UK - Pension funds are being warned to monitor borrowing levels at department store giant Selfridges if it mortgages its flagship Oxford Street store.
Investors will get a dividend windfall of up to £360m – more than the company’s current stock market valuation – if the mortgaging plan goes ahead.
But Isis Asset Management’s head of corporate governance Richard Singleton commented: “While you don’t want to take excessive risks, taking a degree of risk in business is what gives an above average return.”
And Singleton warned that if Selfridges did decide on the radical move, pension funds should take note of the borrowing level of the company and the effect this could have on returns.
He said: “If you are wholly under-geared, it takes pressure off management and makes for an easy and safe life, but it doesn’t necessarily give the best return for shareholders.”
Investors, driven by depressed interest rates, slower global economic growth and rich equity market valuations are examining non-traditional investment opportunities.
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