Sequoia hit by sterling strength – For the financial year ended 31 March 2018, Sequoia Economic Infrastructure has reported a fall in its NAV from 102.72p to 101.32p. Over the same period, it paid dividends of 6p per share, resulting in a total return of 4.1% over the year. Over the year, the appreciation of sterling against the US Dollar, and market movements, particularly in the high yield bond markets, detracted marginally from performance. The result is broken down as follows:
- Interest income on the Company’s investments of 7.78p per share; plus
- Losses on foreign exchange movements of 1.57p per share, partially offset by the effect of the Company’s hedges; less
- Negative market movements of 0.70p per share; less
- The one-off cost of 0.52p arising from writing down acquired assets to their bid price; less
- Operating costs of 1.09p per share; less
- Dividends of 6p per share; plus
- Gains of 0.70p received from issuing shares in May at a premium to NAV.
Currently, only about 29% of the portfolio consists of UK assets denominated in Sterling, with the balance diversified across assets denominated in US Dollars, Euros and Norwegian Kroner. In order to reduce the potential for NAV volatility arising from movements in the exchange rates, the Company has a large currency hedging position, which is designed to rise in value when Sterling strengthens and fall in value when Sterling weakens. The net effect is that the NAV behaves as though 94% of the Company’s assets were denominated in Sterling, 1% in US Dollars and only 5% in Euros or Norwegian Kroner, as at 31 March 2018.
SEQI : Sequoia hit by sterling strength