Majedie (MAJE) has published its annual results for the 12 months ended 30 September 2024, during which it provided NAV and share price total returns of 21.5% and 24.1% respectively. Its chairman, Christopher Getley, says that “each of the three core strategies added meaningfully to the overall returns” and that “the low correlation of performance between the forty-two holdings in the portfolio has been retained”. Dividend payments for the year totalled 8.0p per share for the year and the discount to NAV narrowed from -18.7% to -17.4% at the end of September, averaging 12.2% over the year. At the year end, external managers comprised 63.7%, direct investments 23.7%, special investments 17.0%, UK gilts 5.3%, cash 2.3% with other net current assets and debenture of -12.0% (all as a percentage of total assets). MAJE’s board says that it is negotiating the terms of a revolving credit facility of up to £15m and that the outstanding debenture of £20.7m, with a coupon of 7.25% that is repayable in March 2025, will not be replaced.
Getley says that, although global equity markets are close to all-time highs, bond markets more subdued and geopolitical stability appears to be no closer. He believes this presents opportunities as well as risks for Majedie adding that the liquid endowment strategy will continue to focus on investment ideas where the manager’s analysis has determined the greatest conviction of strong returns, together with resilience to unforeseen events and low correlation between portfolio positions.
Investment manager’s comments – performance highlights
“The portfolio’s net asset value (NAV) per share total return for the financial year ending 30th September 2024 was +21.5%.
“External Managers led the way, with the equity-centric component (approximately half of the total) contributing over +1000bps. The Helikon Long/Short Equity Fund made the biggest contribution to performance at +369bps. The Praesidium Strategic Software Opportunities Fund and Paradigm BioCapital Partners Fund both contributed over +150bps.
“These returns were supplemented by absolute-return managers, who made a largely uncorrelated contribution of over 450bps. Each of the six specialist credit funds within this part of the portfolio performed well, in particular the Millstreet Credit Offshore Fund and the Silver Point Capital Offshore Fund. While the Contrarian Emerging Markets Offshore Fund was the best-performing absolute-return manager, contributing over +185bps as various positive catalysts played out in Latin American positions.
“Although Direct Investments achieved positive absolute returns, the performance of this part of the portfolio lagged the markets because we chose not to own any of the mega-cap growth stocks that led the indices, in our opinion it makes our current investments even more attractive on a risk-adjusted basis. Looking forward, we believe many of the most compelling equity investments lie in quality stocks that have been largely ignored by the market.
“The main contributors were Westinghouse Air Brake Technologies Corp at +100bps, Global X Copper Miners ETF at +72bps and SS&C Technologies Holdings Inc, which added +59bps. Evolent Health Inc, Basic-Fit NV, Alight Inc and United Health Group detracted from performance.
“The contribution from Special Investments was positive, despite the fact we have yet to reach our initial target allocation of 20% of the total portfolio. Partly, this is because some investments appreciated towards fair value sooner than expected, so cash came back to us faster than anticipated. More significantly, we have been – and will remain – highly selective when making special investments. We turn down five ideas for every one that makes the grade.
“In recent months we monetised our investment in a co-investment in the public equity of Shack Shake Inc for an internal rate of return (IRR) of 50% and a 1.5x multiple of invested capital (MOIC) over 18 months. We exited a co-investment in Metro Bank Plc Senior Non-Preferred MREL-eligible Bonds for an IRR of 19.8% and a MOIC of 1.3x. An investment in the public equity of Alkami Inc. was also realised for a strong gain. A co-investment in the public equity of Concentrix Corp. was the only meaningful detractor.”
