18

May

May 2023: Sea changes, swimming naked + time bombs

Andrew Hollingworth

Homepage Slider, Macro Research

Details of a sailboat in old style

(Credit Crunch – Series 2!) Sea change, swimming naked + time bombs

May 2023

Recent weeks have brought ever more economic/interest rate news and the roll-on of the banking crisis in the form of First Republic finally collapsing into JPM’s arms. We make a few new reflections:

We have for some years agreed with David Einhorn’s Jelly Donut view of monetary policy. This being that whilst a few interest rate cuts help economic activity (i.e. one donut tastes good) a too low level of interest rates is akin to too many donuts, making you (and the economy) feel sick. We have long held the view that super-low rates only helped those with top notch credit. i.e., Exor, Brookfield and Berkshire could borrow at 1%, but ordinary people still paid 15-20% on credit card bills. The result of having this starting view is that today we find ourselves with a number of knock-on non-consensus conclusions.

Swimming naked

The section below is extracted from a piece we wrote last Autumn Holland Views: Rejoicing as law and order is restored. It can be found here. We hope it serves as useful warm up for our new views that follow:

Dodge City

Imagine yourself watching an old western movie. Dodge City has been an unruly place for years ruled by gangsters, thieves and speculators. The saloon does a brisk trade as does the house of the rising sun. The church is boarded up and the local sheriff is in the pocket of the thieves. When a new sheriff rolls into town cleaning it up you, the audience, cheer as he restores law and order. But what did the town’s population think? It may depend on who you ask.

The old farmers and church goers of course welcomed the restoration of old values. But much of the town by then was made up of ne’er-do-wells. They liked drinking, gambling and other night-time activities. More than a few farmers’ sons’ heads had been turned away from ploughing and harvesting towards speculation and the easy life. Before we leave this story let’s assume that pre-law and order being restored Dodge City was 80% speculators and 20% old timers. The speculators had grown rich for years. The old timers by contrast had been side-lined, bullied and ignored. Which are you? Bear in mind only 1 in 5 readers can be traditionalists.

The consequence of the 2008 crisis

Investing markets post-2008 (or maybe before) could be seen through this Dodge City lens. Many investors (speculators) wanted the easy life. Lots of growth and nice low interest rates to enable cheap leverage.

The bailout of the financial system in 2008 had a number of consequences:

The most obvious was lasting low interest rates
Less obvious was the bail-out backstop. Central banks would be perceived to again bail out businesses or markets in trouble. This ‘Fed Put’ as it is known presumed central banks were too fearful of the consequences to do otherwise.
Some weak companies survived that should otherwise have failed due to super low interest rates. Additionally, markets awash with capital funded projects that otherwise they would have not at interest rates that supported those that love leverage.
Another consequence was the changing behaviour of many who relied on, or interacted with markets. This included company managers, CIOs and politicians.
- The latter group, politicians, found that with borrowing costs so cheap they could spend like never before, with seemingly no ill consequences.
- As a result, bailouts and generosity became popular policy when once it was frugality and sound finance

Today things have changed… As Dorothy once said: “We are not in Kansas anymore.” Source: Holland Views: Rejoicing as law and order is restored

The Whirlpool

We remain relieved and pleased to see interest rates normalise vs history. We expressed this view in the above piece and saw such a normalisation as unequivocally good news – long term.

Our view is that rates being cut from 3% to 0% had less a positive effect on Main Street than central bankers might have realised from their ivory towers. The 2022/23 reversal in interest rates have had the mirror effect, i.e. less of a dampening impact than expected also.

This realisation we suspect is just sinking in at central banks. We think it has some important longer-term consequences.
Until only very recently central banks thought super-low interest rates were a requirement for ongoing normal economic activity. They are now seeing that this belief was false.
Today all the focus is on short term interest rate decisions and on where/when interest rates will peak. The debate on likely longer-term rates we think is much more important.
The long-term implications from central bankers’ realisation that super-low interest rates are not needed for normal economic activity we think is crucial. The result is that a future world of 3-5% interest rates just became much more likely than one with 0-2% rates.

Much of what we saw during the period of super low rates we think was speculative and consistent with a booming end of market cycle. When considering the outlook for a likely very different future period we need to reflect on this past cycle that is finishing. We conclude; it was long, extreme in nature, and sucked in a great many participants. Our funds’ 2023 year-end letter spoke to this point:

Such periods are often described as “bubbles”. Having now lived through a few, I don’t think this fully explains the psychological struggle investors experience trying to invest during these times. “Whirlpool” might be better image. Imagine you are in a large lake and a powerful whirlpool emerges in the centre. More and more people are being sucked into the whirlpool. You try to swim away, but the whirlpool builds and builds in strength and the longer you swim the more tired you get. Eventually you are exhausted and feel you have to give in to it. That is what it is like.

Another way to think about it is being at a silent disco. You are enjoying your chosen track on your headset and can sing along to it in the silence even if you remove your headphones. But then the DJ turns the sound right up on another track. Your brain just cannot stay on your tune. Quickly you relent and sing along with everyone else in the crowd. That is what it is like. Source: VT Holland Advisors Equity Fund December 2023 Investor letter

Sea change

When we consider what excesses must be purged as this cycle now ends, we need to be mindful of how powerful it was and how many people were sucked into it. This includes central bankers and regulators not just market participants. Only by doing so might we get an idea of what is to come. Some of these past excesses have already been washed out of equity markets. As the best mark to market asset class and a discounter of the future, equity prices were quick to react. However, less readily quoted assets like Private Equity and Real Estate may take much longer to have cheap money excesses purged. On this point we think the views expressed by Howard Marks and his team in the podcasts below very interesting. Also, a recent FT article by Gillian Tett made similar observations about trouble that could be brewing in the Life Insurance sector. Both authors make an important point. This being that the private (off market) funding done in these sectors has grown to an enormous size vs its past. Real estate investors/funders can convince themselves they will be holding an asset for the long term, but if interest rates stay elevated refinancing and valuations could get very difficult. Particularly when old cheap funding is replaced by new funding at maybe double the rate. As Charlie Munger said last weekend, in such periods “the assets remain the same, but the ownership changes!” There will likely be plenty of ‘extend and pretend’, but ultimately lenders may end up owning assets they don’t want, which they will sell, reducing prices etc.

“The ingredients are there for a very large, multi-asset global episode.” Source: Howard Marks May 2023

Penny Drops and Time Bombs…?

We thus conclude that the tightening of credit and its work through in certain parts of banking, asset backed finance, real estate and life insurance might have a way to go yet. As Howard Marks says, this is Sea Change moment. As such it will take time for us to see all those that were swimming naked!

A sector such as Life Insurance we have little expertise in. However, even we could clearly see in the last decade such industries were forced buyers of long bonds at all prices no matter how low yields were. Our understanding is this was due to regulatory requirements.
The LDI crisis that the UK experienced in late 2022 gives an insight into how group think among asset allocators caused tail risks to be ignored. When we reflect on the asset allocators we have met in recent years, we are sad to report that herd mentality/group think behaviour was rampant. All accepted/assumed low-interest rates and many were all-in on ESG investing. This reflection tells us to expect trouble.
Sectors like off-market Asset Backed Finance we do not know either. We suspect the troubles here might be similar though. For now, all such asset owners will state that they are to be held for the ‘long term.’ As per recently troubled banks with their ‘Hold to Maturity’ T-bills! Hopefully, a great many projects were financed with long-term fixed-rate loans. Not all will be, and if they were someone would have to take the other side of that fixed/variable rate swap. If we are concluding above that the world might end up with long term interest rates in a 3-5% range, rather than 0-2% range there will be implications further down the line. As fixed rate loan roll-offs become visible a few years out, asset values will need to change to reflect a new high funding cost reality. Many knock-on implications could follow.
- As a young investor it took a while to understand the relationship between price and yield in the bond market, but eventually it sunk in. The value of a bond with a 6% yield is c.17% less than one with a 5% yield. When the yield move is from 3% to 6% the capital value movement is 50%!!
- If you think you can open our eyes a little more in any of these sectors, we would be very interested to know what we are missing.

Buffett/Munger on real estate

“I once asked Charlie, how do they decide how much a building like this is worth?

The answer was: whatever they can borrow without signing their name” (i.e. using non-recourse debt)

“If you look at real estate generally this phenomenon has been happening. To understand it, you need to remind yourself that this is the attitude of most people that have become big in the real estate business”.

“It all has consequences, and we are starting to see the effect on people that borrowed at 2 ½ % and find out its doesn’t work at current rates.” Source: Warren Buffett, Berkshire Hathaway AGM, May 2023

Regulation + Eat the rich

“Former bank of England deputy governor Paul Tucker has called for lenders to keep enough collateral with central backs to cover all their short-term deposits in single day. His proposals merit further study. If regulators think midsize lenders are significant enough to warrant more deposit protection, then they should face the same scrutiny that large banks face. This means stronger capital and liquidity buffers and broader stress tests” Source: FT Editorial piece May 11^th 2023

“When interest rates rise, this treatment masks losses on banks AFS (Available for Sale) investments, making their capital position look stronger that it really is,” explains Bair, who argued for the US to follow the global approach and force banks to recognise losses on the AFS bonds in real time. Source: Shelia Bair, Head of US FDIC/FT article May 15^th 2023

The 2003-7 boom that preceded the GFC in 2008-9 was arguably made worse by value at risk (VAR) type regulations that allowed banks to take on more risk than was realised at the time. The regulatory changes that followed altered this approach, addressing the just experienced short comings. They were knee jerk and did little to aid a credit recovery.

“The incentives in banking regulation are so messed up and so many people have an interest in them being messed up that its totally crazy. Warren Buffett, Berkshire Hathaway AGM, May 2023.

Post SVB/First Republic we are very likely to see numerous regulatory changes that again will reflect events just occurred. Our best guess on one of these includes hold to maturity assets for smaller/mid-size banks needing to be marked to market in regulatory capital, as per Shelia Bair’s comments. As we watch end of cycle type events unfold in banking, insurance and asset backed financing it would be wise to expect similar regulatory follow-ups/knee jerk reactions:

These will ignore any fault of regulations past.
They will prioritise system and institutional integrity and unit holder safety. There will be scant regard for shareholder equity as Credit Suisse investors found out.
They will seek to require improved equity backing at the first sign of trouble, irrespective of the scale of dilution.

In an environment of social media and short seller reports with a ‘fire first’, sometimes aiming only later could mean permanent diminution of shareholder value in some companies if a dilutive event is forced to occur. We were mindful of these interconnected risks when we wrote our most recent piece on Schwab. We still think Schwab has a wonderful customer proposition that deserves to succeed longer term. However, that the company is structured as a bank is a statement of fact. This structure creates much complexity as we have written about in our piece. The knock-on impact and interconnection of tougher regulation, changing capital needs, interest rate changes and speculator activities in such a company is hard to look past. This is despite our long-term admiration for its business model. This new Schwab piece can be seen here.

“When the facts change, I change my mind, what do you do sir?” Keynes

Recession or Wealth transfer

Whether the sharp rise in interest rates creates a technical US/EU recession or not, we are less interested in. It would be surprising if they did not. The more interesting debate for us is whether any downturn is deep enough for a dramatic U-turn in interest rate policy to occur, thus meaning our long term 3-5% interest rate world does not occur. Instead a 0-2% one re-emerges. On this we will just state that we don’t know. It is notable how during the UK credit market wobbles in late 2022 and the SVB deposit run crisis that emerged earlier this year the largest UK + US banks looked largely unaffected. Additionally, whilst equity markets have fallen, many of the largest global equity index constituents are high margin, low debt companies. Seen in this light, central bankers do not have a spiralling of loan impairments/collapsing value of investor wealth to worry about as they did in past crises (1990/2001/2008). Clearly that situation can change, but if such a spiral does not emerge, how might this cycle evolve if not in a deep and widespread recession?

Our answer is that maybe a re-transfer of wealth occurs. The 2009-2021 low interest rate period was one where savers were punished, and borrowers rewarded. Said another way those prudent with their finances (be they individuals or institutions) made less money, while those who took on risk and borrowed, made out like bandits. The coming period could see that reverse. If it can occur without leading to a collapse in business/financial market confidence, then we would expect central banks to let it run its course – fully. As per our Dodge City analogy at the start of this piece, there is a time when you cannot restore law and order and time when you can. Well capitalised banks, almost full employment, and big companies unaffected by the need for finance (Apple/Amazon/Facebook/Berkshire) suggest that moment might have arrived. If so, anyone invested in a leveraged vehicle that might need an equity injection should expect to get their cheque books out. Regulators, short-sellers and lenders won’t care about long term business models or the NPV of your 30-year project. They will only care that today’s equity is too low vs asset values or interest costs. Few voters, or politicians are going to lose sleep over a greedy Endowment or Wealth fund that miscalculated the future, so needing to stump up more equity. Our observation earlier about much asset backed financing now being ‘off-market’ is interesting. Might some of the dilution pain that is coming happen in private? If so, its contagion will be less damaging for markets and in turn economies.

Absolute vs Relative investors

“Do interest rates of 1% or 4% make you think that differently about investing in Microsoft, Amazon or RyanAir? If you were reaching for yield, by just comparing stock PE’s with super low yielding bonds, maybe it does. But that just shows the error of your investment approach nothing more. Absolute return focused investors do/did not think like that. As a result, few have won popularity contests in recent years!” Source: Holland Views: Rejoicing as law and order is restored

As equity investors we had a ring side seat as ever lower bond yields changed the valuation metrics the vast majority of investors used to assess our investment market. Low interest rates convinced many to pay any price for growth. It also saw asset backed securities re-priced off of low interest rates time and again. Whilst a great many highly intelligent people convinced themselves this was both wise and logical, arguably it was just a mass ‘reach for yield’ exercise. The scale of which markets have never seen before.

Very low interest rates “distort savings. It causes people to go and reach for growth, for yields as if they were on their hands and knees with a flashlight looking under their furniture for some return on their savings” Source: Jim Grant May 2023

Consultants, benchmarks, and career risk will all have played their part in this phenomenon, in the same way there were many psychological building blocks that helped create the pre-2008 boom. The reality is that the vast majority of investors in all asset classes (we will guestimate over 80%) were thinking relative in their assessment of returns – not absolute. This was always a recipe for trouble. The hamster wheel of relative performance drove a need to comply with the accepted wisdom that said low interest rates justified higher asset prices and more leverage.

“The most dangerous activity in finance is the reach for yield”. Paraphrase from Seth Klarman, Margin of Safety

Was there any other way?

We believe there was. As per the extract above from our October piece, absolute return investors do not think in this (relative) way. They (we) assess each company for its potential future absolute compound growth and compare it to the price we have to pay today for that growth. We are always trying to not overpay at the point of purchase so that we have a margin of safety in our cost price vs the absolute compounding we hope to get. This is not rocket science, but it does mean:

You need to be able to value a company independently of its market quote.
If your assessment of a company’s growth vs the value offered gives you a different assessment to others you have to be prepared to have a very different portfolio from other investors.

In the normal flux of stock market returns such a different portfolio is acceptable and it might lead to a few years of divergent performance. However, if that divergence lasts for a decade, it looks a lot like failure! This is the manner with which many good investors saw themselves with little choice but to give in to the power of the whirlpool. Peer pressure, career risk and social proof were almost impossible forces to resist. Whilst all readers have seen this first hand in equity markets, we have little doubt it was also occurring at a similarly frenetic rate in other interest rate benchmarked asset classes also. The unwind of this is what we are now seeing. We welcome the return to normality that the changing interest rate environment brings. We suspect both higher rates and the knock-on impact of them, might be longer lasting than some today believe.

Many commentators discuss investing in terms of value vs growth. However with ‘growth’ being a component of ‘value’ we have always seen this contrast as folly. More interesting to us was the market’s obsession with relative benchmarking/relative performance for a protracted period. This tail chasing was self-perpetuating for a while. As more money flowed into ‘growth’ funds, more AUM bought ‘growth’ stocks, aka they went up! We are truly delighted to see this madness stop. Whilst we are mindful of risks that might pop up in leveraged business models as discussed here our mantra of looking for great, owner run companies when they are priced like bad ones remains. Our assessment of value and the growth we get for that value has always been absolute, never relative. After all, it is not easy to provide for your pension, or pay school fees with ‘relative’ wealth!

Credit Crunch – Part 5

Very long-standing readers/clients will know of the work we did on the eve of the last credit crunch in March 2007. These Credit Crunch pieces (parts 1-4) are all on our website. Indeed, we could have called this piece Credit Crunch part 5, but so few would understand why! After all these pieces were 15 years ago. This was the last time such credit questions needed to be asked. An under-reported fact is that in the period prior to the last credit crunch there were warning signs and people that raised the issue early. We are proud to be on that list. Notably two others that also did so were Jim Grant and Howards Marks – both quoted in this piece! The scale and knock-on effect of what is to come is of course hard to see, but a degree of caution in certain, credit affected, investing areas is wise we suggest.

The wider ramifications of normalised longer term interest rates will also have implications for government spending and the policies/politicians that result. We discussed some reflections in this area in our Holland Views: Rejoicing as law and order is restored piece. There will be many more repercussions we suspect as all parties reflect on the end of a 15 year ‘free money’ period.

We are not optimistic about credit, but we are on the hand we hold

A final point we make is on our optimism for the future. This is not just about some share price mispricings we see in markets today (we do), but also due to the rarity of our/our readers skillsets. We are not saying we expect investing to suddenly become ‘easy’, but it might be ‘less-hard’ than it has felt in recent years. By that we mean the process of working hard to understand the real drivers of absolute compounding only to watch other investors take no notice and instead buy the new shiny growth share was tiring. If we are right and the majority of investors in the last decade have chased market momentum, then they don’t have the skillsets that we at Holland, or you our clients/readers have. That is good news. Whether we can profitably use those skillsets to our advantage remains to be seen, but it feels like we might have better cards in our hands today than Mr Market does. It has not felt that way for many years.

Fig.1 Holland’s modus operandi – Buy great companies when they are priced like bad ones

Source: Holland Advisors

Postscript from Omaha: ROE vs ROCE

Sadly your author was unable to travel to Omaha this year. He has however listened intently to the webcast of the meeting. Those readers wanting to improve their thinking about ‘Returns’ we think could do worse than note the number of times the Berkshire team mentioned “Return on Equity” vs the times they mentioned any other return metric (ROCE/ROIC). The tally reads like a Man City vs Leeds score line! Our focus on absolute returns and ROE has excellent foundations.

Source: CNBC, Berkshire Hathaway AGM, May 2023

With kind regards

Andrew Hollingworth

The Directors and employees of Holland Advisors may have a beneficial interest in some of the companies mentioned in this report via holdings in a fund that they also act as managers to.

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NOTHING IN THE TERMS OF USE EXCLUDES, RESTRICTS OR MODIFIES ANY CONDITION, WARRANTY OR LIABILITY WHICH MAY AT ANY TIME BE IMPLIED BY STATUTE OR ANY OTHER APPLICABLE LAW WHERE TO DO SO IS ILLEGAL OR WOULD RENDER ANY PROVISION OF AN AGREEMENT VOID. 8. Third Party Websites We may provide, on our Website, links to websites operated by third parties as a convenience to you. If you use these other sites, you will leave this Website. If you decide to visit any linked site, you do so at your own risk and it is your responsibility to take all protective measures to guard against viruses or other destructive elements. Holland Advisors (London) Ltd makes no representations, warranties or guarantees of any kind about any of the content of any other website which you may access by hypertext link through this Website. When you access any other website by means of a link from this Website, you should understand that your access to that other website is independent of Holland Advisors (London) Ltd and Holland Advisors (London) Ltd has no control over the content of the website, nor does Holland Advisors (London) Ltd in any way endorse or approve the content of that website. In no event will Holland Advisors (London) Ltd in any way be liable to you or any other person(s) or organisation(s) for loss or damage (whether direct, indirect, consequential, special or other) for any use of any site linked to it by means of hypertext or otherwise. 9. Indemnity You agree to indemnify Holland Advisors (London) Ltd and its officers from and against any claim brought by third parties against Holland Advisors (London) Ltd and its officers as a consequence of your breach of the Terms of Use. Furthermore, if your use of this Website results in the need for servicing, repair or correction of equipment, software or data, you assume all costs thereof. 10. Intellectual Property Rights and Licence The copyright, trade mark or any other intellectual property rights in the Website and the Information are owned by or licensed to Holland Advisors (London) Ltd. You may download or print out a hard copy of individual pages and/or sections of this Website provided you do not remove any copyright or other proprietary notices. Any downloading or other copying from this Website will not transfer title to any software or material to you. You may not reproduce (in whole or in part), transmit (by electronic means or otherwise), modify, link to or use for any public or commercial purpose this Website without the prior written permission of Holland Advisors (London) Ltd. Any rights not expressly granted in the Terms of Use are reserved. 11. Operation of the Website You should be aware that the internet, being an open network, is not secure. If you choose to send any electronic communications by means of this Website, you do so at your own risk. Holland Advisors (London) Ltd cannot guarantee that such communications will not be intercepted or changed or that they will reach the intended recipient safely. 12. Privacy Any personal data relating to you will be collected, used and recorded by us in accordance with current data protection legislation, the Terms of Use and our Privacy Policy. You must read our Privacy Policy as it forms part of the Terms of Use. 13. Governing law The Terms of Use are governed by the laws of England and Wales and the courts of England and Wales will have exclusive jurisdiction over any disputes arising under them. 14. Waiver If you breach the Terms of Use and we take no action, we will still be entitled to use our rights and remedies in any other situation where you breach the Terms of Use. 15. Our details This website is owned and operated by Holland Advisors London Ltd. You can contact us at: Holland Advisors London Ltd, The Granary, 1 Waverley Lane, Farnham, Surrey, GU9 8BB. Updated and effective as of 31st March 2024

Disclaimer

Please read the following conditions of use of this website. This website is directed at high net worth experienced investors and institutional investors who understand the risks involved with the investments being promoted and it should not be relied upon by retail clients (as defined by Financial Conduct Authority). The information on this website is issued by Holland Advisors (London) Limited (hereafter referred to as “Holland Advisors”), a limited liability company (7431314) incorporated in England and Wales, which is authorised and regulated by the Financial Conduct Authority (FRN: 538932). This website is for information purposes only and does not constitute an offer or solicitation to buy or sell securities, funds or any other financial instrument. The information is directed inside the United Kingdom and is not directed at any persons in jurisdictions where it would be against local law or regulation. In particular, information on this site is not directed at any person, partnership or corporation being resident in the United States of America. Holland Advisors disclaims all responsibility if you access or download any information in breach of any law or regulation of the country in which you reside. Information on this site The information provided does not constitute advice. Holland Advisors believes that the sources of the information in this website are reliable. However it cannot and does not guarantee, either expressly or implicitly, and accepts no liability for, the accuracy, validity, timeliness or completeness of any information or data (whether prepared by it or by any third party) for any particular purpose or use or that the information or data will be free from error. Holland Advisors does not undertake any responsibility for any reliance which is placed by any person on any statements or opinions which are expressed herein. Neither Holland Advisors nor any of its directors, officers or employees will be liable or have any responsibility of any kind for any loss or damage that any person may incur resulting from the use of this information. This does not exclude or restrict any duty of liability that Holland Advisors has to its customers under the regulatory system in the United Kingdom. All Information may be changed or amended without prior notice although Holland Advisors does not undertake to update this site regularly. Marketing Communications Documents on this site do not constitute investment research as they have not been prepared in accordance with UK legal requirements designed to promote the independence of investment research. Therefore, even if they contain research recommendations they should be treated as marketing communications and as such will be fair, clear and not misleading in line with Financial Conduct Authority rules. These communications are not personal recommendations to you and any opinions cited are subject to change without notice. Holland Advisors takes all reasonable care to ensure that the information on this site is accurate and complete; however no warranty, representation, or undertaking is given that it is free from inaccuracies or omissions. Documents on this site are based on, and contain, current public information, data, opinions, estimates and projections obtained from sources we believe to be reliable. Past performance is not necessarily a guide to future performance. The content of these documents may have been disclosed to the issuer(s) prior to dissemination in order to verify their factual accuracy. Investments in general involve some degree of risk, therefore Prospective Investors should be aware that the value of any investment may rise and fall and you may get back less than you invested. Value and income may be adversely affected by exchange rates, interest rates and other factors. The investments discussed on this website may not be eligible for sale in some states or countries and may not be suitable for all investors. If you are unsure about the suitability of an investment given your financial objectives, resources and risk appetite, please contact your financial advisor before taking any further action. Holland Advisors and/or its officers, directors and employees may have or take positions in securities, funds or derivatives mentioned on this site (or in any related investment) and may from time to time dispose of any such securities (or instrument). Holland Advisors manages these potential conflicts of interest internally via its compliance procedures. Fund Information Parts of this site may refer to Funds managed or advised by Holland Advisors. These are not solicitations to invest and any potential investors should refer to the “Our Funds” section of the website in order to learn more about these Funds and find out how and where to obtain the relevant full legal documentation. Linked Websites This site may be linked to third party websites or contain information provided by third parties. Holland Advisors does not make any representation as to the accuracy or completeness of such websites or information, has not and will not review or update such websites or information, and cautions browsers that any use made of such websites or information is at their own risk. Holland Advisors does not accept any liability arising out of the information contained on any linked website or Information provided by a third party and the use of such sites and information is at your own risk. This does not exclude or restrict any duty or liability that Holland Advisors has to its customers under the regulatory system in the United Kingdom. Indemnity You agree to indemnify and defend Holland Advisors, its affiliates and licensors, and the officers, directors, employees, and agents of Holland Advisors and its affiliates and licensors, from and against any and all claims, liabilities, damages, losses, or expenses, including legal fees and costs, arising out of or in any way connected with your access to or use of this website and the Information. Use of Cookies If you agree to these terms and conditions a “cookie” might be placed on your computer. A cookie is a packet of information that does not identify individual users of a website, but allows the collection of website activity (such as the number of users who visit our website, the date and time of visits, the number of pages viewed, navigation patterns, what country and what systems users have used to access the site). We can use this information for statistical purposes, which allows us to analyse and improve our website. The cookie will expire automatically after 6 months or you can manually remove cookies in your browser settings. Copyright, Trademarks and Other Rights Copyright, trademarks, database rights, patents and all similar rights in this site and the information contained in it are owned by Holland Advisors or relevant third party providers. You may use the Information and reproduce it in hard copy for your personal reference only. The information contained herein and any supplemental documentation provided is confidential and should not be copied, reproduced or redistributed without the prior consent of Holland Advisors. Governing Law You agree that your use of this site and any dispute arising from this use is subject to English law and you submit to the jurisdiction of the Courts of England & Wales.

Privacy Notice

This is the privacy notice of Holland Advisors London Ltd our company number is 07431314. Our registered office is at The Halt, Smugglers Way, The Sands, Farnham, Surrey, GU10 1NB.

Introduction

This notice describes how we collect, store, transfer and use personal data. It tells you about your privacy rights and how the law protects you. In the context of the law and this notice, ‘personal data’ is information that clearly identifies you as an individual or which could be used to identify you if combined with other information. Acting in any way on personal data is referred to as ‘processing’. This notice applies to personal data collected through our website www.hollandadvisors.co.uk. Except as set out below, we do not share, or sell, or disclose to a third party, any information collected through our website.

Data Protection Officer

We have appointed a data protection officer (‘DPO’) who is responsible for ensuring that our privacy policy is followed. If you have any questions about how we process your personal data, including any requests to exercise your legal rights, please contact our DPO, Claire Brunt at claire@hollandadvisors.co.uk.

Personal data we process

1. How we obtain personal data The information we process about you includes information:

you have directly provided to us
that we gather from third party databases and service providers
as a result of monitoring how you use our website or our services

2. Types of personal data we collect directly When you use our website, you may provide personal data by submission of data by our Sign Up or Contact Us forms. This can be categorised into the following groups:

personal identifiers, such as your first and last names
contact information, such as your email address and your telephone number for communication
records of communication between us including messages sent through our website, email messages and telephone conversations
marketing preferences that tell us what types of marketing you would like to receive

3. Types of personal data we collect from your use of our services By using our website and our services, we process:

technical information about the hardware and the software you use to access our website and use our services, including your Internet Protocol (IP) address, your browser type and version and your device’s operating system
usage information, including the frequency you use our services, the pages of our website that you visit, whether you receive messages from us and whether you reply to those messages
your preferences to receive marketing from us; how you wish to communicate with us; and responses and actions in relation to your use of our services.

4. Our use of aggregated information We may aggregate anonymous information such as statistical or demographic data for any purpose. Anonymous information is that which does not identify you as an individual. Aggregated information may be derived from your personal data but is not considered as such in law because it does not reveal your identity. For example, we may aggregate usage information to assess whether a feature of our website is useful. However, if we combine or connect aggregated information with your personal data so that it can identify you in any way, we treat the combined information as personal data, and it will be used in accordance with this privacy notice. 5. The bases on which we process information about you The law requires us to determine under which of six defined bases we process different categories of your personal data, and to notify you of the basis for each category. If a basis on which we process your personal data is no longer relevant then we shall immediately stop processing your data. If the basis changes then if required by law we shall notify you of the change and of any new basis under which we have determined that we can continue to process your information. 6. Information we process with your consent Through certain actions when there is no contractual relationship between us, such as when you browse our website or ask us to provide you more information about our business, you provide your consent to us to process information that may be personal data. Wherever possible, we aim to obtain your explicit consent to process this information, for example, we ask you to agree to our use of non-essential cookies when you access our website. We continue to process your information on this basis until you withdraw your consent or it can be reasonably assumed that your consent no longer exists. You may withdraw your consent at any time by instructing us claire@hollandadvisors.co.uk. 7. Information we process for the purposes of legitimate interests We may process information on the basis there is a legitimate interest, either to you or to us, of doing so. Where we process your information on this basis, we do after having given careful consideration to:

whether the same objective could be achieved through other means
whether processing (or not processing) might cause you harm
whether you would expect us to process your data, and whether you would, in the round, consider it reasonable to do so

For example, we may process your data on this basis for the purposes of:

improving our services
record-keeping for the proper and necessary administration of our business
responding to unsolicited communication from you to which we believe you would expect a response
preventing fraudulent use of our services
exercising our legal rights, including to detect and prevent fraud and to protect our intellectual property
insuring against or obtaining professional advice that is required to manage business risk
protecting your interests where we believe we have a duty to do so

How and when we process your personal data

8. Your personal data is not shared We do not share or disclose to a third party, any information collected through our website.

Use of information we collect through automated systems

9. Cookies Cookies are small text files that are placed on your computer’s hard drive by your web browser when you visit a website that uses them. They allow information gathered on one web page to be stored until it is needed for use at a later date. They are commonly used to provide you with a personalised experience while you browse a website, for example, allowing your preferences to be remembered. They can also provide core functionality such as security, network management, and accessibility; record how you interact with the website so that the owner can understand how to improve the experience of other visitors. Some cookies may last for a defined period of time, such as one visit (known as a session), one day or until you close your browser. Others last indefinitely until you delete them. Your web browser should allow you to delete any cookie you choose. It should also allow you to prevent or limit their use. Your web browser may support a plug-in or add-on that helps you manage which cookies you wish to allow to operate. The law requires you to give explicit consent for use of any cookies that are not strictly necessary for the operation of a website. 10. Personal identifiers from your browsing activity Requests by your web browser to our servers for web pages and other content on our website are recorded. We record information such as your geographical location, your Internet service provider and your IP address. We also record information about the software you are using to browse our website, such as the type of computer or device and the screen resolution. We use this information in aggregate to assess the popularity of the webpages on our website and how we perform in providing content to you.

Other matters

11. Your rights The law requires us to tell you about your rights and our obligations to you in regard to the processing and control of your personal data. We do this now, by requesting that you read the information provided at http://www.knowyourprivacyrights.org 12. Communicating with us When you contact us, whether by telephone, through our website or by email, we collect the data you have given to us in order to reply with the information you need. We record your request and our reply in order to increase the efficiency of our business. We may keep personally identifiable information associated with your message, such as your name and email address so as to be able to track our communications with you to provide a high quality service. 13. Complaining If you are not happy with our privacy policy, or if you have any complaint, then you should tell us. When we receive a complaint, we record the information you have given to us on the basis of consent. We use that information to resolve your complaint. 14. Retention period Except as otherwise mentioned in this privacy notice, we keep your personal data only for as long as required by us to provide you with the services you have requested. 15. Compliance with the law Our privacy policy complies with the law in the United Kingdom, specifically with the Data Protection Act 2018 (the ‘Act’) accordingly incorporating the EU General Data Protection Regulation (‘GDPR’) and the Privacy and Electronic Communications Regulations (‘PECR’). 16. Review of this privacy policy We shall update this privacy notice from time to time as necessary.