Menhaden Resource Efficiency announced its results for the year ended 2022. The numbers do not make for great reading with NAV down 16.5% while shares fell 20.3%, offsetting their solid performance from the previous year. The discount fell steadily throughout the year, falling as low as 36% at one point. It has improved slightly from this trough, to sit currently at 29%.
The company had considerable exposure to large-cap tech during the year, with GOOG, MSFT, and AMZN, among the largest holdings, which contributed to the underperformance.
Despite the poor returns in 2022, the company’s net asset value has now compounded at 7.3% annually, after fees, over the last five years which remains solid, although not spectacular.
Looking ahead, the portfolio managers commented;
“The Federal Reserve appears committed to tighter financial conditions and higher interest rates in order to curb inflation, although the pace of hikes has slowed markedly. Demand appears to be weakening, with corporates attempting to right size their businesses and announcing layoffs. We do not attempt to try and forecast the depth of any possible recession. We focus on investments which require us to make as few predictions as possible. We believe our criteria of resource efficiency, quality and value should leave the portfolio well placed to generate persistently superior returns for the consistent risk profile we have adopted and which is set out in this report.
“The presence of better opportunities within public markets has limited our private investment activity over the past few years. We believe that the change in financial conditions may be starting to change this situation and we continue to search diligently for suitable private investments. We will only make private investments when they offer a more attractive balance between risk and reward compared to public markets. In this vein, we were pleased to make a new commitment (US$25 million) to the TCI Real Estate Partners (TCI REP) Fund IV in March, after the year end. This fund will follow the same strategy as TCI REP Fund III, which we previously invested in, and we would expect our maximum cash exposure to be around 70% of the commitment.”
MHN : Tech wreck sinks Menhaden Resource Efficiency