TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH XCELERATOR PREMIUM INCOME LIMITED, MANAGING DIRECTOR, ANDY SEMPLE
Clive Tompkins: Hello, Clive Tompkins reporting for the Finance News Network. Xcelerator Premium Income Limited is an unlisted Investment Company that uses options to complement stock picking and deliver greater income. Joining us to discuss its annual results and offer of new shares is Managing Director and co-founder Andy Semple.
Andy welcome to FNN. The last 12 months have been one of the most difficult on record, despite the bounce, how did the company perform? and how many sleepless nights did you have?
Andy Semple: Well thanks for having me Clive. We performed quite well compared to our benchmarks that we go against. We are actually down about 10% for the financial year 2009, however we did pay our shareholders a dividend yield of around about 8%, but we did comfortably beat the ASX200 by around about 16%. Sleepless nights I suppose yes I did have a few, I am glad I don’t have any hair on my head anymore because I would have lost a lot of it, but we where happy with our performance.
Clive Tompkins: Tell us about the Investment Company; why did you choose to operate it as an investment company rather than under the more usual unit trust structure.
Andy Semple: We purposely looked at setting up under company structure Clive because of two key reasons; the safety aspect and the efficiency aspect. What I mean by the safety aspect, safety in the terms of the investor. As a disclosing entity as an unlisted public company, we have to report twice a year and we are audited and also from our perspective as the manager, because it is a company once we have raised the particular funds we are then closed in. So we can then focus on the task at hand of investing on behalf of the shareholder and not having to worry about redemptions. If we saw anything from the GFC (Global Financial Crisis) was when certain funds wanted to be redeemed, they actually could not operate because of their inflexibility there. Whereas in a company structure and being closed in, we were fine in that regard.
On the Efficiency side of things, our mandates to pay are regular investment on the quarterly basis and ultimately that will be franked. With franking credits, a company structure can over time accrue those franking credits, so as time progresses we will be able to have more and more of out yields fully franked, whereas if it were a trust for example, every year you just have to pass them out. Clive Tompkins: So how long has it been going? How much is under management? And who invested at the outset?
Andy Semple: We have been going since July 2008. Currently, assets under management about $1.4 Million and initial seed investors were myself, the other directors of the investment manager plus some selected seed initial clients who seeded the Investment Company.
Clive Tompkins: Are there plans to list?
Andy Semple: That is definitely in our business plan to list. I couldn’t give you a defined time frame, I can definitely tell you it won’t be in 2010 but ultimately yes we would like to have Xcelerator Premium Income Limited to become a listed Investment Company. So that is definitely on our plans to happen in due course.
Clive Tompkins: Andy so where has the use of options proven itself over the last 12 months?
Andy Semple: Options are the key for Xcelerator Premium Income Limited in order for us to generate the type of income returns that we are after for our shareholders. We are basically harvesting the premiums from the options market. With the GFC volatility was a lot higher, so hence options premiums we just out of this world literally. Fortunately with our techniques that we have in our stock selection, we were able to sort of harvest the low hanging fruit there, and in turn, that was filtered through to our shareholders in the form of a consistent dividend throughout that period.
Clive Tompkins: Has it added more or less volatility to the fund?
Andy Semple: Without a shadow of a doubt it put less volatility to Xcelerator Premium Income Limited. Basically we are about 75 maybe to 80% of the volatility of say the ASX200, when we do our monthly comparisons. So by constantly writing options against the portfolio and also using the options for hedging purposes as well, we were able to significantly decrease the volatility.
Clive Tompkins: How do you measure this?
Andy Semple: Every month we calculate obviously the NTA for the company and then we compare that on a base against the ASX200, the ASX50 we also compare it against the listed investment company Djerriwarrh, and also a listed exchange traded fund the Aurora Buy Write Fund. So we have a mix of benchmarks to look upon, and the final one we have would be that we benchmark our income that we are wanting to aim for against the RBA cash rate + 5%.
Clive Tompkins: You are currently offering new shares, what is the minimum subscription? And what are investors buying?
Andy Semple: The minimum subscription is 10,000 shares at $0.86 per share. The present NTA is around about $0.95 per share, so it represents a pretty good deal to new investors.
Clive Tompkins: Being an unlisted Investment Company, how often do you value the units?
Andy Semple: We value the units actually on a daily basis but we report that valuation at the end of the month for existing shareholders and we post that information on the website.
Clive Tompkins: Ok, so what are you fees?
Andy Semple: 2% + GST and there is also a performance based fee on the basis we beat our hurdle.
Clive Tompkins: Andy you have been in broking for a number of years specialising in options, what have you learnt about funds management that will give investors confidence in you and your team?
Andy Semple: Experience is important Clive, the fact that we have actually spent the time seeing different cycles come and go and then able to adapt an appropriate strategy that ensures we maximise the return, but at the same time minimise the risk to existing shareholders.
Clive Tompkins: Last question, Andy where do you see the market in 6 months from now, given the big run up?
Andy Semple: Good question Clive, the short answer, I don’t know. But what I do know is that we are currently experiencing an up trend, and within that up trend I am prepared to go with it. However, I am mindful that things can change, so therefore I have got my stop losses in place should the trend change.
