Blankstone Sington IHT AIM ISA
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Blankstone Sington’s AIM IHT portfolio service is unlike those offered by the larger AIM IHT providers. The objective is broadly the same: to invest in BPR-qualifying stocks, but Blankstone Sington takes a different investment approach. The average company size is smaller and there is a greater emphasis on value investing.
The track record of the portfolio to date is strong compared to its peers and the overall AIM market, although please remember past performance is not a guide to the future. The portfolio also benefits from a highly competitive fee structure. For larger investments, the annual charge on part of the portfolio can be as little as 0.75%.
We believe the Blankstone Sington offer is an interesting option for wealthy or sophisticated investors wishing to target the smaller end of the AIM market. It might also appeal to those with a large IHT portfolio who would like some diversification.
The Blankstone Sington AIM IHT service is a previous winner of the “Best AIM IHT Portfolio Service – DFM Provider” at the Investment Week Tax Efficiency Awards for 2018/19.
ISA: apply online or top up
- Focuses on the smaller end of the AIM market where the managers see value
- Anticipated yield of 1.5%–3% (not guaranteed) which can be used to pay charges
- No initial charge
- Tiered annual fee structure attractive for larger investments
- Differentiated offering in the sector
- Investment manager with over thirty years’ experience in smaller companies investing
- Minimum investment £40,000 (£20,000 existing investors)
- Available both in an ISA and outside an ISA
- Apply online (ISA only)
Coronavirus – an update from Blankstone Sington AIM Inheritance Tax ISA
Stephen English, manager of the Blankstone Sington IHT AIM ISA gives a view and an update on the impact of the coronavirus crisis on the AIM market and the Blankstone Sington portfolio (March 2020). Read the update »
Blankstone Sington is a stockbroker and investment manager based in Liverpool. Whilst Liverpool may not scream financial services, it is a pioneering city in the UK’s financial markets. The Liverpool Stock Exchange dates back to 1836 and Blankstone Sington’s offices are just around the corner from its original building. The business was founded in 1976 by former Liverpool Stock Exchange Chairman, Michael Blankstone, and his business partner, Reggie Sington.
Stephen English is the lead manager on the Inheritance Tax Service and has run the portfolio since its inception in 2010. He is a Chartered Financial Analyst. Mr English is supported by Phil Kirwan who is Portfolio Manager.
Blankstone Sington employs 10 investment professionals. It believes a small, close-knit team enables a nimble, high-conviction investment approach.
The Blankstone Sington AIM IHT service is a previous winner of the “Best AIM IHT Portfolio Service – DFM Provider” at the Investment Week Tax Efficiency Awards for 2018/19 – note past performance is not a guide to the future.
Watch a video interview with manager Stephen English:
Blankstone Sington has been investing in smaller companies for over three decades. The team believes AIM-listed companies offer an opportunity for value investors as the market is under-researched and under-owned by the wider investment industry. This can create pricing anomalies that can be exploited. The team believes there is a sweet spot in firms with a market cap of £150 million and under at the point of investment.
That suits Blankstone Sington’s strategy of investing in undervalued businesses or companies offering growth at a fair price. They fit Blankstone Sington’s mandate of preserving investors’ capital, whilst trying to avoid the more speculative and volatile companies on AIM. By investing with a focus on value, it also hopes to limit risk. It’s a simple theory: if you pay a low or fair price any falls should not be as great as they would be if you overpay or buy at a premium.
Investments must exhibit certain attributes. Broadly speaking, the lead manager Stephen English, looks for companies with the right valuation, strong cash generation and cash flow, a solid history of dividends and management with a proven track record. The portfolio typically invests in companies which are founder led, where management has a stake in the business.
Current portfolio overview
Investors can expect 25 to 40 holdings across a range of sectors. Currently, the portfolio has a bias towards industrial, technology and financial services businesses. The average market cap is £195.5 million and the portfolio is more than 80% invested in businesses with a market cap of less than £250 million (29 Feb 2020).
The minimum investment is £40,000. Blankstone Sington believes this is the smallest sum that allows sufficient diversification. This means ISA investors will need to transfer existing ISAs as well if they intend to invest new money.
The nature of the portfolio companies – cash generative and profitable – means the yield is expected to be 1.5%–3%, which is variable and not guaranteed. Investors can choose to set this against the management charge, have the income paid out or reinvested.
Source: Blankstone, as at 29 February 2020.
Source: Blankstone, as at 29 February 2020.
Example of portfolio companies
Gateley Plc – joint largest holding
Gateley was the first commercial law firm to list on the market when ownership rules were relaxed allowing non-lawyers to own law practices for the first time. Since its IPO in 2015, performance has been strong with revenue growing 14% per year. In fact, revenue has grown every year since 1986 such is its resilience to the wider economy to date.
The group has grown staff numbers to over 1,000, servicing 5,000 clients and generating over £100 million revenue. As well as strong organic growth the group has acquired seven companies since listing, including non-legal businesses which should comprise 20% of revenue in time. Partners hold over 50% of the shares, aligning interests well, and the impressive management team is conservative and focused on a solid balance sheet and strong free cash generation. The shares currently yield over 4% which should be augmented by long-term capital growth, although this is not guaranteed.
Strix Group – joint largest holding
Strix is a global leader in the design, manufacture and supply of kettle safety controls and devices involving water heating and temperature control, steam management and water filtration. Strix has sold over 1.9 billion units, and management estimate that Strix safety controls are used over 1 billion times per day by consumers, in more than 100 countries, and by over 10% of the world’s population.
Based in the Isle of Man and China, the group has over 800 employees, is a trusted partner with a unique, almost consulting, position between Chinese manufactures and Western brands and has a dominant 38% market share of the global kettle control market. The shares hit a record level in December 2019, although they have fallen since due to to its Chinese manufacturing plant and ongoing concerns over Coronavirus and the impact it may have on production. Blankstone believe Strix is a high-quality business that presents good value for long-term shareholders.
As is to be expected, not all investments will be successful. Arena Events listed on AIM in 2017. It provides temporary stands and seating for events, including Wimbledon, The Grand National, Ryder Cup and even Dancing on Ice, and claims to have never lost a tier-one client. Blankstone first invested in May 2018 at a price of 59.5p.
To support new business wins, capital spending on equipment rose over time, causing net debt to start creeping up. While this spend was driving higher earnings Blankstone was sanguine, but when Arena issued a profit warning in Jan 2019, the debt burden came into sharper focus. The cause of the profit warning was overtrading, following too many acquisitions in 2018. To deliver critical contracts, extra staff and costs were taken on, which saw profit forecasts decline. In the months that followed, the management team failed to get costs under control, resulting in another profit warning.
After losing faith in the management team, Blankstone Sington sold its final position in the business at 27p in September 2019. Blankstone Sington now requires evidence of a track record of successful M&A transactions where this is a key tenet of the investment case.
Blankstone Sington has a strong long-term performance track record. In the chart below, the offer currently leads our select group of AIM IHT offers. There are two reasons for this achievement, firstly Blankstone Sington was able to participate well in a rising market, secondly, as the AIM market became more volatile in the final three months of 2018, the portfolio behaved more defensively that other AIM IHT offers. Please note the chart below is prepared quarterly, to December 2019, so does not yet reflect price movements in 2020.
The default view is the performance for this particular offer. You'll be able to see the performance of other AIM ISA offers if you click on the portfolio names above. Source: Blankstone and other AIM ISA managers. Performance is shown net of fees with dividends reinvested. Past performance is not a guide to the future. Dividends are variable and not guaranteed.
Access to your investment
Investors can request partial (subject to a minimum of £40,000 being left in the service) or full withdrawals from the portfolio at any time, subject to liquidity. In normal market conditions, Blankstone Sington aims to fulfil withdrawal requests within five working days but this is not guaranteed. It may take longer for larger sales and in times of low market liquidity.
Risks – important
This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.
AIM IHT portfolios are high-risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.
AIM stocks can be hard to sell, particularly at the smaller end of the market, and can be illiquid. Blankstone Sington’s focus on smaller companies may emphasise this concern. AIM shares can be very volatile especially if the market falls sharply. The difference between the buying and selling price of AIM-listed shares is often wider than the spread for shares listed on the main market.
Tax rules can change and benefits depend on circumstances. Eligibility for BPR is assessed at the date of death and will depend on the companies in the portfolio remaining qualifying. Broadly speaking, you will need to have held a BPR qualifying stock for at least two years and still hold it on death to qualify.
Many firms are under £100 million by market capitalisation. By their very nature, these are not only less liquid but riskier investments as they are smaller businesses.
There is considerable key man risk as Stephen English is central to the service.
The previous Chancellor asked the Office for Tax Simplification to review a range of aspects of IHT, including BPR. A report has been published in July 2019. It is as yet unknown when and if any of the recommendations will lead to a change in rules. Currently, investments qualifying for Business Property Relief should be free from IHT after two years. Please remember, tax rules can and do change and benefits depend on circumstances.
A summary of the main charges and savings is shown below. The investment may have additional charges and expenses: Please see the provider documents for more details. If you would like a full breakdown or a personal illustration, please let us know.
|Full initial charge||nil|
|Wealth Club initial saving||—|
|Net initial charge through Wealth Club||nil|
|Annual management charge||Tiered
(1.25% on first £500k; 0.75% over £500k)
See example of the total charges over 5 years
Blankstone Sington is a longstanding investment manager with experience in smaller company investing. The service is headed up by Stephen English, who we rate highly, and he is supported by the wider team of 10 investment professionals. The service is well thought through in our view and its investment strategy, to seek value from investing in smaller AIM stocks, is differentiated from other larger AIM IHT portfolio services. This approach has so far paid off. Over the past five years, the service has come top amongst a select group of other AIM IHT offers available through Wealth Club. Importantly, it has also shown lower than average volatility. Although, please note, past performance is no guide to future performance.
The service also benefits from a competitive fee structure. For larger investments, the annual charge on part of the portfolio can be as little as 0.75%.
In our view, the offer is worth consideration for experienced investors looking to invest in the smaller end of the AIM market. It could also be an option for those with a large amount in AIM IHT portfolios who want to diversify some of their holdings away from the larger end of the AIM market, the traditional preserve of many IHT portfolios.
ISA: apply online or top up
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.
- Portfolio size
- £38.3 million
- Average market cap
- £195.5 million
- Initial charge
- Saving via Wealth Club
- Net initial charge