Keystone Positive Change Investment Trust (KPC) recently released its full year results for the financial year ending 30 September 2022.
Over the 12-month period KPC reported a NAV total return of -35.2% and share price total return of -43.3%. This compares to the -3.7% generated by KPC comparative index, the MSCI All Country World Index.
The board has recommended a final dividend on 0.4p per share be paid, in accordance with the requirements of investment trusts.
KPC traded on a 13.2% discount as of 30 September 2022, compared to the 0.9% discount it traded on at its last financial year end.
Stock selection and gearing were the dominant drivers of negative returns over the year with the most notable detractor to performance being Moderna, though the management team remain confident in the broader potential of Moderna’s technology which underpins their long-term investment case. Another major detractor was ASML, the leading manufacturer of lithography equipment which performs a critical role in the manufacturing of semiconductors.
Throughout the year, the management team reviewed a number of holdings whose share price had fallen significantly and distinguished between companies facing operational challenges and those performing well operationally but whose share price declines, in their view, were mostly attributable to changes in market sentiment. They used this as a prompt to move on from companies where they had lost conviction and redeployed capital towards companies where the divergence between share price and operating performance created an attractive opportunity for additions. Examples of this include their sale of Beyond Meat and Alibaba, and the corresponding additions to their position in Mercado Libre and Sartorius.
Two new names added to KPC include Nu, the disruptive digital bank in Latin America, and Duolingo, the educational technology company. Purchases which were funded by the reduction in their exposure to Tesla, Nibe, Moderna and ASML. The team also added a new unlisted holding to KPC, Climeworks.
Katie Fox and Lee Quain, managers of KPC, comment: “Against the concerning geopolitical backdrop and complex global challenges, we remain committed to our long-term philosophy of investing in innovative companies that are supporting the transition towards a more prosperous, sustainable, and inclusive future. Our confidence is built on the existence of structural trends such as the advancement of science and technology, continued deflation of renewable energy, and the growing awareness of sustainability issues. These trends provide exciting opportunities for innovative and mission-driven companies. By investing in a subset of them, which are led by outstanding management teams and have the potential to build durable competitive advantages, we believe that the company can generate attractive long-term investment returns for its shareholders and contribute towards a better future.”