Hansa Trust has announced its interim results for the six-months ended 30 September 2015. During the period, the trusts NAV fell 4.1% on a total return basis. The company says that, excluding the Brazil-focused Ocean Wilsons Holdings, the Company’s NAV fell 3.6%. This compares to a return of 1.7% for the benchmark, which is absolute in nature, and -11.0% for the MSCI All Country World Index. During the six months to September 2015, the Ordinary and ‘A’ non-voting Ordinary share prices fell by 46.2p and 45.0p respectively both approximately 5.4% of their values at 31 March 2015. The company says that this is mainly due, in their view, to the impact of the falling value of Ocean Wilsons Holdings on the portfolio, which has suffered due to the weakening Brazilian Real. During this period, the discount of both share classes has remained fairly constant (Ordinary: 24.9%; ‘A’ non-voting Ordinary: 27.8%). The company believes that a key reason for the ongoing discount is the continuing market uncertainly over the Brazilian economy.
The company says that portfolio activity has been modest as most of the changes post the strategic review have now been made. JO Hambro Japan was sold in Q2, whilst Lyxor Nikkei 400 ETF, a passive fund that tracks the new Japanese index focusing on those companies with good shareholder returns and corporate governance, was purchased. The company also purchased Indus Japan Long Only, an active Japanese fund with a focus on larger capitalisation stocks and added to its position in Goodhart Hanjo Japan following a positive update with the manager. The Global Event Partners Fund, managed by BlackRock, was another addition. The company say that this reflects a desire to start adding less correlated investments, which they expect to provide some protection from falling markets as the stock market cycle matures.
In terms of specific fund performances, the company says that its core/regional silo saw a wide range of returns during the period. The two hedge funds produced robust returns with BlackRock European Hedge rising by 12.9% and CF Odey UK Absolute Return by 6.1%. The company says that its exposures to Asian and emerging markets have been under pressure, with Schroder ISF Asian Total Return, Prince Street Institutional and NTAsian Discovery down by 12.5%, 14.8% and 23.4% respectively over the past half year. The combined exposure to the latter two is relatively modest at just 2% of portfolio assets, whilst the weighting in Schroder Asian, which actively manages its risk levels, is higher at 2.3%.
The company says that its Eclectic and Diversifying silo also saw a spread of returns over the past six months. DV4 (property investment) returned 9.3% whereas the technology fund, GAM Star Technology and JLP Credit Opportunity fell by 14.6% and 15.3%, respectively. JLP is a fund which invests in stressed credit that typically comes under pressure at the very end of a cycle, as recession nears and defaults start to rise. The company says that this is not what they envisage in the near‑term and suspect the recent underperformance partly reflects the low liquidity in the sector owing to regulatory restrictions on banks. As coupons are paid and bonds are redeemed we would expect significant value to be realised.
With regards to UK equities, the company says its largest holding, NCC Group offers an almost unique way to play the cybersecurity theme in the UK whose dividend has been increased at a compound rate of 25% pa since the company floated in 2004. Hansteen Holdings is, in the company’s view, managed on a very hands-on basis via a platform of 16 regional offices. Hansa says that, since inception, Hansteen has delivered strong NAV returns alongside an attractive and growing dividend. They say that, owing to the increasingly strong occupier and investment demand within the market, this is expected to continue. UBM has confirmed it is in discussions with a number of parties about a potential sale of its PR Newswire business, which would turn UBM into a fully-focused events business which could drive a re-rating of its shares.
With regards to Ocean Wilsons Holdings, the second quarter results for Wilson Sons, which were released in August, showed a marked rise in EBITDA of 37.8% from the previous year. The company say that this was despite the continuing weak macroeconomic picture in Brazil. During the year, the Wilson Sons’ share price, in Brazilian Real terms, has increased 4.2% from BRL28.3 to BRL29.5, at a time when the BOVESPA has weakened by 11.9%. The company believe that the resilience of the company’s logistics and maritime operations is encouraging and demonstrates the benefits of the company’s diversity. The portfolio of Ocean Wilsons Investments, the subsidiary of OWH, was valued at $248.5m at the end of June 2015, which was down slightly from $251.7m at the end of December 2014. The decline was primarily due to $7.0m of dividends paid in the period, principally to fund the 2014 final dividend payment to shareholders of OWH. The time-weighted, gross‑of-fees, performance over this six month period was 2.2%.
In terms of outlook, the company does not believe that the recent market set back heralds the next recession and bear market in the developed economies, but they do expect to see ongoing volatility as the slowdown in China and other emerging markets plays out. The US and UK lead the way with their cycles being more advanced and growth more robust, but even Europe is seeing positive signs of a recovery in growth from depressed levels. They say that, with Chinese growth falling and many commodity-exporting emerging nations under pressure in the face of weakening commodity prices, prospects for their economies and stock markets remain challenging. However, they believe this is mostly captured in current valuations, which are now significantly below most developed markets but comment that these situations have a habit of persisting for longer than is expected, and typically prior excesses lead to prices over-shooting on the downside.
Taking into account all these factors, the managers believe that that the markets have probably experienced a summer lull, albeit a particularly severe one. They acknowledge that the uncertainty in the global economy, combined with the slowdown in China and the anticipated rate rising cycle in the US, are likely to contribute to ongoing bouts of volatility. However, we are not making significant changes to our strategy, although we are looking to add less correlated investments in order to help protect against market draw‑downs.
Hansa Trust impacted by fall in Ocean Wilson Holdings : HAN