MIGO Opportunities Trust (MIGO) has announced its annual results for the year ended 30 April 2023.
- Over the 12 month period MIGO generated a NAV total return of -9.3% and a share price total return of -10.3%. This compared to the trust’s benchmark, SONIA plus 2%, which returned 4.6%. Some notable contributors to MIGO’s performance include Georgia Capital, Amedeo Air Four Plus and Rockwood Strategic. Detractors clearly outweighed contributors however, with MIGO’s investment managers attributing it to rising interest rates, which has led to a continued collapse in demand for income generating funds, and consolidation in the wealth management industry (a major buyer of investment trusts).
- A dividend of 3.0p per share will be paid for the year, the second time a dividend has been paid in the trust’s history. This was done to ensure that MIGO retains its status as an investment trust.
- MIGO traded on a 3.1% discount at its financial year end, compared to the 2.0% it traded on at its prior year-end. Over the year the board issued 410,000 shares when MIGO traded on a premium, and repurchased 2.2m shares to control its discount. MIGO currently trades on a 4.9% discount.
- MIGO underwent significant changes over its financial year. Nick Greenwood, MIGO’s previous investment manager, announced he would leave Premier Miton Investors. The board subsequently appointed Asset Value Investors (AVI) as MIGO’s AIFM, to implement MIGO’s existing investment policy. Charlotte Cuthbertson, a former co-portfolio manager of MIGO, who joined AVI earlier in July will act a one of MIGO’s new managers, with a further senior level hire expected in the coming months.
In what would be his last annual report, Nick Greenwood commented:
“Looking forward we remain cautious. Investors had enjoyed “free” money since the global financial crisis. Abundant liquidity supported a widespread rise in asset prices during that period. This largesse has now come to an end and the process will move into reverse suggesting mainstream indices will drift. The tide will be against us although the authorities will be limited in respect of how fast liquidity can be drained from the financial system given the fragility of markets. Should the global economy prove resilient, this will only increase the risk of further interest rate increases. Rate rises recently put in place will take time to take effect. Notwithstanding these challenges, there will be many opportunities for us to exploit in overlooked corners of the closed end world. On past occasions when discounts within our portfolio became as wide as they are presently, it proved to be the precursor of the next explosive run up in the value of our portfolio, although there is no guarantee that this pattern could be repeated.
“The challenges facing investment trusts generated by oversupply and consolidation of wealth managers won’t be resolved quickly but there are self-help measures that can be taken. Buybacks reduce the oversupply. Investment trusts that still have ambitions to appeal to the wealth management industry can merge with likeminded vehicles to become large enough for the major chains to support. Such initiatives should help narrow discounts allowing share prices to outperform underlying portfolios. There are new audiences such as self-directed individuals and smaller wealth managers which are still investment-led. These remain attracted to investment trusts. Over decades we have repeatedly been warned that the investment trust industry has been under threat. Nevertheless, the sector has thrived. The law of natural selection is alive and well within the trust world. We will lose funds that no longer attract an audience, but the investment trust sector has constantly evolved over the years and will continue to do so.”