Momentum Multi Asset Value Trust (MAVT) has released its half year report for the six-month period ending 31 October 2022.
Over this period MAVT returned a NAV total return of -16.7% and share price toral return -16.3%, compared to the +8.8% of its benchmark, which is UK CPI plus 6% over annum. The board measures MAVT performance relative to this over a ‘typical investment cycle’, defined as one that spans five to ten years.
Each holding within MAVT’s portfolio represents the value style of investing. The board and investment manager believe that because of the underperformance of the value style, MAVT’s portfolio currently represents outstanding potential which will, at some point, be recognised by the stock market.
The major detractors to MAVT’s performance came from the trust’s UK based assets, and their exposure to sterling. Many of MAVT’s UK holdings are in small and mid-sized companies, which have seen indiscriminate withdrawals over the sampled period, leading to them detracting from performance. MAVT’s overseas equity exposure has fared better, with its holdings in Japan and Asia proving more resilient over the period. The two largest positive contributors were Doric Nimrod Air Two and Three, the airline holding trusts. The two corresponding largest detractors were Marston’s, the pub and hotel chain, and Chrysalis, the private equity trust.
The managers have increased their exposure to the UK, increasing allocations to pre-existing positions based on the valuation opportunity. They have sold down their overseas positions, selling into relative strength. The managers believe that over the next year, they expect to see lower inflation and interest rates should peak with stocks consequently re-rating from extremely low multiples. This environment may prove positive for UK mid-cap companies and, therefore, MVAT’s portfolio.
MAVT declared two interim dividends of 1.8p over the six-month period, a 7.1% increase on the prior year’s. The board has signalled its intention to declare a full year dividend of at least 7.2p per share. Given the outlook for inflation, it is very likely the fourth interim dividend due to be announced in May 2023 will be higher than the current quarterly rate of 1.8p per share, consistent with the board’s intention to increase dividends by at least inflation over the longer run.
During the period MAVT bought back 2,167,692 shares costing £3.6m and issued no shares.
As of the 31 October 2022, MAVT had a net gearing level of 11.9%.