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Flat year for Miton Global Opps

Miton Global Opportunities to put three proposals to shareholders 1

Flat year for Miton Global Opps – after a run of award-winning performance, Miton Global Opportunities reported a negative 0.3% total return for the year ended 30 April 2019. The trust’s benchmark is 3-month SONIA +2% -which worked out at 2.7% for the period. A shift to trading on a small premium gave shareholders an overall return of 1.3%. The MSCI World Index rose by 13.0%.

The manager on the sector as a whole

We have commented in the past about the rapid consolidation of the traditional private client stockbroking firms into the vast private wealth chains. Many of the natural buyers from the not too distant past are now running too much money to be able to include anything other than the very largest trusts within their portfolios.

Whilst the sector has lost one breed of customer it has gained a following from within the self-directed investor community. A number of periodicals read by this type of investor have highlighted that investment trusts are superior vehicles. The protection from daily inflows and outflows enjoyed by the manager of a closed-end fund allows them to build greater conviction within the portfolio, safe in the knowledge that they will not be forced into an unwilling market at short notice to sell holdings in order to meet redemptions. Academic research from the Cass business school estimates that closed-ended funds have outperformed their open-ended peers by 1% per annum. The compounding effect makes this significant over time.

The typical buyer is now a self-directed investor who reads Moneyweek on a Saturday and buys trust shares within their SIPP or ISA on a Monday. Over the years, many commentators have forecast the death of the investment trust yet the sector continues to evolve and remains in rude health.”

Winners

Counter-intuitively, given that the sector remains resolutely out of favour, property proved to be the greatest positive contributor to our attribution. Macau Property Opportunities handed back some cash from the sale of a retail development. Its shares trade on a wide discount which meant that we enjoyed a significant uplift on the portion of our holding redeemed at net asset value. Alpha Real sold a data centre in Frankfurt and a private rental scheme in Leeds at levels far exceeding their carrying values. Real Estate Investors made solid progress within its Birmingham portfolio whilst Stenprop surpassed market expectations with the prices achieved in selling legacy assets. Phoenix Spree only made modest progress in share price terms despite reporting a significant increase in net asset value. The backlash against the gentrification of Berlin has soured sentiment towards the trust. Nevertheless, population growth remains strong in the German capital. This has exacerbated the shortage of housing as the cost of construction remains higher than open market values. The only resolution in the longer term is for authorities to allow housing prices to rise so that demand and supply move into equilibrium. Other positive contributors to last year’s attribution included Establishment Trust which has moved into orderly wind down and EPE Special Opportunities. We highlighted EPE as the main detractor in last year’s annual report. Happily management have managed to turn around Luceco, its principal investment. Whilst there was a useful gain registered during our reporting period, much of Luceco’s progress has occurred post our year-end, its shares having appreciated 53% in May.”

Detractors

Our exposure to India, through India Capital Growth, was one of the worst performers over the year. We pared back the position at the end of 2018 as we anticipated that Indian markets were likely to be volatile in the run-up to the national elections. The Sensex had a difficult start to 2019, unlike the vast majority of world indices, as investors feared that poor economic and unemployment data threatened the re-election of Prime Minister Modi who is largely regarded as being market-friendly. In May, Modi confounded expectations and was not only re-elected but with a bigger majority than he achieved in 2014. This gives him a mandate to introduce further reforms to cut bureaucracy and corruption. We remain bullish on the outlook for India in the long term as favourable demographics, the increasing move away from the informal sector and increasing urbanisation should all drive growth.

Other notable detractors include CQS Natural Resources and Artemis Alpha. The growth of passive investing has disrupted mining equities leading to weakness in smaller mining stocks which is CQS’ core area of focus. In the longer term there will be a real-world value for the products mined. Artemis Alpha has been in a period of transition, much of the troubled unlisted portfolio was expensively liquidated during the year. This has led to the trust posting poor numbers which has led to its shares languishing on a discount approaching 20%.”

MIGO : Flat year for Miton Global Opps

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