#interim management in Russia

[viktorviolettaenterprises]

Avtomat Kalashnikova's Rifle Series

Part 1: 7,62 x39 (Soviet M43)

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Author's Note

Greetings, dear customers!

I’m excited to be back providing great military content for your Sims 4 game! These past five months have been challenging due to various personal issues, including illness and other setbacks that slowed my progress. Managing everything on my own has been tough, especially since my partner has shifted focus away from our shared projects. But life must goes on.

Enough about the woe story—I'm happy to share that I’ve started by remastering some of my older content for those who enjoy classic items. Don’t worry, though; new items are also on the way. So sit back and enjoy! I hope you’ll find the new content up to your usual high standards.

Cheers!

Information

Right after World War II ended, the Red Army began searching for a new service rifle. They sought a rifle that would fire a cartridge based on the M43—a shortened version of the 7.62 x 54mm round, which became the 7.62 x 39mm. This new round was chosen for its moderate recoil and suitability for automatic fire. Initially, the semi-automatic Simonov SKS was selected as an interim solution while the search continued.

In 1946, Mikhail Kalashnikov entered his design into a competition alongside others. However, the Central Committee was not satisfied with the initial results, and all contestants were required to make improvements. A year later, Kalashnikov returned with a modified version, which he named the "Avtomat Kalashnikova model 47." Tests showed that Kalashnikov's design met all the Central Committee's requirements. Ultimately, his design was standardized as the Red Army's main service rifle, simply named the "AK" or "Avtomat Kalashnikov."

🇷🇺Original Releases🇷🇺

The rifle that started it all—the AK-47—is Mother Russia’s proudest gift to the world, born from the genius of Mikhail Kalashnikov. This section details the original AK model produced by the Soviet Union and it's Successcor States, Russian Federation, mark the beginning of an iconic rifle series

AK-47 (Avtomat Kalashnikova 1947)

Of all the weapons in the vast Soviet arsenal, nothing was more The One that Started all. nothing is more profitable than Avtomat Kalashnikova model of 1947, more commonly known as the AK-47, or Kalashnikov. It's the world's most popular assault rifle. A weapon all fighters love. An elegantly simple 9 pound amalgamation of forged steel and plywood. It doesn't break, jam, or overheat. It will shoot whether it's covered in mud or filled with sand. It's so easy, even a child can use it; and they do. The Soviets put the gun on a coin. Mozambique put it on their flag. Since the end of the Cold War, the Kalashnikov has become the Russian people's greatest export. After that comes vodka, caviar, and suicidal novelists. One thing is for sure, no one was lining up to buy their cars.

This Particular Model is first adoption of the AK family by the Red Army in 1949 & Contray to Popular Believe This Type Of Rifle Along With It's Folded Stock Variant Are So Rare and inteded as Red Army Trial Model. It got short service lenght in the Advent Of AKM.

AKS-47 (Avtomat Kalashnikova Skladnoy Model 1947)

Later versions of the original AK-47 are basically standard AK-47s but with a downward-folding metal stock (like the one on the German MP40 submachine gun). This design makes it easier to use in cramped spaces, like inside BMP infantry combat vehicles, and for paratroopers use. It was adopted for use by the Soviet military.

AKM (Avtomat Kalashnikova modernizirovanny)

The AKM is a improved & modernized variant of the AK-47 and was produced in much larger numbers. The most notable difference is that the AKM has a stamped receiver, making it lighter and less costly to produce, a slant compensator on the tip of the barrel (to reduce recoil) & an improved gas tube to ensuring Reliability. The Most Obiquotous AK Variant In Market.

AKMS (S – Skladnoy – Folding), A Variant Of AKMS which was equipped with an under-folding metal shoulder stock. The metal stock of the AKMS is somewhat different from the folding stock of the previous AKS-47 model as it has a modified locking mechanism, which locks both support arms of the AKMS stock instead of just one (left arm) as in the AKS-47 folding model. Like The perk From it's Main Rifle. This Variant Also Featuring More Lighter, Cheaper to Produce and better Recoil Management

AK-103/ Kastov 762

Note:Some of You young folks might knowed this gun from New Call of Duty LOL

The Trend of Weapon Modernization of 21st Century Finally Fall into Kalashnikov's Ear And AK 103 is the Answer for that. The AK-103 is a newer version of the AK-47. It still uses the same 7.62×39mm ammo but comes with some upgrades like a more comfortable synthetic stock and better materials like it's 5.45 Version brother. It’s designed to be more accurate and reliable, making it a solid choice for military and law enforcement use. Overall, it’s a tough like What you expect from Kalashnikov Rifle, modern rifle that handles well in different situations.

AK-104

A Russian Modern Answer to M4 Carbine. The AK-104 is a modernized version of the AK-47, designed to compete with the American M4. Chambered in 7.62×39mm, it’s more compact and features a folding stock, making it easier to handle in tight spaces. The AK-104 incorporates updated materials and design elements to stay relevant in today's weapon trends. Kalashnikov's ability to adapt and innovate has kept the AK series influential and trendy, maintaining its status as a leading choice in firearms across the globe.

☭Warsaw Pacts Derivatives & Foreign Copies☭

Due to the popularity of the Kalashnikov rifle and the heightened Cold War marked by the foundation of the Warsaw Pact (Soviet's defense pact to match Western NATO), many communist-aligned nations started copied Kalashnikov designs, both legally and illegally. The following section covers the foreign derivatives of the legendary Kalashnikov!

🇭🇺FEG AMD-65 (Automata Módosított Deszantfegyver 1965)🇭🇺

Another Masterpiece from Hungarian Factory Fegyver- és Gépgyártó Részvénytársaság. Popular Amongst Afghanistan National Army (Afghan's Army during occupation of United states of America, Until the fall of Afghanistan in 2021) is a modified compact version of the AKM-63 made for use by specialist troops like paratroopers and vehicle crews. The AMD-65 featured a shorter barrel, a muzzle brake, and an Iconic side folding stock.

The AMD-65 is the most famous variant of the Hungarian AKs, due to its distinctive appearance and more widespread availability in the United States compared to other variants.

🇵🇱FB RADOM Wz. 96 Beryl M762🇵🇱

representing Poland's efforts to develop modernized indigenous 5.45x39mm and 5.56x45mm Kalashnikov Rifle in response to late Cold War Warsaw Pact and NATO cartridge standardizations. This particular Model is is an export version of the kbs Wz. 96C chambered in 7.62x39mm. It is most notably used by Nigeria. and Mostly Popular Amongst "PlayerUnknown's Battlegrounds" Gamers or PUBG.

🇷🇴Pistol Mitralieră model 1963/1965🇷🇴

PM md. 63 (Romanian: Pistol Mitralieră model 1963; lit. "model 1963 submachine gun") is the Romanian military designation of Romanian manufactured clones of the Soviet AKM. Produced at the Cugir Arms Factory (today a subsidiary of ROMARM), early Romanian Kalashnikov rifles were almost indistinguishable from Soviet AKMs, but a number of Romanian domestic features were introduced in later production models, making them more and more distinct from Soviet Kalashnikovs. it is better known under the export name of AIM.

PM md. 65 The PM md. 65 is the Romanian clone of the AKMS. As with the md. 63, the rifle features a foregrip integrated into the handguard; in order to accommodate the underfolding stock, however, the foregrip of the PM md. 65 notably slants backwards. The rifle is exported to the west under the export name AIMS.

The Mini Draco (imported by Century Arms) is an ultra-short export variant of the Romanian AK featuring a 7.75" barrel. intended For US Civilians. Straight From Grand Theft Auto V

🇫🇮SAKO/Valmet Assault Rifle Series🇫🇮

The Finnish firearms manufacturer Valmet built assault rifles, in co-operation with Sako, based in part on the Kalashnikov action in the early 1960s, and continued to manufacture them up until 1994. Valmet later merged into Sako (in the late 1980s), and the some of their designs are currently being manufactured.

The model M62 (known as Rk 62 in Finland) was adopted by the Finnish Defence Forces, and still serves as the standard infantry weapon of the Finnish Army.The M62 has an unusual T-shaped tubular buttstock, compared to other Kalashinkov pattern rifles. The gas block and front sight design is very similar to the Israeli Galil rifle, as the Galil was designed based on the Valmet.

The RK 95 TP (known commercially as M95) is an upgraded variant of the M62, designed and manufactured by Sako. It has a folding stock, and can be fitted with suppressors. It was adopted into service by the Finnish Army, although in relatively small numbers, and it is still used by Finnish Special Forces. An export variant in 5.56mm was also produced in extremely limited numbers.

🇨🇳Norinco Type 56🇨🇳

The Type 56 assault rifle is the Chinese clone of the Soviet AK-47 rifle. It was China's service rifle from 1956 to the adoption of the QBZ-95 in around 1997. The Type 56 is the most commonly used AK variant in American film and television productions. This came about because China exported civilian AK variants (both Type 56 patterened and less commonly Soviet AK patterened) to the West in large numbers during the 1980s, primarily by the export companies Norinco

QBZ-56C (Type 56C) – Short-barrel version, introduced in 1991 for the domestic and export market. The QBZ-56C as it is officially designated in China, is a carbine variant of the Type 56-2 and supplied in limited quantities to some PLA units. The Chinese Navy is now the most prominent user. The QBZ-56C is often carried with a twenty-round box magazine, although it is capable of accepting a standard Type 56 thirty-round magazine. It also has a sidefolding stock in addition to a muzzle booster, giving it a similar appearance to the AKS-74U.

Type 56-2 – Improved variant introduced in 1980, with a side-folding stock and dark orange bakelite furniture. The stock also houses a cleaning kit, which both underfolding AKs (all nations) and other sidefolding AKs lacked, instead requiring a separate pouch. It also allows a traditional detachable bayonet, both AK-47 and AKM styles, as an option in addition to the folding spike style. Mainly manufactured for export and rare in China.

Type 56-2M - Basically Norinco Type 56-2 fitted with an aftermarket LHV-47 handguard and ergonomic pistol grip. Perfect for Customization. Model Straight From Grand Theft Auto V

💀Special Role And Novelty Items🤡

This Section will Covering Some Specialized Roles of Kalashnikov Rifle And some just a novelty Items of it which is specifically designed to serve no practical purpose, and is sold for its uniqueness

RPK-47

The Light Machine Gun Version of Legendary Kalashnikov's Assault Rifle. Featuring A Heavier Barrel for supporting Sustained fire, Bipod To enhance stability and accuracy during sustained fire, the RPK includes a bipod. This feature allows the operator to stabilize the weapon while firing from a prone or kneeling position, which is crucial for maintaining accuracy and control in a support role. along with the RPK often features a sturdier stock, which helps manage recoil and enhance overall stability while firing. this particular Version is Using 7.62X39mm

Golden AK Series

Note:Special Thanks For @bluexxxxx For magnificent Watergun Pose in Second Picture.

Alright, picture this: the iconic AK-47, but with a dazzling twist. That’s the Golden AK Series for you! Imagine the legendary Kalashnikov rifle decked out in a sleek, gold finish that screams both style and power. These rifles aren’t just about looking cool (though, let’s be honest, they definitely do). They’re also built with all the rugged reliability and firepower you expect from an The Cold War champion. So, if you want a rifle that combines legendary performance with a touch of glamour, the Golden AK Series is where it’s at. It’s not just a tool; it’s a statement.

@exzentra @exzentra-reblog

[dontforgetukraine]

Having recently spent a few weeks in Poland and Estonia, I formed the impression that the Russian invasion of Ukraine has transformed neighbouring countries in ways that US and western governments completely fail to grasp. Two years of war have radically reshaped expectations.

From the Estonian colleague who calmly told me there will be a Russia-Nato war in the next few years in which Estonia will be partially or completely destroyed, to the Polish mother who no -longer wants her son to pursue a military career--people are drawing conclusions.

They are concluding that Nato is feckless and cannot or will not deter Russia. They are questioning whether their own institutions, and allies, are up to the challenges confronting them. And they are factoring likelihood of war into their own life plans in ways that shocked me.

I mention this because the US and Nato seem to assume that as long as the invasion of Ukraine is contained to Ukraine, and Russia is not actively invading other regional countries, whatever happens in Ukraine (such as the destruction of a children's hospital) stays in Ukraine.

Washington, Brussels, and Berlin have all the time in the world to manage the invasion. If it is eventually resolved to their satisfaction, what happened in the interim--the death and destruction, the blighted lives and hopes--won't matter to much to anyone except Ukraine. They are sadly mistaken. Yes, Ukraine and its people are bearing the brunt of Russia's invasion of Europe. But even if the invasion should end tomorrow, the reputational damage to Nato (and I daresay the EU) has been huge. They have been exposed as inept and compromised. Do Biden, Scholz, et al. think that allowing Russia to ravage Ukraine with impunity will work out well for the Euro-Atlantic institutions that undergird their own power and prestige? People in CEE countries see their supposed allies allowing neighbour Ukraine to be annihilated. People in CEE countries are not fools or passive victims. They see what is being allowed to happen to their neighbour and update their own views accordingly. This is one reason (among many) why the delay in achieving Ukrainian victory is so damaging to the collective West. It's already too late for honour or conscience, but self-interest alone should lead us in the West to help Ukraine expel Russia from its territory sooner rather than later. The credibility of our alliances is ebbing away. Ukraine must win soon to salvage what's left of it.

—Matthew Light, Associate professor of criminology and European studies, University Toronto (Source)

[mariacallous]

Negotiations over a U.N. cybercrime treaty have evolved into a diplomatic proxy war between democracies and their authoritarian rivals over competing future visions of the internet, technology, and human rights in the digital age, pitting the United States and its allies yet again against Russia and China at the United Nations. 

Over the past 10 days, delegates from around the world have convened at the United Nations headquarters in New York for a sixth round of negotiations on the draft text of a first-ever U.N. convention combating cybercrime. 

The aim of the treaty, at least on paper, is to make it easier for countries to share information on the astronomical rise of digital criminal activities like ransomware, denial-of-service attacks, and the exploitation of children online. A bulk of countries involved in the negotiations are hard at work in marathon closed-door negotiating sessions to do just that, according to diplomats and experts tracking the negotiations. 

But a group of authoritarian governments is seeking to advance its own agenda through the U.N. treaty—and the consequences could be dire if it is successful.

The treaty, Western officials, experts, and human rights advocates say, could be used as a pretext to extend state repression into the digital realm—if autocratic governments in Russia, China, Iran, and elsewhere have their way on the final text. One risk is that the treaty could expand the scope of cybercrimes and allow states to crack down on political dissent, free media, or online content in general.

“You could end up in a situation where a treaty intended to boost global cooperation on cybercrime becomes a means for authoritarian states to surveil their populations, access and share personal data of their citizens, and criminalize online content and behaviors they don’t like,” said Megan Roberts, interim managing director of the Digital Innovation and Democracy Initiative at the German Marshall Fund think tank. 

The treaty, and its evolution, is steeped in arcane U.N. processes and technocratic language: The formal name for the negotiation rounds is the “Ad Hoc Committee to Elaborate a Comprehensive International Convention on Countering the Use of Information and Communications Technologies for Criminal Purposes.” Negotiators are fighting over a 72-page document, with tracked changes from countries suggesting different words, phrases, and priorities. 

But how these negotiations play out will determine whether the axes of democracies or autocracies will win out in their vision of global governance in the digital age.

A U.N. treaty, even if not every country in the world signs on, would set a major marker for how national governments and regional blocs could establish their own practices on cybercrime and digital rights in the future. “The top-level thing is just to remember that a treaty is still a massive signaling force,” said Raman Jit Singh Chima, senior international counsel and Asia Pacific policy director at the digital rights group Access Now. “Even if the implementation can be spotty, it’s going to have a massive impact on the design of cybercrime laws for the next 20, 30 years.”

Get the treaty right, experts argue, and it could help countries go after cybercriminal networks much more efficiently, while also setting the standard for future international agreements on cyber issues without eroding human rights. Get it wrong, however, and it could be a major win for autocratic regimes looking to normalize and justify their repression on the net. 

“Imagine a lot of cross-border geopolitical surveillance,” said Katitza Rodríguez of the Electronic Frontier Foundation (EFF), a digital rights advocacy group. The problem, Rodríguez said, is the potential for collaboration between authoritarian regimes. “You’re legitimizing their activities by providing these powers [a way] to be legitimized under a U.N. umbrella treaty.” 

Western countries are pushing back against efforts to do just that, said Deborah McCarthy, the lead U.S. diplomat negotiating the treaty, in an interview. “We’re working to make sure there is strong language for human rights safeguards and grounds for refusal of cooperation” on sharing digital information if it pertains to political persecution or repression.

McCarthy said that, on the other hand, if the treaty negotiations are successful, it would help countries collaborate much more efficiently on tackling transnational cybercrime networks, paving the way for closer law enforcement cooperation across borders and lending resources and expertise on cybercrime to developing countries. 

For the past two decades, global cybercrime has been largely governed by an agreement called the Budapest Convention, named after the Hungarian capital where it was first adopted in 2001 by more than 60 countries—mostly from the West. The Budapest Convention is widely seen as the gold standard because it is viewed as the most comprehensive multilateral cybercrime treaty to date, but outside experts “have long criticized it for not having stronger safeguards for human rights,” according to Deborah Brown, a senior researcher at the nonprofit advocacy organization Human Rights Watch. 

The idea of the new treaty was a brainchild of Russia and some other not-so-democratic countries in a bid that digital rights experts suspect was aimed at supplanting the Budapest Convention with a newer framework that could have more of the Kremlin’s influence in its design. (The Budapest Convention was widely viewed as a Western-created and Western-oriented convention in a way that rankled Moscow, even given its shortfalls on human rights protections. Neither Russia nor China is a signatory to the Budapest Convention.) 

In 2019, Russia and over a dozen other countries including Belarus, Cambodia, China, and Nicaragua, passed a U.N. resolution to establish an international convention on cybercrime. The first negotiating session occurred in February and March of 2022, overshadowed by Russia’s full-scale invasion of Ukraine that dominated the U.N. agenda. The aim in this sixth round of negotiations is to wrap things up and present a finalized treaty in New York at the U.N. General Assembly in 2024, which is actually a tight deadline by laboriously bureaucratic U.N. standards. But digital rights advocates say the stakes are too high not to get it right. “I think rushing consensus without really working out the details would pose a big risk,” Brown said.

One big hang-up in the treaty negotiations now is the scope of the treaty and definition of cybercrimes. The United States, European countries, and others want to ensure cybercrime is narrowly defined to “cyber-enabled crimes” while Russia, China, and its bloc of allies want to expand the definition to any crime in which technology is used. “Because this is a criminal instrument, making it a crime [based on] vague definitions of all uses of devices is something that we cannot accept, because it is an open door to considering many things as crimes,” McCarthy said. (As one example, China in January proposed adding “dissemination of false information” as a cybercrime in the U.N. convention text, a pitch that was immediately opposed by Western countries that feared Beijing would use it as a pretext to go after anyone spreading information critical of the Chinese government.) 

Meanwhile, other cybersecurity experts and digital rights advocates worry that the private sector and civil society groups are being shut out of the negotiating process for this treaty. Service providers like Microsoft are increasingly nervous about their obligation to cooperate and engage with authoritarian governments when it comes to data access and surveillance. 

“There are some non-state actors who have a role here, unlike in most treaty negotiations, and yet this one is proceeding like any treaty negotiation,” said Richard Salgado, a lecturer at Stanford Law School who is also a former director of law enforcement and information security at Google. 

The treaty negotiations represent the latest clash between the United States and geopolitical rivals such as Russia and China at the United Nations. China has in the past routed U.S. efforts to curb its influence in the U.N. system, though the United States notched a significant win when its top candidate, Doreen Bogdan-Martin, was tapped to lead the U.N.’s most important and oldest tech agency, the International Telecommunication Union. Bogdan-Martin defeated Russia’s candidate with 139 out of 172 votes cast.  

Western diplomats and many experts are hopeful that Russia and China will be outmaneuvered again in negotiations over the U.N. cybercrime treaty. But others say not to discount Moscow’s history of using wily tactics at the United Nations to advance its agendas. 

“Russia is a critical player, and I’d hesitate to say they’re not influential, because I think the problem is people underestimate them, and they’re very good at U.N. procedure and parliamentary practices and throwing a curveball in,” Chima said.

“If the treaty process breaks down, immediately Russia, China, and many others will rush … to say, ‘Look, this has broken down, we’re going to create something else,’ either in the U.N. or elsewhere. It’ll cause more chaos.”

Other experts following the negotiations say it could come down to the wire as 2024 approaches and the draft of the treaty remains inundated with red ink. “You’re about to finish a treaty—your screen should have a few track changes in red. Now it’s all red,” Rodríguez said of the current state of the document. “Nothing is agreed until everything is agreed.”

[lizseyi]

Reforming Interpol's Commission For The Control Of Files - Red Notice Monitor

Interpol's Commission for the Control of Files (CCF) is facing significant challenges due to delays in processing requests for deletion or removal of data. According to Interpol's rules and constitution, it should take approximately four months to confirm the presence of data on an individual and nine months to decide if the data should be maintained or removed. However, the reality is a backlog so severe that cases now take well over a year for proper consideration.

The CCF has made improvements under the new administration introduced in March 2022, with decisions becoming more detailed and better reasoned. Nevertheless, the meticulousness required for each case adds to the delay. The CCF consists of only seven part-time members, assisted by around ten lawyers who prepare cases for review. This setup is similar to that of the European Court of Human Rights, where lawyers in the registry summarize key issues and facts for the judges.

With a significant backlog of cases pending, the need for additional resources is clear. The part-time nature of the CCF members role makes it difficult. The members are highly skilled in their legal careers outside of Interpol, but the lack of sufficient funding and investment in the CCF contribute to the delays. Increasing the number of CCF members and allowing greater delegation of powers, or even appointing some members to work full-time, could significantly help. Currently, the CCF convenes at least three times a year, dedicating three or four days each session to complex applications that require substantial time and consideration.

Simple cases, such as bounced checks or family law issues like non-payment of child maintenance, are usually resolved quickly. However, more complex political cases, where extradition is disguised as legal action, often involve frequent abusers of the system such as Russia, China, Turkey, and the UAE. These countries sometimes collaborate to target individuals abroad. Those cases are not always obviously corrupt and only through careful preparation of the case and provision of evidence are lawyers able to show the problems.

The CCF also struggles with the interim suspension of Red Notices, particularly in urgent cases where individuals are detained at borders or airports. Although improvements in communication and decision-making have been noted recently, the lack of resources prevents the CCF from operating within reasonable timeframes. It is hoped that the election of a new General Secretary may prompt Interpol to seek better funding and resources for the CCF to manage and reduce the backlog.

For Interpol to maintain its credibility, a well-resourced CCF is essential. The members of Interpol must recognise the importance of supporting this body to ensure it can uphold justice and the rule of law.

For those facing issues with Red Notices, exploring options forRed Notice removal could provide necessary relief.

[newstfionline]

Wednesday, April 3, 2024

California is gripped by economic problems, with no easy fix (Economist) Home to many of America’s most progressive policies, from criminal justice to vehicle emissions, California serves a unique role as a punchbag for right-wing politicians. Every few years it becomes fashionable to declare that it is a failed state, or that the California dream is turning into a nightmare. This rhetoric is often overblown: in terms of pure economic heft California remains the most powerful American state. But for all its continuing prowess in innovation (not least in artificial intelligence), California again appears to be entering one of its periodic rough patches. The state faces three overlapping challenges: rising unemployment, growing fiscal strains and population outflows. All of these should abate over time, but for now they mark out California as a pocket of relative weakness in an otherwise robust American economy.

State Department Defends Arms Transfers to Israel (Washington Post) State Department spokesman Matthew Miller defended the Biden administration’s recent decision to authorize the transfer of billions of dollars’ worth of warplanes and bombs to Israel, saying Israel needed to defend itself. Miller then came under pointed questioning about whether the 2,000-pound MK84 bombs authorized to be transferred should be described as “self-defense,” as the bombs have been linked to mass-casualty events in Gaza. Miller responded that Israel needed to defend itself “against a very well-armed adversary, like I said Iran, Hezbollah,” and that Washington expects Israel to use any weapons responsibly.

US oil exports (Bloomberg) Who is a major beneficiary of sanctions on Russian and Venezuelan oil? US suppliers who have muscled their way into markets once dominated by OPEC and its allies. US oil exports have set five new monthly records since Western nations began imposing sanctions on Russia, after the Kremlin launched its full-scale invasion of Ukraine. And with trade restrictions on Venezuela set to renew in April, American barrels are beginning to displace sanctioned oil in India, one of the bigger markets for illicit crude.

Panic in Haiti's capital as wild shooting fills streets (Reuters) Panic set in around downtown Port-au-Prince on Monday as wild shooting filled the streets of Haiti's capital, with heavy gunfire near the national palace. The latest violence to rock the Caribbean island nation comes as the outgoing prime minister signaled that a broad transitional council is nearly finalized and seen as key to ending the current social and political crisis and paving the way for new elections.

Peru’s president accused of amassing $500K in jewelry on $50K salary (Washington Post) Even given the low expectations Peruvians have for their leaders, Dina Boluarte was unpopular. For nearly all of her 16-month presidency, her approval ratings have languished in the single digits. She’s widely blamed for the deaths of nearly 50 people killed by security forces while they were protesting her predecessor’s ouster, and accused of standing by while lawmakers dismantle Peru’s democracy. Still, Boluarte, 61, a mid-level civil servant who became Peru’s first female president, had managed to avoid accusations of being personally corrupt. Until now. Her government has been rocked by reporting that in the past year she has amassed a personal jewelry collection worth $500,000 on a monthly presidential salary of around $4,200. Highlights allegedly include a $50,000 Cartier bracelet and a $19,000 Rolex watch. That prompted prosecutors to launch an investigation for “illicit enrichment.” The accusations extend Peru’s streak of presidents to come under serious criminal investigation to eight. Every leader of this Andean nation since 1985 (with the exception of two briefly serving, unelected interims) has been the target of at least one criminal probe.

Norway follows its neighbor Denmark in planning an increase in conscripted soldiers (AP) Norway is to increase the number of conscripted soldiers from the present 9,000 to 13,500, the Norwegian government said Tuesday. “We must have enough people with the right skills at the right time,” Defense Minister Bjørn Arild Gram said. “We will need more people with professional military expertise going forward.” The move by the Scandinavian NATO member comes after neighboring Denmark last month said it wants to increase the number of young people doing military service by extending conscription to women and increasing the time of service from four months to 11 months.

Scottish Hate Crime Law Takes Effect as Critics Warn It Will Stifle Speech (NYT) A sweeping law targeting hate speech went into effect in Scotland on Monday, promising protection against threats and abuse but drawing criticism that it could have a chilling effect on free speech. The law, which was passed by the Scottish Parliament in 2021, expands protections for marginalized groups and creates a new charge of “stirring up hatred,” which makes it a criminal offense to communicate or behave in a way that “a reasonable person would consider to be threatening, abusive or insulting.” A conviction could lead to a fine and a prison sentence of up to seven years. The protected classes as defined in the law include age, disability, religion, sexual orientation and transgender identity. Racial hatred was omitted because it is already covered by a law from 1986. The new law also does not include women among the protected groups; a government task force has recommended that misogyny be addressed in separate legislation.

Ukraine uses drones in what appears to be its deepest strike yet inside Russia (AP) Ukrainian drones attacked industrial facilities in the province of Tatarstan, Russian authorities said Tuesday, in what would be Kyiv’s deepest strike inside Russian territory since the war began more than two years ago. Seven people were injured in the attack on facilities near the cities of Yelabuga and Nizhnekamsk, located some 1,200 kilometers (745 miles) east of Ukraine. The strike damaged a hostel for students and workers in a free economic zone where a factory manufacturing Iranian-designed drones is reportedly located.

Turkey’s shock elections (Washington Post) Turkish President Recep Tayyip Erdogan just experienced what analysts deem his worst political setback in more than two decades. His long-ruling Justice and Development Party, or AKP, lost emphatically in local elections around the country Sunday—a surprising rebuke after Erdogan had consolidated his tight grip on power in general elections last year. The opposition Republican People’s Party, or CHP, secured victories across the country and in Turkey’s five biggest cities, including Istanbul, where Erdogan had campaigned vigorously for his handpicked AKP candidate. This turn of events is fueled, first and foremost, by voter anger at a frustrating status quo. “It was Erdogan’s handling of the economy that appeared to loom largest in the race, with households battered by runaway inflation and the cratering value of the currency,” my colleagues Beril Eski and Kareem Fahim reported. Inflation has been running at about 70 percent.

Macau Races (Nikkei Asia) Macau is getting out of the horse racing business, with the final race at the Macau Jockey Club happening last Saturday after 44 years of operation. The average attendance last year had dwindled to 492 spectators, but the finale on Saturday drew a crowd of 3,000 to send it off.

Taiwan’s strongest earthquake in nearly 25 years damages buildings, leaving 4 dead (AP) Taiwan’s strongest earthquake in a quarter century rocked the island during the morning rush hour Wednesday, damaging buildings and highways and causing the deaths of four people. Taiwan’s national fire agency said four people died in Hualien County and at least 57 were injured in the quake that struck just before 8 a.m. A five-story building in Hualien appeared heavily damaged, collapsing its first floor and leaving the rest leaning at a 45-degree angle. In the capital Taipei, tiles fell from older buildings and in some newer office complexes, while debris fell from some building sites. Schools evacuated their students to sports fields, equipping them with yellow safety helmets. Some also covered themselves with textbooks to guard against falling objects as aftershocks continued.

Japan is still reeling 100 days after the Noto earthquake (Economist) Fishing boots. Their son’s beloved fishing boots—that is what Hamazuka Hiroyuki and Chiaki most hope to find under the rubble of their garage. The Hamazukas’ place in Suzu, on the northern tip of Japan’s Noto peninsula, is one of nearly 100,000 buildings that were damaged or destroyed when a massive earthquake struck on January 1st. As of late March the disaster had killed 244 people. The Hamazukas and their children survived, but like most of their neighbours, nearly 100 days after the tremor, the family is only beginning to piece its life back together. The peninsula will take years to recover, says Fujino Tatsuo with a sigh, a disaster-relief volunteer helping to clear away the Hamazuka family’s debris with an excavator.

World Central Kitchen Pauses Gaza Operations After 7 Workers Killed (NYT) The disaster relief nonprofit World Central Kitchen paused operations in Gaza and the region on Tuesday after the organization said seven of its workers were killed in an airstrike. José Andrés, the organization’s founder, said on X that “several of our sisters and brothers” were killed in an Israeli airstrike on Monday. The group later said in a statement that the team was leaving a warehouse in central Gaza in two armored cars after unloading humanitarian food aid. The group said the convoy was hit despite having coordinated movements with the Israeli military. The Israeli military said in a statement early Tuesday that, in light of the reports, it was “conducting a thorough review at the highest levels to understand the circumstances of this tragic incident.” The military also said it “makes extensive efforts to enable the safe delivery of humanitarian aid, and has been working closely with W.C.K. in their vital efforts to provide food and humanitarian aid to the people of Gaza.” Erin Gore, the nonprofit’s chief executive officer, said that the group’s employees were killed in “a targeted attack” by the Israeli military.

Israeli government says it will block Al Jazeera from broadcasting (BBC) The Israeli parliament has approved a law giving the government the power to ban broadcasts of TV channels including Al Jazeera, the Qatari-owned network. Prime Minister Benjamin Netanyahu said he would "act immediately" to close the network's local office. The US expressed concern over the move. With foreign journalists banned from entering Gaza, Al Jazeera staff based in the strip have been some of the only reporters able to cover the war on the ground. For years, Israeli officials have accused the network of anti-Israeli bias. But their criticisms of the broadcaster have intensified since the Hamas attacks of 7 October. Authorities claim it has close links with Hamas, which Al Jazeera vehemently denies. In a statement, Al Jazeera said: "Netanyahu could not find any justifications to offer the world for his ongoing attacks on Al Jazeera and press freedom except to present new lies and inflammatory slanders against the Network and the rights of its employees.

Israel is determined to invade Rafah (Washington Post) Israel is telling the world that the last battle of the Gaza war will take place in a sand-blown city on the Egyptian border. The Americans are wary. The Palestinians are terrified. Rafah, in southern Gaza, is now home to 1.4 million people—a last refuge for those displaced from other parts of the enclave. Families are living in tents, surviving on limited aid. Among them, and in tunnels beneath them, according to the Israel Defense Forces, are the last intact Hamas battalions and more than 100 Israeli hostages. Prime Minister Benjamin Netanyahu has warned Washington that the war against Hamas cannot be won without taking Rafah. The Biden administration is deeply concerned about Israel’s planned assault—warning of a “disaster” scenario—but appears keen to avoid a public showdown. The Biden administration has urged Israel to consider more targeted “precision” or “surgical” strikes on Rafah, U.S. officials say. Yet those terms are relative. Two weeks of heavy fighting at al-Shifa Hospital in Gaza City, described by the IDF as a “precise” operation, left the medical compound in ruins.

[cyberbenb]

UK Defense Ministry: Wagner elements arrive in Belarus, group expected to continue Africa operations

Wagner Group’s interim arrangements with the Russian state are taking shape, according to the latest intelligence update from the U.K. Defense Ministry published on July 16.     As of July 15, “at least a small contingent” of Wagner fighters arrived at a camp in Belarus, days after the army for hire handed over 2,000 pieces of military equipment, including tanks, to the Russian state, the ministry said.     Wagner-linked social media groups resumed their activity, highlighting its activities in Africa. British intelligence believes Moscow will accept Wagner Group’s desire to maintain an extensive presence in African countries.

Belarus said it had reached an agreement for Wagner Group to train its soldiers. Belarusian dictator Alexander Lukashenko helped broker a deal after Wagner’s one-day rebellion on June 24, which Russian dictator Vladimir Putin called treachery.

The mutiny was launched after Wagner boss Yevgeniy Prigozhin claimed that Russian army attacked his mercenaries, following months of his publicized spats with the Russian Defense Ministry. Wagner fighters had captured Rostov-on-Don and were driving on Moscow, shooting down Russian aircraft that came to interdict. But Prigozhin called off the assault, saying he did not want to spill Russian blood. He was allowed to depart to Belarus.

Russia after Wagner revolt: Will Putin stay afloat or face more turmoil?

The rebellion organized by Russia’s Wagner mercenary group in June is seen by many analysts as a sign of weakness and fragility of Vladimir Putin’s regime. First, several thousand armed mercenaries managed to march for hundreds of kilometers from Rostov to the vicinity of Moscow, and no one

The Kyiv IndependentOleg Sukhov

[xtruss]

Russophobia!

Argument: Braindead Paid Experts’ Point of View On a Current Event.

The World Economy No Longer Needs Russia 😂😂😂! With Alternative Sources in Place, Putin’s Attempt at Blackmailing Europe on Energy Has Failed.

By Jeffrey Sonnenfeld, the Lester Crown professor in management practice and a senior associate dean at the Yale School of Management, and Steven Tian, the director of research at the Yale Chief Executive Leadership Institute. (It seems both are well paid Boak Bollocks and by birth Braindead Idiots)

— January 19, 2023 | From the Hub of Yellow Journalism of Foreign Policy

Russian President Vladimir Putin meets with workers at a missile manufacturing plant in St. Petersburg, Russia, on January 18. Ilya Pitalev/Sputnik/AFP viaGetty Images

For much of the past year, and since his invasion of Ukraine last February, Russian President Vladimir Putin has been riding high on his supposed energy omnipotence, holding the global economy hostage to his whims. Since last summer, Putin has choked off natural gas supplies to Europe, hoping that Europeans, shivering and without heat during the winter, would turn on their leaders and make it politically infeasible to continue support for Ukraine.

The threat was potent: In 2021, a whopping 83 percent of Russian gas was exported to Europe. Russia’s total global exports of 7 million barrels of oil a day and 200 billion cubic meters (bcm) of piped gas a year accounted for about half of its federal revenue. Even more importantly, Russia’s commodities exports played a crucial role in global supply chains: Europe was reliant on Russia for 46 percent of its total gas supply, with comparable levels of dependence on other Russian products including metals and fertilizer.

Now, as we approach the one-year anniversary of Putin’s invasion, it is apparent that Russia has permanently forfeited its erstwhile economic might in the global marketplace.

Thanks to an unseasonably warm winter in Europe, Putin’s moment of maximum leverage has passed uneventfully, and, as we correctly forecast last October, the biggest victim of Putin’s gas gambit was Russia itself. Putin’s natural gas leverage is now nonexistent, as the world—and, most importantly, Europe—no longer needs Russian gas.

Far from freezing to death, Europe quickly secured alternative gas supplies by pivoting to global liquefied natural gas (LNG). This included an estimated 55 bcm from the United States, two-and-a-half times more than prewar U.S. exports of LNG to Europe. Coupled with increases in supply from renewable sources, nuclear, and, in the interim, coal, these alternative supplies have reduced Europe’s dependence on Russian gas to 9 percent of its total gas imports. In fact, Europe now purchases more LNG than it ever purchased Russian gas.

Furthermore, Europe’s unseasonably warm winter means that not only have the worst-case scenarios been avoided, but Europe’s full storage tanks have barely been drawn down and can carry over into next winter. In January, German storage tanks were a record 91 percent full, up from 54 percent last year, meaning that Europe will need to buy significantly less gas in 2023 than in 2022.

The implications are tremendous. Europe is now assured sufficient energy supply well into 2024 at a minimum, providing enough time for cheaper alternative energy supplies—both renewables and bridge fuels—to be fully onboarded and operating within Europe. This includes the completion of an additional 200 bcm/year in LNG export capacity by 2024—enough to fully and permanently replace Russia’s 200 bcm/year gas exports once and for all.

Furthermore, the days of globally expensive energy amid “Russia-driven supply squeezes” are over for good. In addition to Europe’s lower expected demand for LNG, China is pivoting away from global LNG in favor of domestic sources. Coupled with the rapidly increasing LNG supply, it is little surprise that the gas futures market is now pricing gas to be cheaper than prewar levels for years to come.

Putin, on the other hand, has zero remaining leverage and no way to replace his erstwhile primary customer; he is finding out the hard way that it is much easier for consumers to replace unreliable commodity suppliers than it is for suppliers to find new markets. Already, Putin is drawing practically no profit from gas sales, as his prior 150 bcm sales of piped gas to Europe have been replaced by a measly 16 bcm to China and pocket change in global LNG sales, barely enough to cover expenses. There are no markets for Putin to replace anything close to that 150 bcm shortfall: China lacks the necessary pipeline capacity to take any more for at least a decade and prefers domestic and diversified sources of energy anyhow, while Russia’s laggard technology makes it impossible to scale LNG exports beyond a slow trickle.

Putin’s oil leverage is likewise diminishing. Gone are the days when fear of Putin taking Russian oil supplies off the market caused oil prices to skyrocket by 40 percent over two weeks. In fact, when—in response to last month’s rollout of the G-7 oil price cap, which we helped develop—Putin announced a ban, from Feb. 1, on oil exports to countries that accepted the price cap, oil prices actually went down.

Why? Because it is now apparent that the world no longer depends on Putin’s oil. The oil market is turning to favor buyers, not sellers, amid increasing supply—more than enough to compensate for possible drops in Russian crude production. (In December, Russian Deputy Prime Minister Alexander Novak told Russian media that the government was prepared to cut crude production by up to 700,000 barrels in 2023.) Oil prices are lower now than before the war, and in the second half of 2022 alone, there was a surge of supply by 4 million barrels a day from producers such as the United States, Venezuela, Canada, and Brazil. With even more new supply expected this year, any lost Russian crude will be seamlessly and easily replaced within weeks. And this time, Putin cannot coerce Saudi Arabia to ride to the rescue by drastically cutting OPEC+ production quotas as it did last October. That’s because the United States is now pausing crucial Saudi arms and technology transfers amid heightened international scrutiny of OPEC+’s significant surplus unused capacity.

Putin’s leverage has also evaporated because the G-7 price cap gives him a lose-lose choice, which erodes Russia’s energy position no matter what he does. China and India, without explicitly participating in the cap, are leveraging it to drive a hard bargain with Russia, with discounts of up to 50 percent, so even though India is buying 33 times more Russian oil than it was a year ago, Russia is not making much profit, given its $44 break-even cost of production on top of costlier transportation. But if Putin cuts production even more, as he has threatened to do, he will be forfeiting all-important oil market share, long a Putin obsession, amid an increasingly oversupplied oil market and further cutting into his own revenue when he is already starved for cash.

Even Putin’s other commodities cards are all used up. His gambit to weaponize food abjectly collapsed when even his nominal allies turned on him. And in certain metals markets where Russia historically dominated, such as nickel, palladium, and titanium, blackmail-fearing buyers combined with higher prices have expedited reshoring and reinvigorated dormant public and private investment in critical mineral supply chain and mining projects. These are mostly in North and South America and Africa, home to many undertapped mineral reserves. In fact, in several crucial metals markets, such as cobalt and nickel, the combined output of new mines to be opened in the next two years adds up to more than enough supply to replace Russian metals within global supply chains permanently.

Putin’s failed economic gambits are yet another set of miscalculations to add to an increasingly long list, from his underestimation of the people of Ukraine to his underestimation of the collective unity and willpower of the West.

Of course, Putin’s failed economic and energy warfare has not been without consequence. The spillovers have impacted many lives, transformed supply chains, changed trade flows, and consumers still feel the pinch of higher prices as the newfound lower prices take some time to work through the economy.

But what matters is that the end is in sight. Never again will Putin be in a position to cause such chaos and disturbance in the global economy, because he has permanently weakened Russia’s most powerful hand—its energy and commodities might—beyond repair. The war on the battlefield is still being fought, but on the economic front at least, victory is in sight.

[lindaboggers]

Real Estate investment fund HY report: ‘consistent dividend and expertly managed exposure’ says RECI Chairman

Real Estate Credit Investments Ltd (LON:RECI) maintained its disciplined approach to investing and delivering its quarterly 3 pence dividend per share.

Chairman’s statement - Bob Cowdell Chairman

The half year ended 30 September 2022 saw Russia’s illegal invasion and the war in Ukraine continue; increasing inflation throughout the World; and Central Banks in the UK and abroad responding by raising interest rates. The UK suffered political and market turmoil following the removal of Boris Johnson as Prime Minister, the ill-fated tenure of Liz Truss and the “Mini-Budget” presented by her Chancellor Kwasi Kwarteng, which destabilised credit markets. These events caused significant credit and currency market reaction and Rishi Sunak, the UK’s third Prime Minister since the start of the Company’s financial year, has the task of reassuring markets and negating the political risk premium embedded in credit and UK gilt markets.

Rising energy and commodity prices caused by the Ukraine conflict, have been a driver of steeply rising inflation and the expectation is for further increases in interest rates in response. These factors and the forecast of UK economic recession will exacerbate the “cost of living crisis” being felt by many. 

These international and domestic economic challenges have caused many headlines and much market volatility. Against this macro backdrop, your Board and Investment Manager have continued to provide RECI Shareholders and potential new investors with regular and detailed information: focusing on the Company’s portfolio and investment strategy (including its disciplined cash and leverage management); and the selective deployment of cash into an attractive pipeline of new senior debt investment opportunities offering increased returns for the portfolio.

Financial Performance 

RECI reported total net profit for the half year ended 30 September 2022 of £10.3 million on half year end total assets of £465.7 million; £14.2 million for the half year ended 30 September 2021 on half year end total assets of £449.8 million. The NAV as at 30 September 2022 was £1.48 per share (£1.51 per share as at 30 September 2021). The 30 September 2022 NAV reflects the payment of 6 pence per share during the half year in respect of the fourth interim dividend for the year ended 31 March 2022 and the first interim dividend of the current financial year, returning £13.8 million to Shareholders and providing an annualised NAV total return of 5.9% for the half year. During the half year ended 30 September 2022, the Company funded £97.0 million in both the origination of loans and purchases of new bonds for the portfolio. RECI also received net cash inflow from its operating activities (including cash repayments and interest) of £36.9 million in this period

Half Year review and update 

The NAV remained broadly stable during the half year to close at £1.48 per share at 30 September 2022, notwithstanding the payment to Shareholders of two unchanged dividends, totalling 6 pence per share, during that period.

Reaction to the 23 September “Mini-Budget”, saw yield widening in bond markets continue into October. As at 31 October 2022, however, RECI’s NAV was £1.49 per share, impacted by just 0.2 pence per share of negative mark-to[1]market adjustments across the bond portfolio. The first interim dividend of the current financial year was declared on 4 August 2022 and the second interim dividend was declared on 23 November 2022, both maintaining a payment of 3 pence per share. 

When the financial year began on 1 April 2022, RECI had gross leverage of 1.29x and leverage net of cash of 1.14x. Throughout the half year, the Board and Cheyne continued to monitor RECI’s cash resources and repayments and to consider the appropriate level, type and blend of gearing for the Company. At the half year end it held cash of £27.4 million and had gross leverage of 1.35x (1.27x net of cash). The Board and Cheyne continue to consider an expanded range and blend of potential gearing options, including asset level leverage on a non-recourse or partial recourse basis, alongside flexible balance sheet leverage. As at 31 October 2022, the Company had gross leverage of 1.39x (1.33x net of cash) with £10.2 million of asset level leverage (being all non-recourse).

The Company’s shares traded at an average discount to NAV of 2.4% during the financial half year. The market volatility following the “Mini-Budget” provoked much investor uncertainty in credit markets, contributing to some reactive selling of RECI shares on macro concerns, causing the discount to widen in the aftermath. Following the October Quarterly Update and a series of meetings between Cheyne and investors to update on RECI and the portfolio, the discount has begun to narrow. The Company’s shares closed at £1.35 on 21 November 2022 (a discount of 9.4%), which would provide a yield of 8.9% on the basis of continuing to pay a quarterly 3 pence dividend per share for the rest of the current financial year. 

Continuing your Board’s and Cheyne’s commitment to providing detail and transparency regarding the Company’s portfolio and investment strategy, Shareholder Quarterly Updates were also held in May and July 2022 and we appreciate the interest and attendance of both existing and potential new investors.

Outlook 

It appears inevitable that RECI will be operating against a backdrop of high inflation and increasing interest rates, combined with a challenging geo-political outlook, for the rest of this financial year. Nevertheless, the Company’s portfolio composition, structure and continued diversification into Western Europe, position it well to withstand these challenges and steer a course through difficult market conditions. 

Our Investment Manager has worked hard to strengthen the robustness of the Company’s portfolio, with the increased exposure to lower risk senior loans and bonds and the increased size and capital strength of our chosen counterparties. The loan portfolio now has a WAL of just 1.6 years and future loans are expected to be on a floating rate basis. 

As was demonstrated in previous times of economic stress and market uncertainty, Cheyne’s expert origination capability has identified a pipeline of attractive investment opportunities, targeting senior debt with enhanced yields, which will underpin the continued payment of an attractive and stable dividend and position the portfolio to enhance NAV. 

Your Board remains committed to providing investors with a long-term opportunity to receive an attractive dividend stream from an expertly managed exposure to real estate credit assets. 

 Analyst comments: equity sectors

Anthony Leatham, Head of Investment Companies Research at Peel Hunt, said: “These are volatile times and the discount picture is evolving on a week-by-week basis.

“Whilst it feels like a ‘marmite’ choice at the moment, China cannot be ignored. We would highlight Fidelity China Special Situations trading on an 11% discount. A recent update from the manager – Dale Nicholls – points to some of the cheapest valuations across the underlying portfolio companies that he has seen in a long time. Investors are looking for a shift in policy focus to support growth and any positive action could act as a catalyst for a re-rating.”

Priyesh Parmar, Associate Director of Investment Companies Research at Numis, highlighted the opportunities he sees in Vietnamese specialist investment companies in the Country Specialist sector. He said: “The economy is performing strongly and inflation remains below the central bank’s 4% target. The reasons for the sell-off appear concentrated in an area of the market to which the listed funds have no direct exposure. Therefore, we believe this presents a strong buying opportunity. As Vietnam appears on the radar of more generalist investors this should provide a positive backdrop for the country and we believe there is potential for a tighter discount on the listed funds to be more sustainable in future. Furthermore, investors have the potential future catalyst of MSCI Emerging Markets inclusion, albeit this is at least a few years away.”

Analyst comments: alternatives sectors

Iain Scouller, Managing Director of Investment Funds at Stifel, said: “Despite some very strong NAV performance in recent years, many of the private equity funds were trading on discounts of 15% to 25% at the start of 2022. Whilst some haircuts to NAVs are to be expected in this environment, we think discounts are excessive. Even on a ‘worst-case’ view we do not anticipate writedowns in excess of -15% to -20%, which suggests discounts in a worst case are still 20% to 30% post any writedown. In an alternative scenario, where we see rising equity markets going into the 31/12/22 valuation point, we may actually see NAV increases on the funds over the second half of 2022. We also suspect the likelihood of corporate activity in the sector, such as takeover approaches is increasing, and if this materialises, we would expect a substantial positive sector re-rating.”

Myrto Charamis, Co-Head of Investment Companies at Berenberg, said: “I think there are many opportunities within the alternatives investment companies for investors to scoop up high quality strategies at very attractive valuations.

 “For investors who are mainly looking for long-term capital appreciation I believe listed private equity is very cheap trading at an average discount to NAV of 30%. The sector, in my view, provides a lot of headroom for investors who believe valuations are too high.

“For investors who are mainly looking for yield, I believe there are a few great opportunities within the debt and renewables sectors which can compete with the current corporate debt yields. We note BioPharma Credit, which is trading at an 8% discount to NAV with a yield of 7.3%. It provides investors with predictable and uncorrelated returns through its unique strategy of investing in debt assets (primarily senior secured and royalty) in the life sciences industry. Real Estate Credit Investments is trading at a 9% discount with a yield of about 9%. It aims to deliver a stable quarterly dividend with minimal volatility, across economic and credit cycles by originating and investing in real estate debt secured by commercial or residential properties in Western Europe, focusing primarily on the UK, France and Germany. In the renewables sector I believe Harmony Energy Income Trust is the best opportunity with a yield of 7.2% trading at a 4% discount to NAV. It targets a 10% NAV total return, unlevered, by providing investors with unique exposure to two-hour duration grid scale battery energy storage systems in Great Britain which support the resiliency and flexibility of the energy system as the penetration of intermittent renewables increases.”

Anthony Leatham, Head of Investment Companies Research at Peel Hunt, said: “Inflation and rising rates have caused a broad rebasing of expectations across a number of sectors. We see value across renewables (here we highlight Octopus Renewables Infrastructure Trust with its diversified pan-European portfolio) as well as other real-asset strategies including the shipping trusts – Tufton Oceanic Assets and Taylor Maritime Investments, which are trading on deep discounts with generous, well-covered yields and a relatively active secondary market for their underlying investments compared with other real asset classes.

“Private equity trusts have followed the playbook of previous market corrections by selling off into a period of risk aversion. Given the inevitable lag in valuations, particularly across the funds of funds, we have compared the share price performance against NAVs lagged by four months. This data suggests that, whilst the market is quick to price in bad news, there is a consistent tendency to over-compensate. Our pick in the sector is HarbourVest Global Private Equity, which has delivered 23% annualised NAV total return over the last five years and is trading on a 45% discount to the end of September 2022 NAV. In our view, this is a rare discount opportunity for this company and one that has appeared only six times in the last 15 years.”

[georgeschuylerfinance]

Real Estate investment fund HY report: ‘consistent dividend and expertly managed exposure’ says RECI Chairman

Real Estate Credit Investments Ltd (LON:RECI) maintained its disciplined approach to investing and delivering its quarterly 3 pence dividend per share.

Chairman’s statement - Bob Cowdell Chairman

The half year ended 30 September 2022 saw Russia’s illegal invasion and the war in Ukraine continue; increasing inflation throughout the World; and Central Banks in the UK and abroad responding by raising interest rates. The UK suffered political and market turmoil following the removal of Boris Johnson as Prime Minister, the ill-fated tenure of Liz Truss and the “Mini-Budget” presented by her Chancellor Kwasi Kwarteng, which destabilised credit markets. These events caused significant credit and currency market reaction and Rishi Sunak, the UK’s third Prime Minister since the start of the Company’s financial year, has the task of reassuring markets and negating the political risk premium embedded in credit and UK gilt markets.

Rising energy and commodity prices caused by the Ukraine conflict, have been a driver of steeply rising inflation and the expectation is for further increases in interest rates in response. These factors and the forecast of UK economic recession will exacerbate the “cost of living crisis” being felt by many. 

These international and domestic economic challenges have caused many headlines and much market volatility. Against this macro backdrop, your Board and Investment Manager have continued to provide RECI Shareholders and potential new investors with regular and detailed information: focusing on the Company’s portfolio and investment strategy (including its disciplined cash and leverage management); and the selective deployment of cash into an attractive pipeline of new senior debt investment opportunities offering increased returns for the portfolio.

Financial Performance 

RECI reported total net profit for the half year ended 30 September 2022 of £10.3 million on half year end total assets of £465.7 million; £14.2 million for the half year ended 30 September 2021 on half year end total assets of £449.8 million. The NAV as at 30 September 2022 was £1.48 per share (£1.51 per share as at 30 September 2021). The 30 September 2022 NAV reflects the payment of 6 pence per share during the half year in respect of the fourth interim dividend for the year ended 31 March 2022 and the first interim dividend of the current financial year, returning £13.8 million to Shareholders and providing an annualised NAV total return of 5.9% for the half year. During the half year ended 30 September 2022, the Company funded £97.0 million in both the origination of loans and purchases of new bonds for the portfolio. RECI also received net cash inflow from its operating activities (including cash repayments and interest) of £36.9 million in this period

Half Year review and update 

The NAV remained broadly stable during the half year to close at £1.48 per share at 30 September 2022, notwithstanding the payment to Shareholders of two unchanged dividends, totalling 6 pence per share, during that period.

Reaction to the 23 September “Mini-Budget”, saw yield widening in bond markets continue into October. As at 31 October 2022, however, RECI’s NAV was £1.49 per share, impacted by just 0.2 pence per share of negative mark-to[1]market adjustments across the bond portfolio. The first interim dividend of the current financial year was declared on 4 August 2022 and the second interim dividend was declared on 23 November 2022, both maintaining a payment of 3 pence per share. 

When the financial year began on 1 April 2022, RECI had gross leverage of 1.29x and leverage net of cash of 1.14x. Throughout the half year, the Board and Cheyne continued to monitor RECI’s cash resources and repayments and to consider the appropriate level, type and blend of gearing for the Company. At the half year end it held cash of £27.4 million and had gross leverage of 1.35x (1.27x net of cash). The Board and Cheyne continue to consider an expanded range and blend of potential gearing options, including asset level leverage on a non-recourse or partial recourse basis, alongside flexible balance sheet leverage. As at 31 October 2022, the Company had gross leverage of 1.39x (1.33x net of cash) with £10.2 million of asset level leverage (being all non-recourse).

The Company’s shares traded at an average discount to NAV of 2.4% during the financial half year. The market volatility following the “Mini-Budget” provoked much investor uncertainty in credit markets, contributing to some reactive selling of RECI shares on macro concerns, causing the discount to widen in the aftermath. Following the October Quarterly Update and a series of meetings between Cheyne and investors to update on RECI and the portfolio, the discount has begun to narrow. The Company’s shares closed at £1.35 on 21 November 2022 (a discount of 9.4%), which would provide a yield of 8.9% on the basis of continuing to pay a quarterly 3 pence dividend per share for the rest of the current financial year. 

Continuing your Board’s and Cheyne’s commitment to providing detail and transparency regarding the Company’s portfolio and investment strategy, Shareholder Quarterly Updates were also held in May and July 2022 and we appreciate the interest and attendance of both existing and potential new investors.

Outlook 

It appears inevitable that RECI will be operating against a backdrop of high inflation and increasing interest rates, combined with a challenging geo-political outlook, for the rest of this financial year. Nevertheless, the Company’s portfolio composition, structure and continued diversification into Western Europe, position it well to withstand these challenges and steer a course through difficult market conditions. 

Our Investment Manager has worked hard to strengthen the robustness of the Company’s portfolio, with the increased exposure to lower risk senior loans and bonds and the increased size and capital strength of our chosen counterparties. The loan portfolio now has a WAL of just 1.6 years and future loans are expected to be on a floating rate basis. 

As was demonstrated in previous times of economic stress and market uncertainty, Cheyne’s expert origination capability has identified a pipeline of attractive investment opportunities, targeting senior debt with enhanced yields, which will underpin the continued payment of an attractive and stable dividend and position the portfolio to enhance NAV. 

Your Board remains committed to providing investors with a long-term opportunity to receive an attractive dividend stream from an expertly managed exposure to real estate credit assets. 

 Analyst comments: equity sectors

Anthony Leatham, Head of Investment Companies Research at Peel Hunt, said: “These are volatile times and the discount picture is evolving on a week-by-week basis.

“Whilst it feels like a ‘marmite’ choice at the moment, China cannot be ignored. We would highlight Fidelity China Special Situations trading on an 11% discount. A recent update from the manager – Dale Nicholls – points to some of the cheapest valuations across the underlying portfolio companies that he has seen in a long time. Investors are looking for a shift in policy focus to support growth and any positive action could act as a catalyst for a re-rating.”

Priyesh Parmar, Associate Director of Investment Companies Research at Numis, highlighted the opportunities he sees in Vietnamese specialist investment companies in the Country Specialist sector. He said: “The economy is performing strongly and inflation remains below the central bank’s 4% target. The reasons for the sell-off appear concentrated in an area of the market to which the listed funds have no direct exposure. Therefore, we believe this presents a strong buying opportunity. As Vietnam appears on the radar of more generalist investors this should provide a positive backdrop for the country and we believe there is potential for a tighter discount on the listed funds to be more sustainable in future. Furthermore, investors have the potential future catalyst of MSCI Emerging Markets inclusion, albeit this is at least a few years away.”

Analyst comments: alternatives sectors

Iain Scouller, Managing Director of Investment Funds at Stifel, said: “Despite some very strong NAV performance in recent years, many of the private equity funds were trading on discounts of 15% to 25% at the start of 2022. Whilst some haircuts to NAVs are to be expected in this environment, we think discounts are excessive. Even on a ‘worst-case’ view we do not anticipate writedowns in excess of -15% to -20%, which suggests discounts in a worst case are still 20% to 30% post any writedown. In an alternative scenario, where we see rising equity markets going into the 31/12/22 valuation point, we may actually see NAV increases on the funds over the second half of 2022. We also suspect the likelihood of corporate activity in the sector, such as takeover approaches is increasing, and if this materialises, we would expect a substantial positive sector re-rating.”

Myrto Charamis, Co-Head of Investment Companies at Berenberg, said: “I think there are many opportunities within the alternatives investment companies for investors to scoop up high quality strategies at very attractive valuations.

 “For investors who are mainly looking for long-term capital appreciation I believe listed private equity is very cheap trading at an average discount to NAV of 30%. The sector, in my view, provides a lot of headroom for investors who believe valuations are too high.

“For investors who are mainly looking for yield, I believe there are a few great opportunities within the debt and renewables sectors which can compete with the current corporate debt yields. We note BioPharma Credit, which is trading at an 8% discount to NAV with a yield of 7.3%. It provides investors with predictable and uncorrelated returns through its unique strategy of investing in debt assets (primarily senior secured and royalty) in the life sciences industry. Real Estate Credit Investments is trading at a 9% discount with a yield of about 9%. It aims to deliver a stable quarterly dividend with minimal volatility, across economic and credit cycles by originating and investing in real estate debt secured by commercial or residential properties in Western Europe, focusing primarily on the UK, France and Germany. In the renewables sector I believe Harmony Energy Income Trust is the best opportunity with a yield of 7.2% trading at a 4% discount to NAV. It targets a 10% NAV total return, unlevered, by providing investors with unique exposure to two-hour duration grid scale battery energy storage systems in Great Britain which support the resiliency and flexibility of the energy system as the penetration of intermittent renewables increases.”

Anthony Leatham, Head of Investment Companies Research at Peel Hunt, said: “Inflation and rising rates have caused a broad rebasing of expectations across a number of sectors. We see value across renewables (here we highlight Octopus Renewables Infrastructure Trust with its diversified pan-European portfolio) as well as other real-asset strategies including the shipping trusts – Tufton Oceanic Assets and Taylor Maritime Investments, which are trading on deep discounts with generous, well-covered yields and a relatively active secondary market for their underlying investments compared with other real asset classes.

“Private equity trusts have followed the playbook of previous market corrections by selling off into a period of risk aversion. Given the inevitable lag in valuations, particularly across the funds of funds, we have compared the share price performance against NAVs lagged by four months. This data suggests that, whilst the market is quick to price in bad news, there is a consistent tendency to over-compensate. Our pick in the sector is HarbourVest Global Private Equity, which has delivered 23% annualised NAV total return over the last five years and is trading on a 45% discount to the end of September 2022 NAV. In our view, this is a rare discount opportunity for this company and one that has appeared only six times in the last 15 years.”

[mariacallous]

Russiophile far-right party Revival has drafted a law in the Bulgarian parliament which would introduce sanctions on citizens depicted as “foreign agents”.

In a statement published on November 2, the Civil Society Development Council, an advisory body to the Ministerial Council, headed by current interim Minister of EU Funds Management, Atanas Pekanov, condemned Revival’s plan.

“The project affects civil and political rights, the freedom of expression of Bulgarian citizens, and contradicts the Constitution, the laws of the European Commission and international acts to which Bulgaria is a party,” the Council said.

According to the draft, filed on November 1, those who voluntarily register or are found to be “foreign agents”, will be financially sanctioned, publicly shamed and prohibited from carrying out activities in the educational system, state institutions, won’t be eligible to participate in political activities or campaigning, have creative activity or influence the public in any way.

This also include media groups that have received foreign grants of more than 500 euros.

“If I have to register as a foreign agent, as Revival’s law would require, I won’t be able to practice my profession and work with children, the most important aspect from my job,” said on Facebook biologist and researcher Stanimira Deleva, who is supported by National Geographic and Smithsonian Tropical Research Institute working in Bulgaria. “We used to joke that if Revival come to power, they would go after the intellectuals first. That joke isn’t funny anymore,” Deleva said.

Local media drew comparisons between Revival’s ambitions and Russia’s 2012 law on foreign agents, which targeted NGOs and human rights groups and was used as a weapon against media organisations and citizens who receive money from outside Russia.

On October 5, Revival’s leader Kostadin Kostadinov wanted any media criticising his politics to leave a press conference. He called such journalists “foreign agents” serving the US. 

Revival has no obvious allies in the current parliament, which is predominantly pro-EU, so its chances of progress on this draft are modest. 

The party was founded in 2014 by Kostadinov. On local social media, he’s often nicknamed “Kopeykin”, from the Russian currency unit, alluding to his Russian sympathies.

In 2020, the Sofia Prosecution demanded the party cease operating, citing erroneous and counterfeited data regarding registration. However, in 2021, the Sofia City Court dismissed the case. 

The party gathered more exposure in 2021 when it vocally opposed health measures and vaccination, initiating protests. Another controversy ensued after a TV investigation found that many of the party members are actually inoculated. 

Revival entered parliament after the November 2021 elections and also secured seats after the October 2022 snap elections, with its best result yet. 

In interviews on Ukraine, Kostadinov has highlighted that people only hear the Ukrainian side of the conflict and has criticised NATO’s presence in the region.

Russian flags are often present at party demonstrations. In their most recent election campaign, Revival called for a referendum on Bulgaria’s membership in NATO and the EU, a more patriotic and religious approach in the educational system, and has also targeted the adoption of the euro currency. 

A BIRN analysis this year looked into the party’s ascent in local politics.

[saltygardenerlove]

Real Estate investment fund HY report: ‘consistent dividend and expertly managed exposure’ says RECI Chairman

Real Estate Credit Investments Ltd (LON:RECI) maintained its disciplined approach to investing and delivering its quarterly 3 pence dividend per share.

Chairman’s statement - Bob Cowdell Chairman

The half year ended 30 September 2022 saw Russia’s illegal invasion and the war in Ukraine continue; increasing inflation throughout the World; and Central Banks in the UK and abroad responding by raising interest rates. The UK suffered political and market turmoil following the removal of Boris Johnson as Prime Minister, the ill-fated tenure of Liz Truss and the “Mini-Budget” presented by her Chancellor Kwasi Kwarteng, which destabilised credit markets. These events caused significant credit and currency market reaction and Rishi Sunak, the UK’s third Prime Minister since the start of the Company’s financial year, has the task of reassuring markets and negating the political risk premium embedded in credit and UK gilt markets.

Rising energy and commodity prices caused by the Ukraine conflict, have been a driver of steeply rising inflation and the expectation is for further increases in interest rates in response. These factors and the forecast of UK economic recession will exacerbate the “cost of living crisis” being felt by many. 

These international and domestic economic challenges have caused many headlines and much market volatility. Against this macro backdrop, your Board and Investment Manager have continued to provide RECI Shareholders and potential new investors with regular and detailed information: focusing on the Company’s portfolio and investment strategy (including its disciplined cash and leverage management); and the selective deployment of cash into an attractive pipeline of new senior debt investment opportunities offering increased returns for the portfolio.

Financial Performance 

RECI reported total net profit for the half year ended 30 September 2022 of £10.3 million on half year end total assets of £465.7 million; £14.2 million for the half year ended 30 September 2021 on half year end total assets of £449.8 million. The NAV as at 30 September 2022 was £1.48 per share (£1.51 per share as at 30 September 2021). The 30 September 2022 NAV reflects the payment of 6 pence per share during the half year in respect of the fourth interim dividend for the year ended 31 March 2022 and the first interim dividend of the current financial year, returning £13.8 million to Shareholders and providing an annualised NAV total return of 5.9% for the half year. During the half year ended 30 September 2022, the Company funded £97.0 million in both the origination of loans and purchases of new bonds for the portfolio. RECI also received net cash inflow from its operating activities (including cash repayments and interest) of £36.9 million in this period

Half Year review and update 

The NAV remained broadly stable during the half year to close at £1.48 per share at 30 September 2022, notwithstanding the payment to Shareholders of two unchanged dividends, totalling 6 pence per share, during that period.

Reaction to the 23 September “Mini-Budget”, saw yield widening in bond markets continue into October. As at 31 October 2022, however, RECI’s NAV was £1.49 per share, impacted by just 0.2 pence per share of negative mark-to[1]market adjustments across the bond portfolio. The first interim dividend of the current financial year was declared on 4 August 2022 and the second interim dividend was declared on 23 November 2022, both maintaining a payment of 3 pence per share. 

When the financial year began on 1 April 2022, RECI had gross leverage of 1.29x and leverage net of cash of 1.14x. Throughout the half year, the Board and Cheyne continued to monitor RECI’s cash resources and repayments and to consider the appropriate level, type and blend of gearing for the Company. At the half year end it held cash of £27.4 million and had gross leverage of 1.35x (1.27x net of cash). The Board and Cheyne continue to consider an expanded range and blend of potential gearing options, including asset level leverage on a non-recourse or partial recourse basis, alongside flexible balance sheet leverage. As at 31 October 2022, the Company had gross leverage of 1.39x (1.33x net of cash) with £10.2 million of asset level leverage (being all non-recourse).

The Company’s shares traded at an average discount to NAV of 2.4% during the financial half year. The market volatility following the “Mini-Budget” provoked much investor uncertainty in credit markets, contributing to some reactive selling of RECI shares on macro concerns, causing the discount to widen in the aftermath. Following the October Quarterly Update and a series of meetings between Cheyne and investors to update on RECI and the portfolio, the discount has begun to narrow. The Company’s shares closed at £1.35 on 21 November 2022 (a discount of 9.4%), which would provide a yield of 8.9% on the basis of continuing to pay a quarterly 3 pence dividend per share for the rest of the current financial year. 

Continuing your Board’s and Cheyne’s commitment to providing detail and transparency regarding the Company’s portfolio and investment strategy, Shareholder Quarterly Updates were also held in May and July 2022 and we appreciate the interest and attendance of both existing and potential new investors.

Outlook 

It appears inevitable that RECI will be operating against a backdrop of high inflation and increasing interest rates, combined with a challenging geo-political outlook, for the rest of this financial year. Nevertheless, the Company’s portfolio composition, structure and continued diversification into Western Europe, position it well to withstand these challenges and steer a course through difficult market conditions. 

Our Investment Manager has worked hard to strengthen the robustness of the Company’s portfolio, with the increased exposure to lower risk senior loans and bonds and the increased size and capital strength of our chosen counterparties. The loan portfolio now has a WAL of just 1.6 years and future loans are expected to be on a floating rate basis. 

As was demonstrated in previous times of economic stress and market uncertainty, Cheyne’s expert origination capability has identified a pipeline of attractive investment opportunities, targeting senior debt with enhanced yields, which will underpin the continued payment of an attractive and stable dividend and position the portfolio to enhance NAV. 

Your Board remains committed to providing investors with a long-term opportunity to receive an attractive dividend stream from an expertly managed exposure to real estate credit assets. 

 Analyst comments: equity sectors

Anthony Leatham, Head of Investment Companies Research at Peel Hunt, said: “These are volatile times and the discount picture is evolving on a week-by-week basis.

“Whilst it feels like a ‘marmite’ choice at the moment, China cannot be ignored. We would highlight Fidelity China Special Situations trading on an 11% discount. A recent update from the manager – Dale Nicholls – points to some of the cheapest valuations across the underlying portfolio companies that he has seen in a long time. Investors are looking for a shift in policy focus to support growth and any positive action could act as a catalyst for a re-rating.”

Priyesh Parmar, Associate Director of Investment Companies Research at Numis, highlighted the opportunities he sees in Vietnamese specialist investment companies in the Country Specialist sector. He said: “The economy is performing strongly and inflation remains below the central bank’s 4% target. The reasons for the sell-off appear concentrated in an area of the market to which the listed funds have no direct exposure. Therefore, we believe this presents a strong buying opportunity. As Vietnam appears on the radar of more generalist investors this should provide a positive backdrop for the country and we believe there is potential for a tighter discount on the listed funds to be more sustainable in future. Furthermore, investors have the potential future catalyst of MSCI Emerging Markets inclusion, albeit this is at least a few years away.”

Analyst comments: alternatives sectors

Iain Scouller, Managing Director of Investment Funds at Stifel, said: “Despite some very strong NAV performance in recent years, many of the private equity funds were trading on discounts of 15% to 25% at the start of 2022. Whilst some haircuts to NAVs are to be expected in this environment, we think discounts are excessive. Even on a ‘worst-case’ view we do not anticipate writedowns in excess of -15% to -20%, which suggests discounts in a worst case are still 20% to 30% post any writedown. In an alternative scenario, where we see rising equity markets going into the 31/12/22 valuation point, we may actually see NAV increases on the funds over the second half of 2022. We also suspect the likelihood of corporate activity in the sector, such as takeover approaches is increasing, and if this materialises, we would expect a substantial positive sector re-rating.”

Myrto Charamis, Co-Head of Investment Companies at Berenberg, said: “I think there are many opportunities within the alternatives investment companies for investors to scoop up high quality strategies at very attractive valuations.

 “For investors who are mainly looking for long-term capital appreciation I believe listed private equity is very cheap trading at an average discount to NAV of 30%. The sector, in my view, provides a lot of headroom for investors who believe valuations are too high.

“For investors who are mainly looking for yield, I believe there are a few great opportunities within the debt and renewables sectors which can compete with the current corporate debt yields. We note BioPharma Credit, which is trading at an 8% discount to NAV with a yield of 7.3%. It provides investors with predictable and uncorrelated returns through its unique strategy of investing in debt assets (primarily senior secured and royalty) in the life sciences industry. Real Estate Credit Investments is trading at a 9% discount with a yield of about 9%. It aims to deliver a stable quarterly dividend with minimal volatility, across economic and credit cycles by originating and investing in real estate debt secured by commercial or residential properties in Western Europe, focusing primarily on the UK, France and Germany. In the renewables sector I believe Harmony Energy Income Trust is the best opportunity with a yield of 7.2% trading at a 4% discount to NAV. It targets a 10% NAV total return, unlevered, by providing investors with unique exposure to two-hour duration grid scale battery energy storage systems in Great Britain which support the resiliency and flexibility of the energy system as the penetration of intermittent renewables increases.”

Anthony Leatham, Head of Investment Companies Research at Peel Hunt, said: “Inflation and rising rates have caused a broad rebasing of expectations across a number of sectors. We see value across renewables (here we highlight Octopus Renewables Infrastructure Trust with its diversified pan-European portfolio) as well as other real-asset strategies including the shipping trusts – Tufton Oceanic Assets and Taylor Maritime Investments, which are trading on deep discounts with generous, well-covered yields and a relatively active secondary market for their underlying investments compared with other real asset classes.

“Private equity trusts have followed the playbook of previous market corrections by selling off into a period of risk aversion. Given the inevitable lag in valuations, particularly across the funds of funds, we have compared the share price performance against NAVs lagged by four months. This data suggests that, whilst the market is quick to price in bad news, there is a consistent tendency to over-compensate. Our pick in the sector is HarbourVest Global Private Equity, which has delivered 23% annualised NAV total return over the last five years and is trading on a 45% discount to the end of September 2022 NAV. In our view, this is a rare discount opportunity for this company and one that has appeared only six times in the last 15 years.”

[bertrhert]

Real Estate investment fund HY report: ‘consistent dividend and expertly managed exposure’ says RECI Chairman

Real Estate Credit Investments Ltd (LON:RECI) maintained its disciplined approach to investing and delivering its quarterly 3 pence dividend per share.

Chairman’s statement - Bob Cowdell Chairman

The half year ended 30 September 2022 saw Russia’s illegal invasion and the war in Ukraine continue; increasing inflation throughout the World; and Central Banks in the UK and abroad responding by raising interest rates. The UK suffered political and market turmoil following the removal of Boris Johnson as Prime Minister, the ill-fated tenure of Liz Truss and the “Mini-Budget” presented by her Chancellor Kwasi Kwarteng, which destabilised credit markets. These events caused significant credit and currency market reaction and Rishi Sunak, the UK’s third Prime Minister since the start of the Company’s financial year, has the task of reassuring markets and negating the political risk premium embedded in credit and UK gilt markets.

Rising energy and commodity prices caused by the Ukraine conflict, have been a driver of steeply rising inflation and the expectation is for further increases in interest rates in response. These factors and the forecast of UK economic recession will exacerbate the “cost of living crisis” being felt by many. 

These international and domestic economic challenges have caused many headlines and much market volatility. Against this macro backdrop, your Board and Investment Manager have continued to provide RECI Shareholders and potential new investors with regular and detailed information: focusing on the Company’s portfolio and investment strategy (including its disciplined cash and leverage management); and the selective deployment of cash into an attractive pipeline of new senior debt investment opportunities offering increased returns for the portfolio.

Financial Performance 

RECI reported total net profit for the half year ended 30 September 2022 of £10.3 million on half year end total assets of £465.7 million; £14.2 million for the half year ended 30 September 2021 on half year end total assets of £449.8 million. The NAV as at 30 September 2022 was £1.48 per share (£1.51 per share as at 30 September 2021). The 30 September 2022 NAV reflects the payment of 6 pence per share during the half year in respect of the fourth interim dividend for the year ended 31 March 2022 and the first interim dividend of the current financial year, returning £13.8 million to Shareholders and providing an annualised NAV total return of 5.9% for the half year. During the half year ended 30 September 2022, the Company funded £97.0 million in both the origination of loans and purchases of new bonds for the portfolio. RECI also received net cash inflow from its operating activities (including cash repayments and interest) of £36.9 million in this period

Half Year review and update 

The NAV remained broadly stable during the half year to close at £1.48 per share at 30 September 2022, notwithstanding the payment to Shareholders of two unchanged dividends, totalling 6 pence per share, during that period.

Reaction to the 23 September “Mini-Budget”, saw yield widening in bond markets continue into October. As at 31 October 2022, however, RECI’s NAV was £1.49 per share, impacted by just 0.2 pence per share of negative mark-to[1]market adjustments across the bond portfolio. The first interim dividend of the current financial year was declared on 4 August 2022 and the second interim dividend was declared on 23 November 2022, both maintaining a payment of 3 pence per share. 

When the financial year began on 1 April 2022, RECI had gross leverage of 1.29x and leverage net of cash of 1.14x. Throughout the half year, the Board and Cheyne continued to monitor RECI’s cash resources and repayments and to consider the appropriate level, type and blend of gearing for the Company. At the half year end it held cash of £27.4 million and had gross leverage of 1.35x (1.27x net of cash). The Board and Cheyne continue to consider an expanded range and blend of potential gearing options, including asset level leverage on a non-recourse or partial recourse basis, alongside flexible balance sheet leverage. As at 31 October 2022, the Company had gross leverage of 1.39x (1.33x net of cash) with £10.2 million of asset level leverage (being all non-recourse).

The Company’s shares traded at an average discount to NAV of 2.4% during the financial half year. The market volatility following the “Mini-Budget” provoked much investor uncertainty in credit markets, contributing to some reactive selling of RECI shares on macro concerns, causing the discount to widen in the aftermath. Following the October Quarterly Update and a series of meetings between Cheyne and investors to update on RECI and the portfolio, the discount has begun to narrow. The Company’s shares closed at £1.35 on 21 November 2022 (a discount of 9.4%), which would provide a yield of 8.9% on the basis of continuing to pay a quarterly 3 pence dividend per share for the rest of the current financial year. 

Continuing your Board’s and Cheyne’s commitment to providing detail and transparency regarding the Company’s portfolio and investment strategy, Shareholder Quarterly Updates were also held in May and July 2022 and we appreciate the interest and attendance of both existing and potential new investors.

Outlook 

It appears inevitable that RECI will be operating against a backdrop of high inflation and increasing interest rates, combined with a challenging geo-political outlook, for the rest of this financial year. Nevertheless, the Company’s portfolio composition, structure and continued diversification into Western Europe, position it well to withstand these challenges and steer a course through difficult market conditions. 

Our Investment Manager has worked hard to strengthen the robustness of the Company’s portfolio, with the increased exposure to lower risk senior loans and bonds and the increased size and capital strength of our chosen counterparties. The loan portfolio now has a WAL of just 1.6 years and future loans are expected to be on a floating rate basis. 

As was demonstrated in previous times of economic stress and market uncertainty, Cheyne’s expert origination capability has identified a pipeline of attractive investment opportunities, targeting senior debt with enhanced yields, which will underpin the continued payment of an attractive and stable dividend and position the portfolio to enhance NAV. 

Your Board remains committed to providing investors with a long-term opportunity to receive an attractive dividend stream from an expertly managed exposure to real estate credit assets. 

 Analyst comments: equity sectors

Anthony Leatham, Head of Investment Companies Research at Peel Hunt, said: “These are volatile times and the discount picture is evolving on a week-by-week basis.

“Whilst it feels like a ‘marmite’ choice at the moment, China cannot be ignored. We would highlight Fidelity China Special Situations trading on an 11% discount. A recent update from the manager – Dale Nicholls – points to some of the cheapest valuations across the underlying portfolio companies that he has seen in a long time. Investors are looking for a shift in policy focus to support growth and any positive action could act as a catalyst for a re-rating.”

Priyesh Parmar, Associate Director of Investment Companies Research at Numis, highlighted the opportunities he sees in Vietnamese specialist investment companies in the Country Specialist sector. He said: “The economy is performing strongly and inflation remains below the central bank’s 4% target. The reasons for the sell-off appear concentrated in an area of the market to which the listed funds have no direct exposure. Therefore, we believe this presents a strong buying opportunity. As Vietnam appears on the radar of more generalist investors this should provide a positive backdrop for the country and we believe there is potential for a tighter discount on the listed funds to be more sustainable in future. Furthermore, investors have the potential future catalyst of MSCI Emerging Markets inclusion, albeit this is at least a few years away.”

Analyst comments: alternatives sectors

Iain Scouller, Managing Director of Investment Funds at Stifel, said: “Despite some very strong NAV performance in recent years, many of the private equity funds were trading on discounts of 15% to 25% at the start of 2022. Whilst some haircuts to NAVs are to be expected in this environment, we think discounts are excessive. Even on a ‘worst-case’ view we do not anticipate writedowns in excess of -15% to -20%, which suggests discounts in a worst case are still 20% to 30% post any writedown. In an alternative scenario, where we see rising equity markets going into the 31/12/22 valuation point, we may actually see NAV increases on the funds over the second half of 2022. We also suspect the likelihood of corporate activity in the sector, such as takeover approaches is increasing, and if this materialises, we would expect a substantial positive sector re-rating.”

Myrto Charamis, Co-Head of Investment Companies at Berenberg, said: “I think there are many opportunities within the alternatives investment companies for investors to scoop up high quality strategies at very attractive valuations.

 “For investors who are mainly looking for long-term capital appreciation I believe listed private equity is very cheap trading at an average discount to NAV of 30%. The sector, in my view, provides a lot of headroom for investors who believe valuations are too high.

“For investors who are mainly looking for yield, I believe there are a few great opportunities within the debt and renewables sectors which can compete with the current corporate debt yields. We note BioPharma Credit, which is trading at an 8% discount to NAV with a yield of 7.3%. It provides investors with predictable and uncorrelated returns through its unique strategy of investing in debt assets (primarily senior secured and royalty) in the life sciences industry. Real Estate Credit Investments is trading at a 9% discount with a yield of about 9%. It aims to deliver a stable quarterly dividend with minimal volatility, across economic and credit cycles by originating and investing in real estate debt secured by commercial or residential properties in Western Europe, focusing primarily on the UK, France and Germany. In the renewables sector I believe Harmony Energy Income Trust is the best opportunity with a yield of 7.2% trading at a 4% discount to NAV. It targets a 10% NAV total return, unlevered, by providing investors with unique exposure to two-hour duration grid scale battery energy storage systems in Great Britain which support the resiliency and flexibility of the energy system as the penetration of intermittent renewables increases.”

Anthony Leatham, Head of Investment Companies Research at Peel Hunt, said: “Inflation and rising rates have caused a broad rebasing of expectations across a number of sectors. We see value across renewables (here we highlight Octopus Renewables Infrastructure Trust with its diversified pan-European portfolio) as well as other real-asset strategies including the shipping trusts – Tufton Oceanic Assets and Taylor Maritime Investments, which are trading on deep discounts with generous, well-covered yields and a relatively active secondary market for their underlying investments compared with other real asset classes.

“Private equity trusts have followed the playbook of previous market corrections by selling off into a period of risk aversion. Given the inevitable lag in valuations, particularly across the funds of funds, we have compared the share price performance against NAVs lagged by four months. This data suggests that, whilst the market is quick to price in bad news, there is a consistent tendency to over-compensate. Our pick in the sector is HarbourVest Global Private Equity, which has delivered 23% annualised NAV total return over the last five years and is trading on a 45% discount to the end of September 2022 NAV. In our view, this is a rare discount opportunity for this company and one that has appeared only six times in the last 15 years.”

[craigmyersfinance]

Real Estate investment fund HY report: ‘consistent dividend and expertly managed exposure’ says RECI Chairman

Real Estate Credit Investments Ltd (LON:RECI) maintained its disciplined approach to investing and delivering its quarterly 3 pence dividend per share.

Chairman’s statement - Bob Cowdell Chairman

The half year ended 30 September 2022 saw Russia’s illegal invasion and the war in Ukraine continue; increasing inflation throughout the World; and Central Banks in the UK and abroad responding by raising interest rates. The UK suffered political and market turmoil following the removal of Boris Johnson as Prime Minister, the ill-fated tenure of Liz Truss and the “Mini-Budget” presented by her Chancellor Kwasi Kwarteng, which destabilised credit markets. These events caused significant credit and currency market reaction and Rishi Sunak, the UK’s third Prime Minister since the start of the Company’s financial year, has the task of reassuring markets and negating the political risk premium embedded in credit and UK gilt markets.

Rising energy and commodity prices caused by the Ukraine conflict, have been a driver of steeply rising inflation and the expectation is for further increases in interest rates in response. These factors and the forecast of UK economic recession will exacerbate the “cost of living crisis” being felt by many. 

These international and domestic economic challenges have caused many headlines and much market volatility. Against this macro backdrop, your Board and Investment Manager have continued to provide RECI Shareholders and potential new investors with regular and detailed information: focusing on the Company’s portfolio and investment strategy (including its disciplined cash and leverage management); and the selective deployment of cash into an attractive pipeline of new senior debt investment opportunities offering increased returns for the portfolio.

Financial Performance 

RECI reported total net profit for the half year ended 30 September 2022 of £10.3 million on half year end total assets of £465.7 million; £14.2 million for the half year ended 30 September 2021 on half year end total assets of £449.8 million. The NAV as at 30 September 2022 was £1.48 per share (£1.51 per share as at 30 September 2021). The 30 September 2022 NAV reflects the payment of 6 pence per share during the half year in respect of the fourth interim dividend for the year ended 31 March 2022 and the first interim dividend of the current financial year, returning £13.8 million to Shareholders and providing an annualised NAV total return of 5.9% for the half year. During the half year ended 30 September 2022, the Company funded £97.0 million in both the origination of loans and purchases of new bonds for the portfolio. RECI also received net cash inflow from its operating activities (including cash repayments and interest) of £36.9 million in this period

Half Year review and update 

The NAV remained broadly stable during the half year to close at £1.48 per share at 30 September 2022, notwithstanding the payment to Shareholders of two unchanged dividends, totalling 6 pence per share, during that period.

Reaction to the 23 September “Mini-Budget”, saw yield widening in bond markets continue into October. As at 31 October 2022, however, RECI’s NAV was £1.49 per share, impacted by just 0.2 pence per share of negative mark-to[1]market adjustments across the bond portfolio. The first interim dividend of the current financial year was declared on 4 August 2022 and the second interim dividend was declared on 23 November 2022, both maintaining a payment of 3 pence per share. 

When the financial year began on 1 April 2022, RECI had gross leverage of 1.29x and leverage net of cash of 1.14x. Throughout the half year, the Board and Cheyne continued to monitor RECI’s cash resources and repayments and to consider the appropriate level, type and blend of gearing for the Company. At the half year end it held cash of £27.4 million and had gross leverage of 1.35x (1.27x net of cash). The Board and Cheyne continue to consider an expanded range and blend of potential gearing options, including asset level leverage on a non-recourse or partial recourse basis, alongside flexible balance sheet leverage. As at 31 October 2022, the Company had gross leverage of 1.39x (1.33x net of cash) with £10.2 million of asset level leverage (being all non-recourse).

The Company’s shares traded at an average discount to NAV of 2.4% during the financial half year. The market volatility following the “Mini-Budget” provoked much investor uncertainty in credit markets, contributing to some reactive selling of RECI shares on macro concerns, causing the discount to widen in the aftermath. Following the October Quarterly Update and a series of meetings between Cheyne and investors to update on RECI and the portfolio, the discount has begun to narrow. The Company’s shares closed at £1.35 on 21 November 2022 (a discount of 9.4%), which would provide a yield of 8.9% on the basis of continuing to pay a quarterly 3 pence dividend per share for the rest of the current financial year. 

Continuing your Board’s and Cheyne’s commitment to providing detail and transparency regarding the Company’s portfolio and investment strategy, Shareholder Quarterly Updates were also held in May and July 2022 and we appreciate the interest and attendance of both existing and potential new investors.

Outlook 

It appears inevitable that RECI will be operating against a backdrop of high inflation and increasing interest rates, combined with a challenging geo-political outlook, for the rest of this financial year. Nevertheless, the Company’s portfolio composition, structure and continued diversification into Western Europe, position it well to withstand these challenges and steer a course through difficult market conditions. 

Our Investment Manager has worked hard to strengthen the robustness of the Company’s portfolio, with the increased exposure to lower risk senior loans and bonds and the increased size and capital strength of our chosen counterparties. The loan portfolio now has a WAL of just 1.6 years and future loans are expected to be on a floating rate basis. 

As was demonstrated in previous times of economic stress and market uncertainty, Cheyne’s expert origination capability has identified a pipeline of attractive investment opportunities, targeting senior debt with enhanced yields, which will underpin the continued payment of an attractive and stable dividend and position the portfolio to enhance NAV. 

Your Board remains committed to providing investors with a long-term opportunity to receive an attractive dividend stream from an expertly managed exposure to real estate credit assets. 

 Analyst comments: equity sectors

Anthony Leatham, Head of Investment Companies Research at Peel Hunt, said: “These are volatile times and the discount picture is evolving on a week-by-week basis.

“Whilst it feels like a ‘marmite’ choice at the moment, China cannot be ignored. We would highlight Fidelity China Special Situations trading on an 11% discount. A recent update from the manager – Dale Nicholls – points to some of the cheapest valuations across the underlying portfolio companies that he has seen in a long time. Investors are looking for a shift in policy focus to support growth and any positive action could act as a catalyst for a re-rating.”

Priyesh Parmar, Associate Director of Investment Companies Research at Numis, highlighted the opportunities he sees in Vietnamese specialist investment companies in the Country Specialist sector. He said: “The economy is performing strongly and inflation remains below the central bank’s 4% target. The reasons for the sell-off appear concentrated in an area of the market to which the listed funds have no direct exposure. Therefore, we believe this presents a strong buying opportunity. As Vietnam appears on the radar of more generalist investors this should provide a positive backdrop for the country and we believe there is potential for a tighter discount on the listed funds to be more sustainable in future. Furthermore, investors have the potential future catalyst of MSCI Emerging Markets inclusion, albeit this is at least a few years away.”

Analyst comments: alternatives sectors

Iain Scouller, Managing Director of Investment Funds at Stifel, said: “Despite some very strong NAV performance in recent years, many of the private equity funds were trading on discounts of 15% to 25% at the start of 2022. Whilst some haircuts to NAVs are to be expected in this environment, we think discounts are excessive. Even on a ‘worst-case’ view we do not anticipate writedowns in excess of -15% to -20%, which suggests discounts in a worst case are still 20% to 30% post any writedown. In an alternative scenario, where we see rising equity markets going into the 31/12/22 valuation point, we may actually see NAV increases on the funds over the second half of 2022. We also suspect the likelihood of corporate activity in the sector, such as takeover approaches is increasing, and if this materialises, we would expect a substantial positive sector re-rating.”

Myrto Charamis, Co-Head of Investment Companies at Berenberg, said: “I think there are many opportunities within the alternatives investment companies for investors to scoop up high quality strategies at very attractive valuations.

 “For investors who are mainly looking for long-term capital appreciation I believe listed private equity is very cheap trading at an average discount to NAV of 30%. The sector, in my view, provides a lot of headroom for investors who believe valuations are too high.

“For investors who are mainly looking for yield, I believe there are a few great opportunities within the debt and renewables sectors which can compete with the current corporate debt yields. We note BioPharma Credit, which is trading at an 8% discount to NAV with a yield of 7.3%. It provides investors with predictable and uncorrelated returns through its unique strategy of investing in debt assets (primarily senior secured and royalty) in the life sciences industry. Real Estate Credit Investments is trading at a 9% discount with a yield of about 9%. It aims to deliver a stable quarterly dividend with minimal volatility, across economic and credit cycles by originating and investing in real estate debt secured by commercial or residential properties in Western Europe, focusing primarily on the UK, France and Germany. In the renewables sector I believe Harmony Energy Income Trust is the best opportunity with a yield of 7.2% trading at a 4% discount to NAV. It targets a 10% NAV total return, unlevered, by providing investors with unique exposure to two-hour duration grid scale battery energy storage systems in Great Britain which support the resiliency and flexibility of the energy system as the penetration of intermittent renewables increases.”

Anthony Leatham, Head of Investment Companies Research at Peel Hunt, said: “Inflation and rising rates have caused a broad rebasing of expectations across a number of sectors. We see value across renewables (here we highlight Octopus Renewables Infrastructure Trust with its diversified pan-European portfolio) as well as other real-asset strategies including the shipping trusts – Tufton Oceanic Assets and Taylor Maritime Investments, which are trading on deep discounts with generous, well-covered yields and a relatively active secondary market for their underlying investments compared with other real asset classes.

“Private equity trusts have followed the playbook of previous market corrections by selling off into a period of risk aversion. Given the inevitable lag in valuations, particularly across the funds of funds, we have compared the share price performance against NAVs lagged by four months. This data suggests that, whilst the market is quick to price in bad news, there is a consistent tendency to over-compensate. Our pick in the sector is HarbourVest Global Private Equity, which has delivered 23% annualised NAV total return over the last five years and is trading on a 45% discount to the end of September 2022 NAV. In our view, this is a rare discount opportunity for this company and one that has appeared only six times in the last 15 years.”

[dreamilykawaiibasement]

Real Estate investment fund HY report: ‘consistent dividend and expertly managed exposure’ says RECI Chairman

Real Estate Credit Investments Ltd (LON:RECI) maintained its disciplined approach to investing and delivering its quarterly 3 pence dividend per share.

Chairman’s statement - Bob Cowdell Chairman

The half year ended 30 September 2022 saw Russia’s illegal invasion and the war in Ukraine continue; increasing inflation throughout the World; and Central Banks in the UK and abroad responding by raising interest rates. The UK suffered political and market turmoil following the removal of Boris Johnson as Prime Minister, the ill-fated tenure of Liz Truss and the “Mini-Budget” presented by her Chancellor Kwasi Kwarteng, which destabilised credit markets. These events caused significant credit and currency market reaction and Rishi Sunak, the UK’s third Prime Minister since the start of the Company’s financial year, has the task of reassuring markets and negating the political risk premium embedded in credit and UK gilt markets.

Rising energy and commodity prices caused by the Ukraine conflict, have been a driver of steeply rising inflation and the expectation is for further increases in interest rates in response. These factors and the forecast of UK economic recession will exacerbate the “cost of living crisis” being felt by many. 

These international and domestic economic challenges have caused many headlines and much market volatility. Against this macro backdrop, your Board and Investment Manager have continued to provide RECI Shareholders and potential new investors with regular and detailed information: focusing on the Company’s portfolio and investment strategy (including its disciplined cash and leverage management); and the selective deployment of cash into an attractive pipeline of new senior debt investment opportunities offering increased returns for the portfolio.

Financial Performance 

RECI reported total net profit for the half year ended 30 September 2022 of £10.3 million on half year end total assets of £465.7 million; £14.2 million for the half year ended 30 September 2021 on half year end total assets of £449.8 million. The NAV as at 30 September 2022 was £1.48 per share (£1.51 per share as at 30 September 2021). The 30 September 2022 NAV reflects the payment of 6 pence per share during the half year in respect of the fourth interim dividend for the year ended 31 March 2022 and the first interim dividend of the current financial year, returning £13.8 million to Shareholders and providing an annualised NAV total return of 5.9% for the half year. During the half year ended 30 September 2022, the Company funded £97.0 million in both the origination of loans and purchases of new bonds for the portfolio. RECI also received net cash inflow from its operating activities (including cash repayments and interest) of £36.9 million in this period

Half Year review and update 

The NAV remained broadly stable during the half year to close at £1.48 per share at 30 September 2022, notwithstanding the payment to Shareholders of two unchanged dividends, totalling 6 pence per share, during that period.

Reaction to the 23 September “Mini-Budget”, saw yield widening in bond markets continue into October. As at 31 October 2022, however, RECI’s NAV was £1.49 per share, impacted by just 0.2 pence per share of negative mark-to[1]market adjustments across the bond portfolio. The first interim dividend of the current financial year was declared on 4 August 2022 and the second interim dividend was declared on 23 November 2022, both maintaining a payment of 3 pence per share. 

When the financial year began on 1 April 2022, RECI had gross leverage of 1.29x and leverage net of cash of 1.14x. Throughout the half year, the Board and Cheyne continued to monitor RECI’s cash resources and repayments and to consider the appropriate level, type and blend of gearing for the Company. At the half year end it held cash of £27.4 million and had gross leverage of 1.35x (1.27x net of cash). The Board and Cheyne continue to consider an expanded range and blend of potential gearing options, including asset level leverage on a non-recourse or partial recourse basis, alongside flexible balance sheet leverage. As at 31 October 2022, the Company had gross leverage of 1.39x (1.33x net of cash) with £10.2 million of asset level leverage (being all non-recourse).

The Company’s shares traded at an average discount to NAV of 2.4% during the financial half year. The market volatility following the “Mini-Budget” provoked much investor uncertainty in credit markets, contributing to some reactive selling of RECI shares on macro concerns, causing the discount to widen in the aftermath. Following the October Quarterly Update and a series of meetings between Cheyne and investors to update on RECI and the portfolio, the discount has begun to narrow. The Company’s shares closed at £1.35 on 21 November 2022 (a discount of 9.4%), which would provide a yield of 8.9% on the basis of continuing to pay a quarterly 3 pence dividend per share for the rest of the current financial year. 

Continuing your Board’s and Cheyne’s commitment to providing detail and transparency regarding the Company’s portfolio and investment strategy, Shareholder Quarterly Updates were also held in May and July 2022 and we appreciate the interest and attendance of both existing and potential new investors.

Outlook 

It appears inevitable that RECI will be operating against a backdrop of high inflation and increasing interest rates, combined with a challenging geo-political outlook, for the rest of this financial year. Nevertheless, the Company’s portfolio composition, structure and continued diversification into Western Europe, position it well to withstand these challenges and steer a course through difficult market conditions. 

Our Investment Manager has worked hard to strengthen the robustness of the Company’s portfolio, with the increased exposure to lower risk senior loans and bonds and the increased size and capital strength of our chosen counterparties. The loan portfolio now has a WAL of just 1.6 years and future loans are expected to be on a floating rate basis. 

As was demonstrated in previous times of economic stress and market uncertainty, Cheyne’s expert origination capability has identified a pipeline of attractive investment opportunities, targeting senior debt with enhanced yields, which will underpin the continued payment of an attractive and stable dividend and position the portfolio to enhance NAV. 

Your Board remains committed to providing investors with a long-term opportunity to receive an attractive dividend stream from an expertly managed exposure to real estate credit assets. 

 Analyst comments: equity sectors

Anthony Leatham, Head of Investment Companies Research at Peel Hunt, said: “These are volatile times and the discount picture is evolving on a week-by-week basis.

“Whilst it feels like a ‘marmite’ choice at the moment, China cannot be ignored. We would highlight Fidelity China Special Situations trading on an 11% discount. A recent update from the manager – Dale Nicholls – points to some of the cheapest valuations across the underlying portfolio companies that he has seen in a long time. Investors are looking for a shift in policy focus to support growth and any positive action could act as a catalyst for a re-rating.”

Priyesh Parmar, Associate Director of Investment Companies Research at Numis, highlighted the opportunities he sees in Vietnamese specialist investment companies in the Country Specialist sector. He said: “The economy is performing strongly and inflation remains below the central bank’s 4% target. The reasons for the sell-off appear concentrated in an area of the market to which the listed funds have no direct exposure. Therefore, we believe this presents a strong buying opportunity. As Vietnam appears on the radar of more generalist investors this should provide a positive backdrop for the country and we believe there is potential for a tighter discount on the listed funds to be more sustainable in future. Furthermore, investors have the potential future catalyst of MSCI Emerging Markets inclusion, albeit this is at least a few years away.”

Analyst comments: alternatives sectors

Iain Scouller, Managing Director of Investment Funds at Stifel, said: “Despite some very strong NAV performance in recent years, many of the private equity funds were trading on discounts of 15% to 25% at the start of 2022. Whilst some haircuts to NAVs are to be expected in this environment, we think discounts are excessive. Even on a ‘worst-case’ view we do not anticipate writedowns in excess of -15% to -20%, which suggests discounts in a worst case are still 20% to 30% post any writedown. In an alternative scenario, where we see rising equity markets going into the 31/12/22 valuation point, we may actually see NAV increases on the funds over the second half of 2022. We also suspect the likelihood of corporate activity in the sector, such as takeover approaches is increasing, and if this materialises, we would expect a substantial positive sector re-rating.”

Myrto Charamis, Co-Head of Investment Companies at Berenberg, said: “I think there are many opportunities within the alternatives investment companies for investors to scoop up high quality strategies at very attractive valuations.

 “For investors who are mainly looking for long-term capital appreciation I believe listed private equity is very cheap trading at an average discount to NAV of 30%. The sector, in my view, provides a lot of headroom for investors who believe valuations are too high.

“For investors who are mainly looking for yield, I believe there are a few great opportunities within the debt and renewables sectors which can compete with the current corporate debt yields. We note BioPharma Credit, which is trading at an 8% discount to NAV with a yield of 7.3%. It provides investors with predictable and uncorrelated returns through its unique strategy of investing in debt assets (primarily senior secured and royalty) in the life sciences industry. Real Estate Credit Investments is trading at a 9% discount with a yield of about 9%. It aims to deliver a stable quarterly dividend with minimal volatility, across economic and credit cycles by originating and investing in real estate debt secured by commercial or residential properties in Western Europe, focusing primarily on the UK, France and Germany. In the renewables sector I believe Harmony Energy Income Trust is the best opportunity with a yield of 7.2% trading at a 4% discount to NAV. It targets a 10% NAV total return, unlevered, by providing investors with unique exposure to two-hour duration grid scale battery energy storage systems in Great Britain which support the resiliency and flexibility of the energy system as the penetration of intermittent renewables increases.”

Anthony Leatham, Head of Investment Companies Research at Peel Hunt, said: “Inflation and rising rates have caused a broad rebasing of expectations across a number of sectors. We see value across renewables (here we highlight Octopus Renewables Infrastructure Trust with its diversified pan-European portfolio) as well as other real-asset strategies including the shipping trusts – Tufton Oceanic Assets and Taylor Maritime Investments, which are trading on deep discounts with generous, well-covered yields and a relatively active secondary market for their underlying investments compared with other real asset classes.

“Private equity trusts have followed the playbook of previous market corrections by selling off into a period of risk aversion. Given the inevitable lag in valuations, particularly across the funds of funds, we have compared the share price performance against NAVs lagged by four months. This data suggests that, whilst the market is quick to price in bad news, there is a consistent tendency to over-compensate. Our pick in the sector is HarbourVest Global Private Equity, which has delivered 23% annualised NAV total return over the last five years and is trading on a 45% discount to the end of September 2022 NAV. In our view, this is a rare discount opportunity for this company and one that has appeared only six times in the last 15 years.”

[brianway23]

Real Estate investment fund HY report: ‘consistent dividend and expertly managed exposure’ says RECI Chairman

Real Estate Credit Investments Ltd (LON:RECI) maintained its disciplined approach to investing and delivering its quarterly 3 pence dividend per share.

Chairman’s statement - Bob Cowdell Chairman

The half year ended 30 September 2022 saw Russia’s illegal invasion and the war in Ukraine continue; increasing inflation throughout the World; and Central Banks in the UK and abroad responding by raising interest rates. The UK suffered political and market turmoil following the removal of Boris Johnson as Prime Minister, the ill-fated tenure of Liz Truss and the “Mini-Budget” presented by her Chancellor Kwasi Kwarteng, which destabilised credit markets. These events caused significant credit and currency market reaction and Rishi Sunak, the UK’s third Prime Minister since the start of the Company’s financial year, has the task of reassuring markets and negating the political risk premium embedded in credit and UK gilt markets.

Rising energy and commodity prices caused by the Ukraine conflict, have been a driver of steeply rising inflation and the expectation is for further increases in interest rates in response. These factors and the forecast of UK economic recession will exacerbate the “cost of living crisis” being felt by many. 

These international and domestic economic challenges have caused many headlines and much market volatility. Against this macro backdrop, your Board and Investment Manager have continued to provide RECI Shareholders and potential new investors with regular and detailed information: focusing on the Company’s portfolio and investment strategy (including its disciplined cash and leverage management); and the selective deployment of cash into an attractive pipeline of new senior debt investment opportunities offering increased returns for the portfolio.

Financial Performance 

RECI reported total net profit for the half year ended 30 September 2022 of £10.3 million on half year end total assets of £465.7 million; £14.2 million for the half year ended 30 September 2021 on half year end total assets of £449.8 million. The NAV as at 30 September 2022 was £1.48 per share (£1.51 per share as at 30 September 2021). The 30 September 2022 NAV reflects the payment of 6 pence per share during the half year in respect of the fourth interim dividend for the year ended 31 March 2022 and the first interim dividend of the current financial year, returning £13.8 million to Shareholders and providing an annualised NAV total return of 5.9% for the half year. During the half year ended 30 September 2022, the Company funded £97.0 million in both the origination of loans and purchases of new bonds for the portfolio. RECI also received net cash inflow from its operating activities (including cash repayments and interest) of £36.9 million in this period

Half Year review and update 

The NAV remained broadly stable during the half year to close at £1.48 per share at 30 September 2022, notwithstanding the payment to Shareholders of two unchanged dividends, totalling 6 pence per share, during that period.

Reaction to the 23 September “Mini-Budget”, saw yield widening in bond markets continue into October. As at 31 October 2022, however, RECI’s NAV was £1.49 per share, impacted by just 0.2 pence per share of negative mark-to[1]market adjustments across the bond portfolio. The first interim dividend of the current financial year was declared on 4 August 2022 and the second interim dividend was declared on 23 November 2022, both maintaining a payment of 3 pence per share. 

When the financial year began on 1 April 2022, RECI had gross leverage of 1.29x and leverage net of cash of 1.14x. Throughout the half year, the Board and Cheyne continued to monitor RECI’s cash resources and repayments and to consider the appropriate level, type and blend of gearing for the Company. At the half year end it held cash of £27.4 million and had gross leverage of 1.35x (1.27x net of cash). The Board and Cheyne continue to consider an expanded range and blend of potential gearing options, including asset level leverage on a non-recourse or partial recourse basis, alongside flexible balance sheet leverage. As at 31 October 2022, the Company had gross leverage of 1.39x (1.33x net of cash) with £10.2 million of asset level leverage (being all non-recourse).

The Company’s shares traded at an average discount to NAV of 2.4% during the financial half year. The market volatility following the “Mini-Budget” provoked much investor uncertainty in credit markets, contributing to some reactive selling of RECI shares on macro concerns, causing the discount to widen in the aftermath. Following the October Quarterly Update and a series of meetings between Cheyne and investors to update on RECI and the portfolio, the discount has begun to narrow. The Company’s shares closed at £1.35 on 21 November 2022 (a discount of 9.4%), which would provide a yield of 8.9% on the basis of continuing to pay a quarterly 3 pence dividend per share for the rest of the current financial year. 

Continuing your Board’s and Cheyne’s commitment to providing detail and transparency regarding the Company’s portfolio and investment strategy, Shareholder Quarterly Updates were also held in May and July 2022 and we appreciate the interest and attendance of both existing and potential new investors.

Outlook 

It appears inevitable that RECI will be operating against a backdrop of high inflation and increasing interest rates, combined with a challenging geo-political outlook, for the rest of this financial year. Nevertheless, the Company’s portfolio composition, structure and continued diversification into Western Europe, position it well to withstand these challenges and steer a course through difficult market conditions. 

Our Investment Manager has worked hard to strengthen the robustness of the Company’s portfolio, with the increased exposure to lower risk senior loans and bonds and the increased size and capital strength of our chosen counterparties. The loan portfolio now has a WAL of just 1.6 years and future loans are expected to be on a floating rate basis. 

As was demonstrated in previous times of economic stress and market uncertainty, Cheyne’s expert origination capability has identified a pipeline of attractive investment opportunities, targeting senior debt with enhanced yields, which will underpin the continued payment of an attractive and stable dividend and position the portfolio to enhance NAV. 

Your Board remains committed to providing investors with a long-term opportunity to receive an attractive dividend stream from an expertly managed exposure to real estate credit assets. 

 Analyst comments: equity sectors

Anthony Leatham, Head of Investment Companies Research at Peel Hunt, said: “These are volatile times and the discount picture is evolving on a week-by-week basis.

“Whilst it feels like a ‘marmite’ choice at the moment, China cannot be ignored. We would highlight Fidelity China Special Situations trading on an 11% discount. A recent update from the manager – Dale Nicholls – points to some of the cheapest valuations across the underlying portfolio companies that he has seen in a long time. Investors are looking for a shift in policy focus to support growth and any positive action could act as a catalyst for a re-rating.”

Priyesh Parmar, Associate Director of Investment Companies Research at Numis, highlighted the opportunities he sees in Vietnamese specialist investment companies in the Country Specialist sector. He said: “The economy is performing strongly and inflation remains below the central bank’s 4% target. The reasons for the sell-off appear concentrated in an area of the market to which the listed funds have no direct exposure. Therefore, we believe this presents a strong buying opportunity. As Vietnam appears on the radar of more generalist investors this should provide a positive backdrop for the country and we believe there is potential for a tighter discount on the listed funds to be more sustainable in future. Furthermore, investors have the potential future catalyst of MSCI Emerging Markets inclusion, albeit this is at least a few years away.”

Analyst comments: alternatives sectors

Iain Scouller, Managing Director of Investment Funds at Stifel, said: “Despite some very strong NAV performance in recent years, many of the private equity funds were trading on discounts of 15% to 25% at the start of 2022. Whilst some haircuts to NAVs are to be expected in this environment, we think discounts are excessive. Even on a ‘worst-case’ view we do not anticipate writedowns in excess of -15% to -20%, which suggests discounts in a worst case are still 20% to 30% post any writedown. In an alternative scenario, where we see rising equity markets going into the 31/12/22 valuation point, we may actually see NAV increases on the funds over the second half of 2022. We also suspect the likelihood of corporate activity in the sector, such as takeover approaches is increasing, and if this materialises, we would expect a substantial positive sector re-rating.”

Myrto Charamis, Co-Head of Investment Companies at Berenberg, said: “I think there are many opportunities within the alternatives investment companies for investors to scoop up high quality strategies at very attractive valuations.

 “For investors who are mainly looking for long-term capital appreciation I believe listed private equity is very cheap trading at an average discount to NAV of 30%. The sector, in my view, provides a lot of headroom for investors who believe valuations are too high.

“For investors who are mainly looking for yield, I believe there are a few great opportunities within the debt and renewables sectors which can compete with the current corporate debt yields. We note BioPharma Credit, which is trading at an 8% discount to NAV with a yield of 7.3%. It provides investors with predictable and uncorrelated returns through its unique strategy of investing in debt assets (primarily senior secured and royalty) in the life sciences industry. Real Estate Credit Investments is trading at a 9% discount with a yield of about 9%. It aims to deliver a stable quarterly dividend with minimal volatility, across economic and credit cycles by originating and investing in real estate debt secured by commercial or residential properties in Western Europe, focusing primarily on the UK, France and Germany. In the renewables sector I believe Harmony Energy Income Trust is the best opportunity with a yield of 7.2% trading at a 4% discount to NAV. It targets a 10% NAV total return, unlevered, by providing investors with unique exposure to two-hour duration grid scale battery energy storage systems in Great Britain which support the resiliency and flexibility of the energy system as the penetration of intermittent renewables increases.”

Anthony Leatham, Head of Investment Companies Research at Peel Hunt, said: “Inflation and rising rates have caused a broad rebasing of expectations across a number of sectors. We see value across renewables (here we highlight Octopus Renewables Infrastructure Trust with its diversified pan-European portfolio) as well as other real-asset strategies including the shipping trusts – Tufton Oceanic Assets and Taylor Maritime Investments, which are trading on deep discounts with generous, well-covered yields and a relatively active secondary market for their underlying investments compared with other real asset classes.

“Private equity trusts have followed the playbook of previous market corrections by selling off into a period of risk aversion. Given the inevitable lag in valuations, particularly across the funds of funds, we have compared the share price performance against NAVs lagged by four months. This data suggests that, whilst the market is quick to price in bad news, there is a consistent tendency to over-compensate. Our pick in the sector is HarbourVest Global Private Equity, which has delivered 23% annualised NAV total return over the last five years and is trading on a 45% discount to the end of September 2022 NAV. In our view, this is a rare discount opportunity for this company and one that has appeared only six times in the last 15 years.”