Blankstone Sington IHT AIM ISA
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.
This investment strategy appears to have served Blankstone Sington well. 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%.
In August 2020, Stephen English and Phil Kirwan – the two portfolio managers responsible for setting up and managing the service since 2010 – left the business. Blankstone Sington has since made a number of experienced internal appointments to replace them. Chief Investment Officer Paul Williams, who already has overall responsibility for investment research at the firm, will take a more active role in managing the service. Blankstone Sington intends to maintain as much continuity as possible and the investment strategy, which applies across the firm’s investment services, will remain unchanged.
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
- Blankstone Sington has 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)
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.
The AIM IHT service is headed up by Neil Blankstone, who is the second generation of the company’s original founders. Neil has worked in the business for 30 years and has a dual role of business development and management of the IHT service. Neil has advised on and dealt in AIM securities as part of broader bespoke and advisory managed services since AIM’s inception 25 years ago. Neil is supported by three experienced investment professionals in managing the AIM service, including Blankstone Sington’s Chief Investment Officer, Paul Williams. Paul has overall responsibility for investment research in the business and has led the research department since 1998. He has overseen the research of the AIM service since its inception and will be taking a more active role in the management of the service following the departure of Stephen English and Phil Kirwan. In addition to its internal resources, Blankstone Sington has acquired additional external support to bolster its research of AIM stocks for the service.
Blankstone Sington employs nine investment professionals. It believes a small, close-knit team enables a nimble, high-conviction investment approach. The team includes a dedicated dealer, Peter Kelly, who has over 30 years’ experience at Blankstone Sington. The team believes by investing via its in-house dealer it can potentially achieve better pricing when placing trades, particularly within the AIM market, where there are fewer buyers and sellers, although this is not guaranteed.
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 trying to preserve investors’ capital, whilst trying to avoid the more speculative and volatile companies on AIM. By investing with a focus on value, it 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: despite this remember that AIM can be high risk and volatile and is only for experienced investors.
Investments must exhibit certain attributes. The team looks for companies with what it considers to be the right valuation, strong cash generation and cash flow, a solid history of dividends and a management team 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 5% 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 stock faced some challenges during the coronavirus outbreak as concerns grew over disruption to its Chinese manufacturing plant. Its share price has since recovered strongly, setting a record high in August 2020 (past performance is not a guide to the future). Blankstone believes 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 January 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. However, the recent performance has been affected by the impact of Covid-19 on global financial markets. Please note the chart below is prepared quarterly, to June 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 Sington and other AIM ISA managers. Performance is shown net of fees, excluding initial charges, with dividends reinvested, based on the average portfolio performance across the service, except for Puma and Fundamental which shows the performance of one example portfolio. 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 of the companies invested in are under £100 million by market capitalisation. By nature, these are not only less liquid but also riskier investments as they are smaller businesses.
A previous Chancellor requested a review of IHT to simplify the tax system. A report was published in July 2019, but this has not yet led to any rule changes. 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|
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|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 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. The service has built a strong longer-term performance track record. Importantly, it has also shown lower than average volatility. Although, please note, past performance is no guide to future performance.
Investors should note that in August 2020 both Stephen English and Phil Kirwan – the two portfolio managers responsible for setting up and managing the service since 2010 – have left the business. We rate Stephen English highly and, whilst this development is not welcome news, Blankstone Sington has made a number of experienced internal appointments to replace the duo. These include its Chief Investment Officer, Paul Williams, who has held overall responsibility for investment research across the firm since 1998. Blankstone Sington intends to maintain as much continuity as possible. The investment strategy, which is deployed throughout the firm’s investment services, will remain unchanged, which investors may appreciate.
The service continues to benefit 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 newly appointed but experienced team appears capable of executing Blankstone Sington’s investment strategy effectively. The strategy might appeal to investors wishing to invest in the smaller end of the AIM market. The service 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.
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