#Luxembourg Specialised Investment Fund

[jamieclawhorn]

Have £1,000 to invest? A FTSE 250 dividend stock that I’d buy and hold for the next two decades

In my opinion, companies that provide a specialist, bespoke service are some of the best investments you can make for the long term. Firms like Sanne (LSE: SNN) for example, which is a specialist global provider of corporate and fund administration services.

Administration services are tedious and time-consuming, but they are also extremely complex and companies can’t afford to get them wrong. With this being the case, I understand it is often more cost effective for businesses to outsource these functions, rather than build their own in-house teams.

Growth charging ahead 

You only need to take a look at Sanne’s historical figures to see just how big this market for outsourced administration is becoming. From just £19m in sales in 2012, the company reported total sales of £113m in 2017.

The City doesn’t expect growth to slow down any time soon. Analysts have already pencilled in potential revenues of £157m for 2019. Alongside its first-half results release, published this morning, the firm confirmed today that it is currently on track to hit full-year growth forecasts. For the six months to the end of June, revenues grew 17%, although due to “an atypical first half weighting of results in 2017,” profit before tax declined 12% year-on-year on a constant currency basis.

And as well as the bespoke and specialist nature of the firm’s business, what I also like about Sanne is its relatively small size and cash generation. For the first half of 2018 for example, it booked an underlying operating profit margin of 30%. 

These figures indicate to me that the company has plenty of capital to reinvest back into the business and expand into new markets. Bolt-on acquisitions in Madrid, Mauritius and Luxembourg show that this is exactly what management is doing.

As Sanne continues to build on its position in the market for administration services, I would be happy to hold the stock for the next two decades. Currently trading at a forward P/E of 21, the shares don’t come cheap, but I believe it is worth paying a premium to take part in Sanne’s growth story.

Bolt-on growth 

Diploma (LSE: DPLM) is a business that I believe has similar qualities. The company produces specialised technical products for industries such as life sciences. This is not the sort of market where any old business can come and quickly grab market share, Diploma has spent decades building its reputation. And like Sanne, the firm is using its cash flow to acquire smaller businesses to help boost growth. 

The latest acquisition was FS Cables, for a total cash consideration of £18m.

A combination of organic growth from its existing ops, as well as complementary growth from acquisitions, has helped turbocharge Diploma’s earnings expansion over the past five years. It doesn’t look as if experts believe this will change any time soon. 

The City is expecting earnings to expand 26% in 2018, leaving the stock trading at a forward P/E multiple of 25. That’s a bit on the expensive side, but once again I believe this specialist business with enormous growth potential is worth a premium valuation. Over the past six years, earnings growth has averaged just under 10% per annum on a compound basis. 

If this continues, it won’t be long before Diploma grows into its valuation.

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Could these 2 FTSE 250 growth stocks double your money again?

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

[overviewnewss]

Abu Dhabi fund eyes stake in £3bn PIC

One of many world’s greatest sovereign wealth funds‎ is plotting to purchase an enormous stake within the pension buyout agency which stands behind the retirement obligations of corporations together with EMI, the music writer, and WPP, the advertising and marketing providers large.

Sky Information has learnt that the Abu Dhabi Funding Authority (ADIA) is amongst a small variety of events in talks ‎to accumulate JC Flowers’ 21.four% shareholding in Pension Insurance coverage Company (PIC).

The method, which is being run by bankers at Evercore and is at an early stage, is predicted to worth the entire of PIC at near £3bn. ADIA is more likely to bid for almost all of the Flowers stake, ‎with CVC Capital Companions, the non-public fairness group which beforehand owned System One motor racing, probably shopping for a small chunk of the shares to take its personal holding in PIC as much as 20%. CVC purchased into PIC a yr in the past, since when it has insured pension liabilities from corporations together with Pirelli and 3i, the listed non-public fairness group. PIC is certainly one of a crop of huge pension buyout corporations, whose ranks additionally embody Rothesay Life. It loved a robust 2017, reporting underlying working revenue of £195m. Final yr, Legend Holdings, which part-owns the Chinese language private computing group Lenovo, purchased an enormous stake in PIC, which is predicted to contemplate a inventory market itemizing within the subsequent couple of years. PIC’s different shareholders embody Reinet, a Luxembourg-based investor.‎‎

Like its rivals, PIC specialises in insuring third events’ company pension schemes and taking over duty for making retirement funds to their members. The corporate insures greater than 150,000 pensioners by way of the schemes it has struck offers with, and has over £25bn in monetary investments. PIC’s different company purchasers embody the London Inventory Trade Group, Cadbury and Honda, whereas it additionally has a rising public sector pipeline. The pension buyout business has grown quickly over the past decade as corporations have sought to search out methods of managing the longevity threat embedded of their outlined profit pension schemes. The variety of trustees trying to take action within the UK has elevated in latest months amid public controversies over the pension deficits at corporations equivalent to BHS and Carillion.

Sky Information revealed final month group of distinguished Metropolis figures together with the previous boss of the Pension Safety Fund had joined forces to launch Pensions Superfund, a brand new automobile geared toward pooling corporations’ outlined profit schemes. ADIA declined to touch upon Thursday.

The post Abu Dhabi fund eyes stake in £3bn PIC appeared first on Overview News.

[djgblogger-blog]

These five countries are conduits for the world's biggest tax havens

http://bit.ly/2vP50iT

Tax sheltering is not just the domain of exotic Caribbean isles. Major world powers, including the United Kingdom, play a critical and previously undisclosed role in global tax avoidance. CORPNET, CC BY-NC-SA

First came the Panama Papers, then the BahamasLeaks. Journalists continue to shed light on and raise a public outcry over the offshore financial centres that corporations use to reduce their tax bill – something that is still being challenged in court.

A new study has now uncovered all the world’s corporate tax havens and, for the first time, revealed the intermediary countries that companies use to funnel their money into these places.

Published on July 24 in the academic journal Scientific Reports, the paper Uncovering Offshore Financial Centers: Conduits and Sinks in the Global Corporate Ownership Network shows that offshore finance is not the exclusive business of exotic, far-flung places such as the Cayman Islands and Bermuda.

The Netherlands and the United Kingdom also play a crucial – although a heretofore obscure – role in the tax-avoidance game, acting as conduits for corporate profits as they make their way to tax havens.

What makes a tax shelter

Tax havens are a popular, legal and often secret instrument for multinational corporations to move capital across borders. By taking advantage of loopholes in various national legislations and placing operations in countries with low taxes, companies can reduce their tax rate from around 35% to 25% to 15% or lower.

Figure 1: The United States Effective Corporate Tax Rate (1947-2011)

American companies use clever (and legal) tactics to offshore profits and reduce their tax burden. US Federal Reserve via Wikimedia

Silicon Valley companies have become expert at this tactic. Using a combination of subsidiaries in Ireland, the Netherlands and Bermuda to reduce its tax burden, Apple paid just 0.005% tax on its European profits in 2014, the European Comission reported.

If multinationals’ profits were accounted for where the economic activity takes place, they would pay a combined US$500 to US$650 billion more on taxes each year, according to estimates by the Tax Justice Network and the International Monetary Fund. Of this, around US$200 billion a year would go to developing countries, which is more than they receive annually in development aid (US$142.6 billion).

Findings like this have put tax havens on the radar of US and European regulators, but there’s no broadly accepted definition of what makes a country an offshore financial centre.

Lists published by the Organisation of Economic Cooperation and Development (OECD) and the International Monetary Fund use different criteria to define tax shelters, and their outcomes are highly politicised.

The Tax Justice Network’s Financial Secrecy Index, Oxfam’s list of the worst corporate tax havens and Jan Fichtner’s 2015 Offshore-Intensity Ratio have proven to be more useful.

Fichtner (a co-author of this article) provides a rough yardstick for judging OFC jurisdictions by examining the proportion between foreign capital, such as FDI, and the size of the domestic economy.

What none of these measures can tell us, though, is the origin of the foreign investment reported by these tax havens. How does Apple’s money get from California to Bermuda anyway?

Big data and network analysis

By bringing together political economists and computer scientists in the CORPNET research group at the University of Amsterdam, it became possible to study how corporations make use of particular countries and jurisdictions in their international ownership structures. The novel, data-driven network approach of our study shed light on how offshore finance flows across the globe.

We looked not at country-level statistics but at detailed company data. By asking which countries and jurisdictions play a role in corporate ownership chains that is incommensurate with the size of their domestic economies, we were able to identify, for the first time, a complex global web of offshore financial centres.

We analysed the entire massive global network of ownership relations, with information of over 98 million firms and 71 million ownership relations. This granular firm-level network data helped us to distinguish two kinds of tax havens: sinks and conduits.

Introducing sinks and conduits

“Sink OFCs” attract and retain foreign capital. We identified 24 sink OFCs, including well-known tax havens such as Luxembourg, Hong Kong, the British Virgin Islands, Bermuda, and the Cayman Islands, but also Taiwan, a heretofore unnoticed tax haven.

Using our method, we can now investigate which jurisdictions are used by corporations en route to sinks. These “conduit OFCs” are attractive intermediate destinations because their numerous tax treaties, low or zero withholding taxes, strong legal systems and good reputations for enabling the quiet transfer of capital without taxation.

Figure 2: Mapping equity flows

The size of conduits (green) and sinks (red) reflects the investment that flows through the country. The colour to its position as a sink (blue = no sink, red = sink). The size of the arrows is proportional to the investment between two countries and the colour to its importance (blue = lower flow than expected, red = higher flow than expected). CORPNET

We found that a handful of big countries – the Netherlands, the UK, Switzerland, Singapore and Ireland – serve as the world’s conduit OFCs. Together, these five conduits channel 47% of corporate offshore investment from tax havens, according to the data we analysed.

The Netherlands leads the pack with 23%, followed by the UK (14%), Switzerland (6%), Singapore (2%) and Ireland (1%).

Each conduit jurisdiction is specialised both geographically and in industrial sectors. The Netherlands excels in holding companies, for example, while Luxembourg favours “administrative services”. Hong Kong’s geographic speciality lies in connecting to the British Virgin Islands and Taiwan.

New targets

Our findings debunk the myth of tax shelters as exotic far-flung islands that are difficult, if not impossible, to regulate. Many offshore financial centres are highly developed countries with strong regulatory environments.

That means that targeting conduit OFCs rather than sinks could prove more effective in stemming tax avoidance. This realisation may help European Union and the OECD officials, who have increased pressure on cracking down on tax avoidance since the 2008-2009 financial crisis (to modest effect), by helping regulators better tailor their policies.

British Finance Minister Philip Hammond has speculated that the UK could become a European tax haven if the EU fails to offer it a good Brexit deal. But, in practice, the City of London is already a major offshore financial centre.

Figure 3: Sink Offshore Financial Centres

Jurisdictions in blue have been under British sovereignty in the past or are still UK dependencies. CORPNET, Author provided

Of 24 sink OFCs, 18 have a current or past dependence to the UK, including major tax havens such as the Cayman Islands, Bermuda, British Virgin Islands and Jersey. New territories with low or no corporate taxes are continuously emerging as sink OFCs, but, as our study shows, there are just a handful of conduit OFCs.

Results and details are available on the dedicated website www.ofcmeter.org

Javier Garcia-Bernardo receives funding from the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme (grant no. 638946).

Eelke Heemskerk receives funding from the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme (grant no. 638946).

Frank Takes receives funding from the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme (grant no. 638946).

Jan Fichtner receives funding from the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme (grant no. 638946).