Review: Blankstone Sington Inheritance Tax AIM ISA
Blankstone Sington’s IHT portfolio is unlike those offered by the larger AIM IHT providers. The objective is broadly the same: to invest in BPR qualifying stocks and preserve capital, but Blankstone Sington takes a different approach. The average company size is much smaller (under £150 million) and there is a greater emphasis on value investing.
The track record of the portfolio to date is excellent. Blankstone Sington’s portfolio has only underperformed the FTSE AIM All-Share index in one quarter in the last six years, 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 0.5%.
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. This might be achieved by holding this portfolio alongside others that invest in larger AIM companies, such as Octopus or Unicorn.
- Focus on the smaller end of the AIM market where the managers see value
- ISA available
- Anticipated yield of 1.5%-3% (not guaranteed) which can be used to pay charges
- No initial charge
- Tiered annual fee structure: pay as little as 0.5% on larger investments
- Differentiated offering in the sector
- Experienced investment manager with over thirty years in smaller-companies investing
- Minimum investment £50,000
Based in Liverpool, Blansktone Sington is predominantly a stockbroker and investment manager. The company manages £412 million.
Liverpool may not scream financial services but 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 the 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 Neil Turner who is the Chief Executive and has oversight of the portfolio.
Blankstone Sington employs 11 investment professionals. It believes a small, close-knit team enables a nimbler, higher-conviction investment approach.
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 a unique 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 an investment sweet spot in firms with a market cap of £150 million and under.
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 cashflow, a solid history of dividends and management with a proven track record. The portfolio typically invests in companies which are founder led, where management have a stake in the business.
Source: Blankstone Sington. Performance since inception is from 1 April 2010 to 31 March 2017, net of fees and commission. Please note: past performance is not a guide to the future.
Annual performance to December each year
|Blankstone Sington IHT Portfolio||21.07%||33.82%||4.34%||17.90%||14.57%|
|FTSE AIM All-Share (Total Return)||2.86%||21.33%||-16.53%||6.63%||16.07%|
Source: Blankstone Sington. Portfolio performance is calculated on a simple weighted average of all real money client portfolios reflecting any commission costs during the period as well as investment fees. The performance quoted represents past performance. Past performance is not a reliable indicator of future results. The performance of individual portfolios may vary due to factors such as portfolio size, stock selection and timing of investment transactions. Initial dealing fees are not reflected in the performance table, with first month’s performance excluded, given the adverse effect of an inflow of funds on established portfolios’ performance.
Investors can expect between 25 to 40 holdings across a range of sectors. Currently, the portfolio has an average market capitalisation of £148.7 million (30 June 2017). There is a heavy weighing to support services (23.5%) and significant exposures to pharmaceuticals and biotechnology (15%) alongside software and computer services (12%).
The minimum investment is £50,000. Blankstone Sington believes this is the smallest sum an investor needs to place to allow 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 between 1.5% -3%, is variable and not guaranteed. Investors can choose to set this against the management charge, have the income paid out or reinvested.
What kind of companies are in the portfolio?
Warpaint London has been running for 25 years. It has a market capitalisation of £154.89 million (June 2017). It owns and sells cosmetics, including its own brand W7 which is manufactured in the same factory Chanel uses. The firm listed on AIM in November 2016 with an IPO valuation of £63 million.
The founders retain a 60% stake in the firm and their interests are thus aligned with those of shareholders. Sales have grown even through the financial crisis and already 40% of the businesses sales are generated overseas. The UK make-up market is worth £2 billion and the US market £9 billion. Since listing the shares have risen significantly.
Blankstone Sington views an increased regulatory burden as one of the certainties of modern life, alongside death and taxes. Ideagen offers governance, risk and compliance software to tackle risk management in an organisation. It’s a dull but importance service. Instances of poor governance, risk and compliance in recent times include LIBOR rate-rigging, PPI mis-selling, BP oil spill and even the tragic Alton Towers crash. Companies are increasingly prioritising governance, risk and compliance and Ideagen can help.
The software is used by over 3,000 organisations in life sciences, aerospace and defence, finance, transport and healthcare. Blankstone Sington believes all are sectors in long-term growth trends. Clients include BAE Systems, Emirates, Shell and the European Central Bank as well as 150 hospitals in the UK and US.
The senior management has a sizeable stake in the company and a recent placing funded an acquisition of a complementary software company.
Ideagen has a market capitalisation of £170.45 million (June 2017).
Designers and distributors of well-known toy brands – including Teletubbies and Peppa Pig – Character Group has a market capitalisation of £102 million (June 2017). The joint MDs remain large shareholders in the firm with a 17% stake between them.
The balance sheet is healthy with £18.6 million net cash which should help the company if there is any economic downturn and buoy dividends.
Returning cash to shareholders has been a feature of the executive team’s management through a progressive dividend. Share price performance has been muted but Blankstone Sington argues this belies strong progress.
Access to your investment
Investors can withdraw at any time provided £50,000 is left in the service. Investors can also choose to fully liquidate the portfolio. In normal market conditions Blankstone Sington aims to fulfil withdrawal requests within five working days. It may take longer for larger sales and in times of low market liquidity.
Please remember this is a long-term commitment and capital is at risk: AIM shares are considered more risky and more volatile than more mainstream investment.
Liquidity of companies listed on AIM must be seen as a key risk in this service. It can be a volatile market with little trading at certain times. Blankstone Sington’s focus on smaller companies may emphasise this concern.
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.
Under current rules, BPR-qualifying AIM investments held for at least two years and on death should be IHT free, but remember tax rules can change and tax benefits will depend on circumstances. Assessment for BPR qualification is only done by HMRC on death.
The absence of an initial charge is welcome. The management charge for investments of up to £500,000 is 1.25%, from £500,000-£1 million is 1.0% and the balance over and above that is 0.5%. All are subject to VAT. There is a dealing charge of £25 per transaction – which on a portfolio of 33 stocks would be £825. These charges are highly competitive for a larger IHT portfolio.
Blankstone Sington is a longstanding investment manager with much experience in smaller company investing. This is a well thought out service. It could be a consideration for 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). This service has little overlap with the larger offerings. Performance has been strong and the team has so far delivered on its objectives, but as always there are no guarantees.
Wealth Club aims to highlight investments we believe have merit, but you should form your own view. You should decide based 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. 4 August 2017