Abrdn Diversified Income... Share Discussion Threads

[spectoacc] 06/1/2024 15:47

Lol @tiltonboy.

I bought Langbar for the first time a few hours before suspension - what a mug. Believed the bank proof.

Agree ADIG, seems a good investment from here - Opportunity Cost the main reason for not.

[tiltonboy] 06/1/2024 11:47

I'm relatively comfortable in ADIG knowing half of my current investment will be coming back in the coming months. I'm waiting for the annual report to have a look at the Private Market stuff and take a view on anything that might be flaky. With conditions improving will we see any positive surprises in Tranches 2 & 3?

[tiltonboy] 06/1/2024 11:42

Langbar was the most obvious fraud but still fooled many.

I got fooled by In-House Group, but by pure fluke spotted a lie and got out. They advertised a hotel they had on their books as agent up for sale....what are the chances that a shareholder would spot that the hotel was in actual fact one in Costa do Sauipe in Brazil where I had previously stayed...lol..

[spectoacc] 06/1/2024 07:23

"The only defence we have as investors is to be moderately diversified no matter how confident we may be about any particular line item."

Yes, that's true. Patisserie Valerie, seemingly a one-man fraud spotted by no one, the perfect example.

But analysts etc in general are part of the problem. Was a few lone voices on both Carillion and Autonomy. The hilarity with AU. was HP were written to by one of them (Paul Morland I think?) pointing out the state of the accounts, particularly revenue recognition, after they bid/before completion.

HP when ahead anyway, then had the cheek to sue Autonomy. Sorry, but if you've been warned first...

Hedge funds/shorters tend to do the job of auditors and spot what doesn't look right. With very few misses, and a lot of hits. NMC Health another cracker.

And I've barely got on to AIM, eg Quindell :)

@Thrug - difficult to believe Dan McCrum of the FT was threatened by BaFin. They brought criminal charges. That in a nutshell is why never to trust the markets.

Apologies for OT.

[thrugelmir] 06/1/2024 00:10

Worth reading up on Wirecard to grasp the complexity of corporate fraud. Fascinating insight. Majority of retail investors play the stock markets. They've not the slightest clue of the real world of business. Been too easy for far to long to invest without the slightest thought.

[spectoacc] 05/1/2024 15:58

Ha another good example ;)

[essentialinvestor] 05/1/2024 15:52

* apologies, it's MADE I had in mind,
edited the last post.

[spectoacc] 05/1/2024 15:28

Much that went on with HOME was indeed extraordinary. To pick some favourites:

- They successfully raised more cash, many times;
- Knight Frank did the bunkum valuations - allegedly without ever going inside any of the properties;
- MNG take a bow: they continued to buy AFTER the easily confirmed allegations had been made;
- The hidden gifting of 12 months rent to the lessee, from HOME's purchase proceeds;
- The Board, continuing to issue RNS denials of what a group of posters on ADVFN could easily see was true from 15 mins of Googling.


I've been inside a couple of HOME properties - strewth. Suspect some of the CIC/charity lessees existed only on paper, with zero management/CapEx.

Amazing how (alleged) fraud can be hiding in plain sight (eg Patisserie Valerie), and how "wait a minute, look at this, it's bunkum" fraud like Autonomy, Carillion etc can still attract buyers (using OPM of course) and go on for years.

If I've a nose for them, it's only thanks to losing on the likes of Camkids, Naibu (both China AIM frauds), Langbar (a classic) and several more.

But does amaze me how little research big institutional investors (and investment trusts) actually do, preferring to trust management, auditors, valuers. ie those behind/missing every fraud & scam ever.

[essentialinvestor] 05/1/2024 15:16

MADE valued at £1 bn briefly, extraordinary.

[spectoacc] 04/1/2024 19:16

Many = most. Just about anything late-era ZIRP, or bandwagon.

HOME springs to mind too, as does performance of CSH (albeit taken out) & SOHO (I hold).

Some have performed reasonably, and been marked down, but most have been cr*p.

[riverman77] 04/1/2024 18:16

To be fair the IT sector needed a good clear out, with a lot sub scale funds and many of the recent listings being real dross (SONG and DGI9 immediately spring to mind). Hopefully after all the wind downs and mergers the sector will be in a much stronger position.

[chucko1] 04/1/2024 18:00

Totally agree that the set of opportunities is likely to grow significantly. I especially like GABI and VSL of the current crop as they have short durations and acceptable transparency of current portfolio. They really ought not be wound down, but people are so sick and tired of the excessive discounts they just want a quick fix. I do not agree, but if winding the trust up is "the will of the people", I may as well take advantage out of it as opposed to being puritanically opposed.

One wonders what will be left of the UK Trust Menu within a few years!?

[riverman77] 04/1/2024 17:25

There are several good wind down opportunities, but not had the chance to look at them in detail. I seriously think there could be a good opportunity to start a new fund just to invest in a basket of these, although unlikely it would ever get off the ground.

[mwj1959] 04/1/2024 17:20

I suspect the trust wind down opportunity set is only going to get larger in 24 if there isn't a meaningful narrowing of discounts. Problem is that most of the vulnerable have exposure to illiquid assets, so any return of capital is likely to be protracted in most instances. But I guess with most of them paying a decent yield investors are being paid to wait.

[chucko1] 03/1/2024 14:20

R77, I see it as a good opportunity, but not a great one. We are in agreement on that. But these wind downs have a life of their own and in certain market conditions can be oversold. This is why I make some effort to model it so that I am ready if and when that opportunity arises.

As you say, it might take a long time. But on the other hand, there is then a long time for the market to misprice this along the way, as often occurs with asset backed funds when the overall market is getting walloped.

At this stage, I have a lot more in GABI and in VSL. Less in SLFX as it has already paid back over 70pps in capital (having been easily able to buy in size at 35p). Also a chunk in RECI, which although not in wind down, has a short duration which is therefore moderately similar.

[riverman77] 03/1/2024 14:05

Thanks for the detailed analysis Chucko. I agree with all your figures, although I still can't get particularly excited about this - it will take years to sell everything and think there are better opportunities out there right now.

[essentialinvestor] 03/1/2024 13:30

Trust wind up also arguably means the buy backs created some 'value' because of the share count reduction.

[spectoacc] 02/1/2024 16:23

2.5% by end of December 2023 abrdn said - came from their team of economists. Hilarious.

Mind, if the market is saying 5 rate cuts by next December, that's miles out too IMO.

I love macro. I don't love ADIG, but hold in reasonable size. As you say, it's what's in the price (& Opportunity Cost).

[essentialinvestor] 02/1/2024 14:08

Great post, much appreciated.

[tiltonboy] 21/12/2023 17:32

On the basis that you are going to get back virtually 50% of your investment in the next six months, I will probably add to my holding.

xd today

[essentialinvestor] 21/12/2023 16:21

skinny, given their record, it may be best to err on the side of caution.

Very much appreciate your input and the other recent posts. Way above my paygrade to attempt a valuation, but as a speculative wind down situation,
I'm hoping it just may pay a nice multi year return.

I did not anticipate buying back in, but have some spare cash atm. Just a modest amount.

[skinnypope] 21/12/2023 16:13

Follow up post to my attempt to model the wind down cashflows.

I agree I am way too pessimistic on the 30% discount to sell the Tranche 2 assets, and in fact it’s not outlandish to expect a decent accretion in the NAV of these assets in the coming year. I will move my discount to 20% on these, but still keep the discount to reflect the execution and timing risks, with ADIG being a slightly “forced” seller.

I’ve spent a bit of time thinking and modelling the potential future dividend policy, which may be a fool’s errand, but here goes.

- The dividends (and bond interest) paid out each year seem to be matched against the portfolio dividend and fixed income receipts fairly precisely.

- If this is the case going forward, I can use the same portfolio wind down schedule to model decreasing income into the fund, therefore model future dividends.

What follows here is total guesswork, but grounded in the above assumptions, so please treat with a healthy degree of scepticism.

1. Looking at the portfolio breakdown on the bonds / credit / equities portfolio being sold first, I see running yields generating around £5.5m per annum, roughly a third of the total pay-out ADIG is making.

2. The other income coming from the private assets is pretty impossible to know, except that it must be paying out around £10-11m per annum [if anyone can help validate this, I’d appreciate it].

3. So, I will model the pay-out dropping on the Apr24 dividend by the full amount of the liquid portfolio (in other words the Apr dividend will be 0.95p per share), and then straight line amortises down every quarter on a pro-rata basis for the two private portfolios, down to zero at the end of 2028.

So here is the punchline – with my pessimistic views on the selldown valuations combined with my new (possibly naïve) views on future dividends, I now have the total return up to an annualised 15.2%

[hohum1] 21/12/2023 15:12

I can’t find the secondaries fund IV holdings online but the ADIG manager has certainly referred to Action in various reports. 3i sold a stake in Action to various other PE houses a few years ago, of which Aberdeen was one, but held onto a large chunk and since then the valuation has soared. So the doubling in IRR noted by CC looks about right