I prefer to talk to the organ grinder, not the monkey; as a shareholder I talk to the CEO.
I don’t actually talk. I know the CEO of MP Evans and send an email. There have been developments at MPE. It’s slightly complicated but we have bought some of the shares in an Indonesian Company that hitherto had owned some of our shares. But we didn’t buy all their shares; Praba Madhavan picked up the rest and now has a significant stake in MPE (more than 4%). The CEO confirms Mr Madhavan is a Good Egg. He has a lot of experience in palm oil and on the side he runs a Vietnamese restaurant in Jakarta with his Vietnamese wife. The CEO speaks highly of their restaurant. I hope he comes to the AGM next year.
I don’t know the CEO of Caledonia Investments. Their website does not have his email address – a mistake I think – so I got out a fountain pen and wrote to him. He replied on 28th August; “Thank you for your letter of 29th July which arrived as I was disappearing off on holiday, so apologies for the slow reply. It is always nice to hear from a long-term shareholder who, thankfully, is showing a reasonable gain on investment cost not ,of course, forgetting the dividends paid. We will strive to ensure this continues. Your concern about on-going charges and fees is interesting – the short answer is apples being compared to pears. The long answer follows and I hope it makes sense!”
At this point the CEO hands the baton to a minion who produces thirty-two pages explaining the fee and on-going charge structure. I knew some of this but now I have a better grasp. It is to the CEO’s credit and to the credit of Caledonia’s corporate culture that I got such a comprehensive, unpatronising reply.
”The long answer” explains why Caledonia’s fees and “other ongoing costs” are a staggering 3.3%. You may remember that I rubbished British Empire Trust for revealing 3.2%. Both BET and Caledonia invest in private companies and private equity. There are higher than usual fees to do this but, if it comes out right, it is worth it. Of course the published returns for Caledonia are after these charges. Caledonia, capitalised at the sunny side of £2 billion, can make these sort of investments. Neil Woodford thought he could but committed too much to long term bets and his shareholders are short-term punters. Rothschild Investment Trust (RIT) does it too but they can. Their fees and ongoing charges are 3.9% and their shares trade at a 7% premium so, I suppose, they are better at it than Caledonia. A five year snapshot can be misleading but it’s better than nothing: RIT + 56%. Caledonia + 40%.
So my short answer is that drilling too deeply into fees and charges can be misleading. Caledonia’s published charge in the FT is 0.93% but I looked at a document required by the EU: Key Information Document (KID). One caveat: if you invest in this sort of investment trust it must be for the long term. Caledonia trades at an 18% discount. This could move 10% either way but, as I have found since 2003, Caledonia delivers over the long term.
To digress, I have never met the CEO of Caledonia but I must have met his father in 1963; he was an usher at my sister’s wedding.