Monks Investment Trust (MNKS), which in August 2022 announced it was combining with The Independent Investment Trust, released its annual report for the year ended April 2023. During the year the NAV total return was -1.6%. The share price total return was -7.0%, while the World Index returned +3.2%. This follows on from last year’s under-performance with the company’s NAV falling -18.9% compared to the index return of 6.1%. The manager noted that it is now eight years since the change in the company’s investment approach was implemented in March 2015. Since then, the NAV total return has been +126.7% against the benchmark return of +127.4%. Over the same period, the share price total return was +131.3%. Recent under-performance by growth stocks has wiped out the cumulative gains of the prior years.
Commenting on the performance, chairman KS Sternberg noted:
“The board’s most important role is to challenge the managers on your behalf, to justify why their chosen portfolio should deliver superior returns over the long term. We remain impressed by the breadth and depth of their research, and their willingness to look across geographies and sectors to find underappreciated growth, without a dogmatic approach of narrowing the opportunities to only the fastest growth companies in relatively new parts of economies.
“The board has challenged the managers with respect to recent underperformance, which the managers write about in their report below. The last two years have reminded the managers of the importance of valuation discipline. The aggressive period of monetary tightening has most certainly not reined in the pace of underlying change in economies, as the latest developments in artificial intelligence demonstrate. The managers remain focused on capturing this change, and finding the winners as the economic landscape shifts, even when overall growth is feeble. We believe that our managers have constructed a portfolio with very good long-term prospects, thoughtful diversification, and with only a relatively small premium price for much faster growth than the rest of the market will deliver. The board shares Baillie Gifford’s optimism that investors will, in due course, return to attractive growth companies with sustainable business models.”
Regarding the outlook, managers Spencer Adair and Malcolm MacColl continued:
“Contrary to consensus, we believe the opportunity set is broadening and the prospects for growth companies are as compelling as ever. The operating environment for companies has undeniably changed. We have reflected on where we may have done better and adjusted the portfolio – we are confident that the companies we own for Monks are well-placed to adapt and thrive. Monks’ proposition is clear, namely, to grow savers’ capital over the long term. The most certain way to do this is to invest in companies that grow their earnings over long periods – this is the hard currency of returns. We are fortunate to be able to look across the growth spectrum and around the world for ideas. Monks owns an exciting and eclectic portfolio that is well diversified and it deploys modest levels of gearing (5.3% on a net basis) that will enhance long-term returns. We remain unwavering in our commitment to identifying and owning companies where we see the greatest underappreciation of future growth. It is this future growth that will drive the returns of Monks’ shareholders long into the future.”
MNKS: Struggles continue for Monks Investment Trust