EP Global Opportunities runs for the exit. Responding to the covid-19 outbreak, the manager of EP Global Opportunities had raised its cash level to 18% of the trust at the end of February (up from 8% at the end of January).
The managers had this to say “we are finding it very difficult to identify ‘cheap’ assets in which to invest. One of the reasons that the assets of the company are not measured against any benchmark is to ensure we can invest according to where value may be found, rather than being tied to the composition of any particular equity market index. Equally, we are not forced to invest when we are unable to identify value. We are prepared to build cash as a reserve to take advantage of the opportunities that we expect to arise. This is not a comfortable position when equity markets are rising and frothy, but we strongly believe it is the logical and appropriate course of action.”
EP Global Opportunities made 5% for investors in 2019 as a 6% return on NAV was diluted by a small widening of its discount. The dividend totalled 7.5p, an increase of 15.4% on 2018.
[EP Global Opportunities may not like to benchmark itself against an index but we will point out that the MSCI AC World Index returned 19.3% in 2019 – EPG is the second-worst performing trust in its peer group over one, three, five and ten years (after Majedie). The managers were convinced that equity markets were overvalued. The future of the trust may depend on what happens over the next few months – whether they are caught out holding a lot of cash when the market rebounds or whether they are able to pick up bargains from distressed sellers, laying the foundations for future outperformance.]