than the career of Richard Feynman, the Nobel laureate and Caltech professor whose life is a testament to making the cosmos comprehensible to the public.

If he could do that without ci ng a single formula, if he could do that with a conversa onal tone and a sense of excitement, surely a fund manager — with the help of an investor rela ons expert — can do the same within his respec ve domain.

Now is the me to explain what you do.

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China Region Stabilizes, CEF JFC Reaps

JP Morgan China Region Fund managers have long said a stabilization of the

market is all the fund needed to show positive results, and they were right.

China Region Stabilizes, Risks Remain But So Does Opportunity

It has been a few months since China has made any market shaking actions. In fact, there have been very few major

market moving headlines out of the country since the “circuit breaker” fiasco and ousting of financial market regulator

Xiao Gang for his mishandling of the market. In that time the Chinese markets and comthe funds built on them have had

a chance to stabilize. Nowhere is that more evident than with the JP Morgan China Region Fund which has risen more

than 25% since hitting its low in early February. The mainland Chinese Shang Hai index rose only 11.7% in that time,

the Hong Kong Heng Seng index 13.7%.

Risk To China Growth Remain

However, despite the seeming calm in the market there is still quite a bit of risk present, as evidenced by the recent

MSCI decision to keep China out of the emerging market index. Their decision was based on limited accessibility to

mainland markets and the need for an “observation” period to make sure reforms would hold, and perhaps to see if the

country’s regulators would make further missteps. Mainland shares, traded on the Shang Hai and Shenzen stock

exchanges and referred to as “A” shares, are stock in Chinese based companies priced in Renminbi and typically only

purchased or own-able by Chinese nationals. Chin Ping Chia of MSCI had this to say about the China A market . . .

“China A-Shares are too big to be ignored but remain difficult for many institutional investors to access. How can global

investors avoid a stock market that is now the world’s third-largest, with a total market value of nearly USD 4 trillion,

putting it just behind the United States and Japan?” The MSCI is not the only global oriented organization to feel this

way. The IMF has also recently upped its near term forecast for the country, describing it as “more buoyant”, but hedged

that statement by saying mid-term risk remain. Risks associated with rising credit levels, excess capacity and financial

sector risk. The IMF sees the growing level of corporate debt a key fault line... that must be addressed immediately with

a commitment to reforms”. The IMF spokesperson went on to say that China’s economy faces growing vulnerabilities,

and that there is less capacity to deal with them. Treasury Secretary Jack Lew says overcapacity is “corrosive” for

Chinese growth. These sentiments were echoed by Sheng Laiyun of China’s National Bureau of Statistics who said in

response to slowing fixed asset investment “overcapacity and difficulty finding credit financing is keeping private

companies from investing... economic growth momentum needs to be strengthened”. The latest data shows that FAI

grew only 7.4% in the YTD period, versus 10+% in the same period last year.

Looking to the data signs of slowing persist despite the PBOC’s reiteration of the 6.8% GDP growth target for this year.

On the inflation front consumer level inflation slipped to 2% annually in May while exports and imports both fell. Exports

declined by -4.1%, imports by -0.4%, leading the PBOC to predict the 2ndyear of declining exports. The services sector,

long hailed as the key growth driver in China’s changing economy, is also in trouble. The Services PMI, while still above

the expansionary 50 level, fell to a three month low of 51.2. Manufacturing PMI fell as well, dropping to 50.1, showing

the bare minimum of expansion.

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The one ray of hope through all of this is a report last month that China’s government was seeking help from Great

Britain in efforts to create a “super” regulator. The Reuters report cites several sources with inside delegations to

London to observe and study the system there.

JP Morgan’s China Region Fund In A Time Of Uncertainty

The JP Morgan China Region Fund has been making changes to accommodate for the ever changing investment

scene in China. Over the past few months there have been some notable alterations in the portfolio make-up such as a

reduction in exposure to financials (-4.7% in May), an increase in exposure to consumer discretionary (+5.3% in May)

with industrials and most others holding fairly steady. In addition, fund managers have been raising capital at the same

time, up 6.4% from the previous month, in effort to be ready for new investments as the opportunity arises. Likewise,

there has been some changes in where the money is deployed. May saw a 5.3% increase in China/Hong Kong “P”

chips and a -7.0% reduction in Taiwan holdings, and -4.6% reduction in China/Hong Kong “H” shares.

I’ve already mentioned that the fund saw a +25% increase in value over the past 5 months, since China markets hit

bottom in February. This is roughly double the performance of the mainland and Hong Kong markets and example of

management’s expertise in the region. In past updates managers had commented numerous times on the possibilities

of further stimulus, the effects of intervention and the need not so much for increased expansion but simply a

stabilization of markets for the fund to do well. They were right. Forward outlook remains the same, diminishing stimulus

with policy supporting a shit to a consumer driven economy.

“As hopes of a rapid, stimulus fueled macro-economic recovery have diminished, the opportunity in Greater China

should remain in policy or consumer-driven growth markets. A rapid recovery, while positive for cyclical equities in the

short-term,would likely be premised on a continued build-up of debt to unsustainable levels. Moderation should continue

economically, while equities should be supported by a still buoyant liquidity situation and the possibility of greater

foreign participation via either index inclusion or the start of Shenzhen-Hong Kong Connect.”

NAV, Discounts And Opportunity For The Future

Net asset value, and the discount to NAV, have been a bit volatile over the past 12 months due to market volatility in the

underlying region. At the height of the China scare NAV had declined nearly 50%, not surprising give the +40% drop in

the value of Chinese equities, and produced a discount to NAV of nearly -20%, an historic low. This discount proved to

be a prime entry for shareholders as it has been reduced by half in the recent months. As of last check the discount was

closer to -10% and in line with historical averages but this does not mean opportunity does not still exist, in fact, based

on some recent developments, the opportunity for shareholders may be better than ever.

The board of directors is pursuing a program to further reduce the funds discount to NAV. The proposals, which may

result in an increase to the funds size, repurchasing shares at or close to NAV and other means of returning

shareholder value. The proposals are due in part to advice from the funds investment adviser, JF International

Management, INC. who believes them to be in the best interest of shareholders. The plan is not yet implemented

though, subject to shareholder approval at the twice postponed annual meeting. The meeting was postponed due to

lack of quorum.

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Pristine Advisers Investment Quarterly Newsletter Investing In China, Easier Said Than Done

China is one of the fastest growing regions in Asia and an excellent opportunity for investors, if you have access to the

market.

A Quick Guide To Investing In China

China is a large, diverse economy with a healthy industrial sector and rapidly growing consumer base. Over the past few

years economic growth has slowed, from over 10% to just under 7%, yet remains one of the bright spots of the investing

world. The only thing holding back more robust investment in the region is incredibly tight regulation and limited access to

the stock market. Access is not denied to citizens of China but, depending on where you are and how the company you

wish to invest in does business, it is denied to most foreigners. The biggest obstacle to investing in China is the fractured

nature of the market. There are at least 5 different classifications of Chinese stocks, not counting the domestic Hong Kong

market and Taiwan. Needless to say this makes investing in the region very difficult for experienced managers, much

more so for the average investor.

Chinese “A” Shares – These are what might be considered the standard run of Chinese stock. These companies are

located in China, traded on the mainland exchanges, priced in renminbi and typically only available to locals. The average

foreign investor has no access to this market, one of the biggest criticisms of the Chinese financial system.

Chinese “B” Shares – These are an off-shoot of “A” shares. They represent the same companies as “A” shares but are

priced in dollars and available to foreign investment without the restrictions placed on “A” shares. The problem with “B”

market is that it has not caught attention of the global investment community, is not very liquid and is subject to wild

market volatility.

Chinese “H” Shares – These are companies located and operating in China but incorporated and listed on the Hong Kong

stock exchange in Hong Kong dollars. Technically, these shares are available to foreign investment but once again, tight

regulations make it a difficult process.

Red Chips – To make things even more confusing, a Chinese company can be operating in China, incorporated in some

international location and then traded on the Hong Kong exchange. These stocks are much easier for the average

investor to own but still come with problems. One is that these companies are most often run and operated by the Peoples

Republic Of China, another is that they are often issued by companies who are also listed in “A” shares and subject to

volatility in mainland markets.

P Chips – Are similar to Red Chips in that they are companies with operations within China, incorporated in a foreign

jurisdiction and listed on the Hong Kong stock exchange. The difference is that they are typically operated by private

businessmen, not the government, and can be traded on a variety of international exchanges. This class is also has three

other sub-classifications; S chip for those stocks listed on the Singapore exchange, N Chips when on the New York Stock

Exchange and L Chip on the London Exchange.

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This is why choosing a fund manager with ample experience is of the utmost important. Phillip Li and Norman Ho at

Value Partners Asia Pacific Fund are two such managers. To start with, Value Partners is the largest and longest

running publicly traded financial management company in the China and greater Asian economic arena. The

company is headquartered in Hong Kong with operations located throughout the region. As fund managers Li and

Ho have access to top level research and resources not available to average investors. Plus, they are both

Chartered Financial Advisers with more than 35 years of combined experience investing in China and the

Asia-Pacific Region.

The Asia-Pacific Fund is a diversified closed-end fund focused on the Asia-Pacific region, ex-Japan. The fund

invests in stocks with solid balance sheets and positive growth prospects doing the bulk of their business within the

region.

Visit The Asia Pacific Fund at www.asiapacificfund.com or

to read more of their blogs visit https://asiapacificfund.com/Blogs.php

Launched in May 1987, The Asia Pacific Fund is a diversified, closed-end management investment company, listed on the New York Stock Exchange under the symbol "APB." Its holdings consist of investments in equity securities of companies in the Asia Pacific region. Included in this website are the Fund's net asset value and daily closing prices, shareholder reports, press releases and monthly fact sheets. It also provides answers to some of the most frequently asked questions about the Fund. This site is updated on a regular basis. The Fund is managed by Value Partners Hong Kong Limited (“Value Partners”). For further information on The Asia Pacific Fund, please call our toll free line at 1-888-4-ASIA-PAC or visit www.asiapacificfund.com for periodic updates on The Fund.

www.asiapacificfund.com

https://asiapacificfund.com/Blogs.php

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Pristine Advisers Investment Quarterly Newsletter Closed End Fund ‐ How to Invest and How to Educate Investment Community

By defini on, a closed‐end fund is a publicly traded investment company that raises a fixed amount of capital through an ini al public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange.

In 2013, CEF environment changed and investment community was a racted to closed end funds due to the variety of advantages, solid returns and leverage poten al. Investors buy and sell shares in closed‐end funds like individual stocks, but most of them are not choosing to trade through full‐service brokers to get even higher returns on their investment. Naturally the best deals are always coming with excessive knowledge and understanding of CEF layers.

What is Closed End Fund exactly? Closed‐end funds are o en confused with, and mistakenly called, mutual funds. A major difference is that closed‐end funds behave more like a stock. The market value is driven by supply and demand for the shares. On the other hand, an open‐end mutual fund con nually issues new shares to investors and does not trade on an exchange. Maybe the best way to understand a closed‐end fund is to compare it with an open‐end mutual fund.

Investors should think of a mutual fund as “open‐ended” because the cash flow door, both into and out of the fund, is always open. In other words, the por olio manager con nues to invest new cash from investors, and the fund company con nues to offer new shares of the fund to new investors. The manager only invests a fixed amount of cash that was raised in an ini al public offering of the fund’s shares. If you want to buy shares of the fund, you buy the shares from another investor via a stock exchange. The number of fund shares do not fluctuate based on investor demand.

Benefits of CEF are various, here are most important ones:

A CEF’s discount offers investor a bonus when the gap between the share price and NAV narrows a er investment

A CEF manager can invest without worrying that cash may be needed to meet sudden redemp ons by large numbers of shaky investors, some mes that is the case with open‐end fund managers

Closed‐end funds tend to pay investors higher levels of income because they invest more heavily in income‐producing assets — more inflows of fresh funds

If during the holding period of closed‐end fund shares the discount narrows, the reduc on in the discount gives a small boost to the fund's performance when investor sell the shares.

CEF managers can put capital in a long term strategy without worrying whether their fund will have enough liquidity to pay back investors who suddenly sell (redeem) shares

CEF orders can be placed throughout the trading day along with limit which boosts investors ability to control market price and ming

CEF do not impose amounts on purchases or sales, as most mutual funds do which means there are no minimums

Clear commissions and no hidden fees ‐ investor pays one commission to buy CEF shares and another to sell them. Those are the

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It is important to men on that CEF offer regular distribu ons based on a wide variety of asset strategies. Because of their unique structure featuring minimal cash in or out of the fund, closed‐end funds may allow retail investors access to assets and strategies that might not typically be available via other retail investment products.

Because of the many strategies available, income‐oriented investors have the opportunity to diversify the sources driving cash flow poten al in their por olios.

This site groups closed‐end fund strategies into four main categories:

Tax‐free income funds, also known as municipal bond strategies

Taxable income funds

US equity funds

Non‐US equity and income funds

h ps://www.linkedin.com/pulse/closed‐end‐fund‐how‐invest‐educate‐investment‐community‐stokic

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Closed‐End Equity Funds: Unlocking Value Through Shareholder Ac vism

As professional investors who spend a lot of me analyzing the closed‐end fund (CEF) market, we o en ques on ac ons (or inac on) taken by fund companies. Advancements in proxy access and fiduciary standards are designed to ensure management makes decisions that are in the best I nterest of shareholders, but it ap‐pears that this is not always the case. For company management and boards of directors, a retail investor shareholder base is o en preferred over ins tu onal shareholders. Typically, retail holders aren’t aware of their ability to force change and rarely challenge the board’s recommenda on or decision. In fact, retail investors o en don’t vote their proxies. Fortunately, ins tu onal investors are now significant holders of many CEFs. We have seen the effects that large investors, present company included, can have by pushing shareholder‐friendly ac ons, such as tender offers, conversion to term trusts and open‐endings for CEFs that have experienced poor management, bad per‐formance and long‐las ng wide discounts to NAV. For example, the U.S. General Equity CEF segment has significantly lagged other areas of the CEF market. It is currently trading at a weighted average discount of ‐12.6% to net‐asset value (NAV) compared to the overall CEF market discount of ‐3.7%. Within this sector of 20 funds, there is approximately $1.5 billion in unlocked value. Equity discounts have barely moved despite contrac on in other subsectors. We believe this is a testament to the low confidence shareholders have in equity fund boards and their managements’ ability to provide value. Here are a few common infrac ons we are seeing from fund companies: Prin ng new shares for reinvestment and therefore significantly disadvantaging non‐reinves ng shareholders

Recommended by Forbes

Failure to buy back their own shares at double digit dis‐counts

Failure to address long‐standing discounts

Failure to address significant underperformance versus benchmarks

Hiding behind non‐disclosed policies

Pu ng asset growth above NAV performance and shareholder returns

Three equity CEFs that we think should take increased ac on to improve value for shareholders include (as of July 8, 2016):

1. Tri‐Con nental Corp (NYSE: TY): $20.68, ‐15.42% discount

2. General American Investors (NYSE: GAM): $31.58, ‐18.12% discount

3. Liberty All‐Star (NYSE: USA): $5.06, ‐16.23% discount

Boards represent the owners of the fund and must uphold their fiduciary duty to investors. They should be forcing fund management to be more proac ve in growing value for shareholders, even if it disadvantages the fund company. Examples of how funds can improve value to shareholders include:

1. Implement a share buyback with a clear‐cut policy and meline

2. Employ accre ve annual tender offers

3. Convert the strategy to an ETF/term trust structure or merge with an open‐end fund

4. Use dividend reinvestment as an opportunity to buy shares in the open‐market

As the ETF structure becomes more proficient at handling ac vely‐managed strategies, it will be hard for boards to defend against the ra onal case for conver ng to an ETF. If these CEFs were to become more proac ve, they could retain the value‐add of being in the closed‐end structure.

It’s clear that the equity CEF market is rife with funds at steep discounts that would benefit from shareholder ac vism pressures and board ac on. Too many firms have been ge ng away with poor management prac ces that have resulted in steep discounts to NAV. It’s up to us as investors to put this pressure on these funds and push their boards into taking meaningful ac on towards reducing discounts and returning shareholder value. Please, vote your proxies and ques on board recommenda ons.

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Prospect Capital Corpora on (NASDAQ:PSEC, NYSE: PBB) is one of the largest mul ‐line business development company (BDC), providing debt financing to private U.S. middle market companies and inves ng in other credit‐related strategies. The company’s diversified por olio at 3/31/2016 consisted of 125 long‐term investments with a fair value of over $6.0 billion.

For the March 2016 quarter, Prospect reported Net Investment Income (“NII”) of $87.6 million, or $0.25 per weighted aver‐age share. For the twelve months ended 3/31/2016, PSEC earned $1.04 of NII per weighted average share, with NII exceeding dividends by $0.04 per weighted average share, providing dividend coverage of 104%. In addi on, Prospect increased its por olio’s annualized yield to 13.4% as of 3/31/2016.

PSEC con nues to provide shareholders with a monthly dividend of $0.08333 per share, represen ng an annualized cash yield of 12.8% as of 6/30/2016. Since its IPO in July 2004, PSEC’s cumula ve distribu ons to shareholders have totaled ~$1.96 bil‐lion, or $14.96 per share. The company’s monthly dividends, combined with changes to NAV per share, have enabled PSEC to generate opera ng returns greater than the industry median over both the short term and long term:

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As PSEC maintains its focus on outperformance, insiders at Prospect have increased stock purchases in PSEC to over $160 million since the company’s 2004 IPO, including over $50 million during the March 2016 quarter. Senior managers now own more than 6% of PSEC’s outstanding shares and have never sold a single share.

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Pristine Advisers/CEFNetwork Past Webinars

Webcast Presenta on: Water Security: #1 Investment Opportunity

Panelist included: Gary Chambers of Water Info on Tap Jud Hill of Blue Star Capital LLC Thomas Schumann of Thomas Schumann Capital CLICK HERE for a replay of this Webcast

Click Here to view the presenta on

This event was accepted for 1 CFP Con nuing Educa on Credit

Webcast Presentation: MLP Webinar

Moderated by: John Cole Scott of Closed-End Fund Advisors

Panelist included: Charles Helme, Managing Director at BH Asset Mgmt Emily Hsieh, Director of Global Operations at Alerian Elliot Miller, Retired Attorney Robert Prado, Managing Director at PricewaterhouseCoopers LLP

CLICK HERE for a replay of this Webcast

Click Here to view the presentation

This event was accepted for 1 CFP Con nuing Educa on Credit

Webcast Presentation: Achieving Retirement Readiness, Putting Realize In-come Back into the Equation

Presenter: Steve Selengut, President and Private Portfolio Manager of Sanco Services Inc

CLICK HERE for a replay of this Webcast Click Here to view the presentation

This event was accepted for 1 CFP Continuing Education credit

Webcast Presentation: Let's talk about IR & PR in the investment community

Panelist included: Patricia Baronowski of Pris ne Advisers CLICK HERE for a replay of this Webcast


Webcast Presenta on: Finding Alpha Through An Ac ve Buyback Strategy

Panelist included: Ted Theodore of TrimTabs Asset Management CLICK HERE for a replay of this Webcast


http://www.cefnetwork.com/docs/GC.pdf

http://waterinfoontap.com/

http://www.cefnetwork.com/docs/JH.pdf

http://www.cefnetwork.com/docs/TS.pdf

http://thomasschumann.com/

https://attendee.gotowebinar.com/register/3871555637186763012

http://www.cefnetwork.com/docs/WaterSecurityInvest.pdf

http://www.cefnetwork.com/docs/conf/bios/JCS2015bio.pdf

http://www.cefadvisors.com/

https://www.linkedin.com/in/charles-helme-77392234?authType=NAME_SEARCH&authToken=_vwv&locale=en_US&trk=tyah&trkInfo=clickedVertical:mynetwork%2cclickedEntityId:121724871%2cauthType:NAME_SEARCH%2cidx:1-1-1%2ctarId:1459876131835%2c

http://www.bhasset.com/

https://www.alerian.com/author/emily/

https://www.alerian.com/author/emily/

http://www.cefnetwork.com/docs/EM.pdf

http://www.cefnetwork.com/docs/RP.pdf

http://www.pwc.com/


http://www.cefnetwork.com/docs/MLP%20Webinar.pdf

http://www.cefnetwork.com/docs/SS.pdf

http://sancoservices.com/Sanco/

https://attendee.gotowebinar.com/recording/314830135512703748

http://www.cefnetwork.com/docs/AchievingRetirement%20Readiness.pdf


http://www.slideshare.net/pattybeeny/lets-talk-about-ir-pr-in-the-investment-community-63185964

http://www.cefnetwork.com/docs/TT.pdf

http://trimtabs.com/


http://www.cefnetwork.com/docs/TrimTabs.pdf

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SAVE THE DATE:

Pris ne Advisers / CEFNetwork

6th Annual CEF/BDC/MLP/ETF

Investment Strategies Conference Thursday, October 13th New York Hilton Hotel

For more details and to register CLICK HERE

Qualified Financial Planners can earn 6 CFP Continuing Education Credits for attending.

If you are interested in participating at our events, sponsorship opportunities are available!

ACT NOW before it’s too late!

Join us on our LinkedIn Groups

BDC Funds ‐ www.linkedin.com/groups/6599442

CEFNetwork ‐ www.linkedin.com/groups/4119220

Closed‐End Fund Corporate Governance ‐ www.linkedin.com/groups/6599435

Closed‐End Fund Events ‐ www.linkedin.com/groups/8206191

Closed‐End Fund Forum ‐ h ps://www.linkedin.com/groups/4291587

Closed‐End Fund Specialist ‐ www.linkedin.com/groups/2080875

Equity Income Investors & Professionals Group ‐ www.linkedin.com/groups/5109576

ETF – Exchange Traded Fund News, Commentary, Events and Discussions ‐ www.linkedin.com/groups/6600634

http://www.cefnetwork.com/conf/2016/2016conference.php

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We got our clients listed here and we can do the same for you

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Award Winning

Investor Relations, Public Relations, Media Relations Social Media Strategists

WE Magazine for Women

“2014 Who’s Who Among

Women in Ecommerce”

World Class Magazine

“The Right Connections &

Relationships”

2015 Best in Business

Honor from National Association

of Professional Women

2013 New York

Excellence Award

The Confidence Factor for

Women in Leadership

Women of Distinction

2014 New York

Excellence Award

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Award Winning

Investor Relations, Public Relations, Media Relations Social Media Strategists

30

Best Investment Fund Marketer - USA Pristine Advisers is an Investor Relations, Public Relations and Media Relations firm assisting a variety of clients of all shapes, sizes, backgrounds and locations. Patricia Baronowski, President and Founder of Pristine Advisers, provides us with a unique overview of the company and its service offering.

Pristine Advisers manages the IR/PR/Media Relations for various funds in the closes-end space, as well as, ETFs, BDCs, REITs and MLPs. We not only monitor current investors, but we also seek out potentially new investors, analysts, brokers and media to post our clients in a positive light. Our goal is to communicate with the investment community to ensure they are satisfied and that their questions are answered and that they feel comfortable with management and their investments. When shareholders feel comfortable and that their concerns are tended to and their questions are answered and management is in touch with them quarterly at best – this goes a long way for ROI. Our high quality services are supplied to a wide variety of clients, including Closed-End Funds, Exchange-Traded Funds, Hedge Funds, Business Development Companies, Master Limited Partnerships, Restaurants, Mom-and-Pop Shops, Fortune 500 Companies, Extreme Sports Businesses, Authors, etc. We support clients around the world of all shapes and sizes. We’ve helped start-ups, mergers and major corporations with huge success. Many of the clients we have had for over 20 years and who have followed us across three different firms, which is a huge testament to the type of service and commitment we provide our clients. This service has been provided in this market for 29 years. During this time we have seen many market movements, and knowing how to position our clients; that market conditions move up and down; what triggers movements and how Funds or Companies can respond and react to this is vital to our success. As long as the Companies or Funds are proactive and managing their portfolios correctly then a down market could be a great buying opportunity for investors. Everyone wants to buy when prices are low and then sell when they are high. It is all a matter of reading the markets, knowing the Funds, communicating with investors and being proactive and ensuring shareholders are not left in the dark. To ensure that this is not the case and that our information is always up to date, we are continuously monitoring the news to ensure we are up to date on the global markets, investment strategies, etc. and that our clients are doing everything that is possible to ensure shareholders needs are met. Our years of experience in the business has helped to set us apart from our competitors, as it has helped us to gain a thorough knowledge of the clients we represent. Other key factors in ensuring our success include our training and knowledge in the market and the contacts we’ve established through the years. We have accumulated investors, analysts, brokers and media through the years and target a select group of people for our clients, who support us at our investor conferences, whereas some of our peers will simply invite vendors or investors who may be interested in Fortune 500 firms or other businesses and such and really not interested in clients at all. Ultimately all of these factors combine to provide the results which highlight our superior services and dedication to client support. In the past we have managed to increase media exposure for some of our clients by as much as 253%, share price by 18% and funds aver-age annual total return 19%. The future of our market is always evolving and changing, but this is part of what excites us. Working in such a challenging, adapting market is invigorating and ensures no two days are ever the same. I believe one of the changes that will be prominent moving forward is that many firms are hiring internal IR and/or PR people to assist them. Our approach sees us working with the internal IR/PR staff because we have the expertise and experience to support our clients, and do not need to outsource this.

Download - Pristine Advisers Investment Quarterly Newsletter · 2017-04-04 · 10 Pristine Advisers Investment Quarterly Newsletter Mexico’s Emerging Market More Attractive Than You Think

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