AJ Bell’s outsourced assessment of value provider 360 Fund Insight has concluded that Bluefield Solar Income Fund (BSIF ) is not appropriate for private investors because it has ‘worrisome’ borrowing levels and an ‘aggressive’ dividend policy.

In the two-page document shown to Citywire, 360 shows a misunderstanding of what Bluefield does by comparing its portfolio of UK solar, wind and battery storage assets with the WilderHill New Energy Global Innovation index, which is made up of shares in global renewable energy companies, and an exchange-traded fund that tracks it.

Holding shares in a portfolio of over 100 global energy companies is an different investment proposition to a portfolio of actual assets delivering largely inflation-linked, government-backed revenues that offer income investors a dependable yield. It’s not comparing like for like. 

Declaring the 8.80p per share dividend ‘aggressive’ is at odds with 360’s observation that Bluefield’s forward revenues from the inflation-linked contracts cover it twice over. 

Perhaps they believe the 9% yield is the aggressive bit, which is a result of a high payout and a low share price, but that’s what makes Bluefield so attractive at the current 27% discount to net asset value, and why investors are cross that 360’s report has prevented them from buying the investment company on AJ Bell.

In Bluefield’s own recently published assessment of value, it says the main purpose of the £601m fund is to provide shareholders with an attractive return ‘principally in the form of regular income distributions’. By contrast, the ETF reinvests dividends it receives an only offers an ‘accumulation’ or growth share class to investors.

360 flags BSIF’s borrowing of 41.5% of gross assets as ‘worrisome’, given the dividend policy and elevated interest rates. This is within the fund limits and the sector average and the board has pointed out in recent documents that at a 3.5% fixed rate, it’s pretty cheap.

Emphasising the high leverage by pointing to the Invesco ETF’s zero borrowing is a straw man argument, given ETFs are passive and can’t use gearing.  

Lastly, 360 says Bluefield’s factsheets distributed to retail investors do not provide key data such as the total cost of investing, performance and the discount/premium evolution.

The Kent-based company, which was founded in 2017 by former members of the investment research team at funds platform Allfunds Bank, says it bore in mind the fact that Bluefield is distributed to retail investors with ‘limited knowledge of the risks of investment trusts’, which is laudable.

It makes good points that trusts are not held to the same reporting standards as open-ended peers and that there are a number of factors that can impact a shareholder’s returns, including ‘leverage, liquidity, opaque costs and charges.’ It also points out that BSIF’s ongoing charges total 1.94% versus 0.6% for the ETF.  

Bluefield’s portfolio manager James Armstrong told Citywire he was very surprised and disappointed to learn through investor feedback that Fund Insight 360’s fair value assessment suggested that BSIF did not offer fair value.

‘Since AJ Bell’s announcement to investors, the BSIF share price has fallen, trading away from BSIF has increased, and many frustrated investors continue to contact Ocorian, BSIF’s company cecretary, expressing their confusion over the suggestion that BSIF does not offer fair value. They have also been frustrated by an inability to trade on the AJ Bell platform as a result,’ he said.

The tone of this assessment is set when 360 makes the contentious opening statement that professional investors are better suited to closed-end funds in general. That appears to be a strange comment on behalf of AJ Bell, a retail broker thousands of customers invested in trusts.

It rightly sets out to ensure retail investors aren’t hoodwinked by hidden costs, ‘misleading’ NAV returns and borrowing levels, but the assessment misses the mark. 

Unfortunately, there are wider consequnces. 360 Fund Insight’s conclusion means AJ Bell’s DIY investors are barred from buying any shares online not only in BSIF, but also Digital 9 Infrastructure (DGI9 ), Cordiant Digital Infrastructure (CORD ) and Amedeo Air Four Plus (AA4 ), which have also all failed. 

360 won the contract to provide fair value assessments for thousands of funds on AJ Bell in January, including all offshore-domiciled investment companies.

The company declined to comment. In a statement AJ Bell said: ‘The assessments consider a range of factors, including cost and performance, in line with regulatory guidance. As with all our processes, it will be reviewed periodically and we’ll continue to listen to feedback from customers, regulators and other stakeholders.’