SGX Business Trust Discussions

[Nick]

Business trust funds like MIIF and MPSF invest $$$ to own small stakes in businesses which they don't control. Hence their fate is not in their own hands but rather in the businesses which they invest in hence a prudent investor must spend time to research all of these businesses (most private) to understand their risk and growth factors. MIIF learnt its lesson from the credit crunch and sold their investments which they had small stakes in (Arqiva, MEIF). CAC was an interesting divestment but I am guessing they just want to be an Asian centric fund. MIIF was in great shape financially with minimal debts and high margins (it is a fund) but its small stake in Arqiva which was highly in debt led to its inability to pay a distribution for the next few years to shareholders (including MIIF). This caused a sharp drop in its revenue and DPU. MPSF invest in a multitudes of funds holding small stakes in each of them. So they are at the mercy of those funds fate most of which turned bad in 2009. Hence, unless prospective shareholders researched each and every investment these biz funds made, they are taking a big leap of faith in fully trusting the fund manager. This is why it is complicating - too many assets, too little time to research them effectively. It is also a paradox - you invest in a fund so that you don't have to do much research but to invest successfully in a fund, you need to research its asset extensively !

There is a difference between control and ownership. MIIF and MPSF owned shares in many companies in 2007/08 but controlled few of them. MIIF is in better shape now since it control significant stake in their assets. But most of these assets have heavy debts so be careful. There are a few listed companies here which deals with infrastructure assets ie Pan United (owns a stake in a port), CM Pacific (owns toll roads), telcos, water stocks and WTE BOT plants.