By Tom Winnifrith | Tuesday 11 July 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
There are numerous reasons NOT to own shares in sub scale and underperforming Paternoster Resources (PRS) as I explained at the weekend HERE. But there is a different way of looking at this piece of investment crap.
Paternoster incurred administrative expenses of £241,616, £293,795 and £290,128 for the three years ended 31 December 2016, 2015 and 2014 which doesn’t sound expensive. However, when you divide this by the year end net asset value as at 31 December for the last three years of £2,758,784, £2,948,406 and £3,584,454 you end up with an expense ratio of 8.7%, 9.9% and 8.1% respectively.
That makes Paternoster a very expensive fund manager indeed but it gets far worse because Paternoster invests in other very sub scale investment vehicles like Pires and Polemos.
For instance Pires had operating expenses for years ended 31 October 2016 and 2015 respectively were £248,611 and £314,207 compared to net assets of £130,714 and £592,351 respectively. Pires in turn invests in other number of other small companies many of which also have their own listing fees and costs to bear.
Polemos incurred administrative expenses of £269,000 and £149,000 for the years ended 31 December 2016 and 2015 and had net assets of £310,000 and £271,000 respectively. It subsequently raised £495,000 before expenses after the year end and then made an investment of approximately £500,000 in a new AIM listing for an existing TSX listed entity. Its expense ratio will still be in the region of 40% of assets under management and punters could have bought the underlying stock themselves.
Companies like Pires and Polemos should really distribute their assets to shareholders because they will only make money for the crony capitalists in the AIM Casino because even if they have an investment performance that would make Warren Buffet proud the expense ratio just eats away all their returns.
Investors looking for a punt on junior resource stocks would be better off in a real fund with lower expense ratios or failing that picking their own stocks and saving on some of the costs incurred by the likes of Paternoster, Pires and Polemos. And in terms of stock selection the recent record of Nick Lee and Amanda Van Related Party hardly inspires confidence - minus 16% in Q1 of this year alone. Surely most of us can do better than that?
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