October 2024

Monthly | Investment companies 

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Winners and losers in September 2024

The Dow Jones and S&P 500 hit record levels over September, whilst the price of gold reached its all time high, with a 28% increase since the start of the year. Against optimism from Jerome Powell on the state of the US economy, the Federal Reserve maintained its main interest rate of 4.75%, yet indicated that this could be lowered soon. A weaker dollar relative to the pound has impacted valuations of US investments – this shows up in the declines of sectors such as growth capital and financials as well as more directly-affected sectors.

Source: Morningstar, Marten & Co. Note: inclusive of sectors with at least two companies. Note: many alternative asset sector funds release NAV performance on a quarterly basis

On the downside, investors took profits from trusts and stocks in the biotechnology and healthcare sector – switching money into sectors perceived as less defensive. While advances in technology mean that the opportunity in the sector is as exciting as ever, companies both large and small have been cutting their budgets to protect themselves from a challenging macro environment.

UK small cap prices may be adjusting to fears of higher taxes in the upcoming budget, with the possibility of inheritance tax exemptions for AIM stocks being withdrawn a likely factor in price declines in this part of the market.

Worst performing sectors in September 2024 by total price return

Source: Morningstar, Marten & Co. Note: inclusive of sectors with at least two companies. Note: many alternative asset sector funds release NAV performance on a quarterly basis

Best performing

Chinese focused trusts such as JPMorgan China Growth & Income, Fidelity China Special and Baillie Gifford China Growth produced substantial rises by NAV, driven by the rally of Chinese stocks following government stimulus boosts. All three funds saw their share price surge by more than 22%, with all three holding Tencent and Alibaba, two technology stocks that have emerged as major benefactors of the Chinese rally. Both Baillie Gifford China Growth Trust and JPMorgan China Growth and Income have China Merchants Bank among their holdings, whose stock reached a year high, with JPMorgan China Growth adding to its original investment. With investments diversified across Asia but with considerable allocations towards China, several funds in the Asia Pacific sectors and the global emerging markets sector (such as Templeton Emerging Markets) had their share prices uplifted by the Chinese rally, particularly Invesco Asia, which allocates 25% of its investments to Chinese companies.  

Best performing funds in total NAV (LHS) and share price (RHS) terms over September 2024

Source: Morningstar, Marten & Co. Note: excludes trusts with market caps below £15m at 30/09/24

Second to the jumps in NAV from Chinese funds, was Chrysalis’ NAV increase of 16.8%, propelled by the sale of Featurespace to Visa. The fund expects that it will receive around £89m, which represents a 20% premium to Chrysalis’ carrying value of Featurespace of £74.2m as of 30th June 2024.

Life Science REIT’s chair said that it was willing to take any action necessary to address its steep discount to NAV. The launch of a strategic review by Menhaden Resource Efficiency, ahead of its continuation vote next year, caused the company’s NAV to rise by 11.1%. EJF’s interim results were well received by investors.

Balanced Commercial Property Trust is being taken over by Starwood.

A contributing factor to Pantheon Infrastructure’s increase in NAV was a series of share buybacks, totalling £2.75m. Within the same time frame, the trust raised its dividend target by 5%, with its first interim dividend to be paid in late October. The growth in NAV has been built on a NAV total return of 8.5% in the six months ended to 30^th June 2024. Among its best-performing investments over September was Calpine, which has benefited from a favourable trading environment for energy companies.

Worst performing

In terms of the worst performing trusts, Phoenix Spree Deutschland reported a 7.1% fall in its net tangible assets. Although rate cuts by the European Central Bank should have helped ease the impact of lowered demand, heightened building costs have contributed to Europe’s largest economy’s property issues, which has also been affected by a lack of foreign investment. Sticking with investments on the continent, European Opportunities Trust’s disposal of certain securities has coincided with a substantial decrease in its revenue return per share.

As mentioned above, budget concerns may be weighing on UK small cap share prices.

Worst performing funds in total NAV (LHS) and share price (RHS) terms over September 2024

Source: Morningstar, Marten & Co. Note: excludes trusts with market caps below £15m at 30/09/24

Worldwide Healthcare’s NAV fell by 6.4%, partly caused by a hit to Novo Nordisk’s share price. Life Science REIT delivered less than impressive half year results, as investors continue to be wary of the office sector.

Digital 9 continues to look for buyers for its assets. A reassessment of the impact of its inability to finance growth in its portfolio led to a significant drop in NAV. HydrogenOne’s discount widened for no good reason and it looks oversold.

Schiehallion Fund’s fall in share price may have been connected to the potential legal battle that ByteDance, the parent company of TikTok, may be facing amid calls for a ban of the popular social media app in the US. Carrying on from previous months, JPMorgan Emerging Europe, Middle East and Africa’s share price has continued to suffer from its legacy Russian holdings.

The value of Ground Rents Income Fund continued to fall, as a result of reforms within the leasehold sector, meanwhile Ceiba Investments’ share price has persisted to drop due to a combination of factors. There is a big section on Cuba in the latest economic and political roundup.

Moves in discounts and premiums

More expensive (LHS) and cheaper (RHS) relative to NAV over September 2024

Source: Morningstar, Marten & Co

As discussed, Phoenix Spree Deutschland’s discount has been affected by a difficult German property market, whilst Chrysalis’ sale of Featurespace gave its share price a boost. Life Science REIT’s comments on its discount have had some effect. While Balanced Commercial Property’s closure will have been prompted by the recommendation by the trust’s board to accept a cash offer from Starwood Capital for the company, and Menhaden’s strategic review has helped narrow that discount.

Money raised and returned

Money raised (LHS) and returned (RHS) over September 2024 in £m

Source: Morningstar, Marten & Co. Note: excludes trusts with market caps below £15m at 30/09/24. Note: based on the approximate value of shares at 30/09/24

Higher returns, associated with prevailing higher interest rates, have been attracting investors to the debt – loans and bonds sector. Castelnau issued shares in connection with its purchase of an additional stake Cambium International – paying for this with shares rather than cash..

Scottish Mortgage topped the money returned table by some distance, adding to its buyback programme, now totalling over £1bn. More than £30m behind Scottish Mortgage but still £60m ahead of F&C Investment Trust, JPMorgan European Discovery made a tender offer for 15% of its shares, with cash being distributed to its shareholders during September.

Major news stories and QuotedData views over September 2024

Visit www.quoteddata.com for more on these and other stories plus in-depth analysis on some funds, the tools to compare similar funds and basic information, key documents and regulatory news announcements/ on every investment company quoted in London

Property News

QuotedData views

Visit www.quoteddata.com for more on these and other stories plus in-depth analysis on some funds, the tools to compare similar funds and basic information, key documents and regulatory news announcements on every investment company quoted in London

Interviews

Have you been listening to our weekly news round-up shows? Every Friday at 11 am, we run through the more interesting bits of the week’s news, and we usually have a special guest or two answering questions about a particular investment company.

Research

Following its recent tender offer, Gulf Investment Fund’s (GIF) future is at risk as the board is proposing a windup of the fund (a sale of the trust’s assets with the proceeds returned to shareholders after the costs of liquidating the fund have been deducted). We believe a strategy as successful and distinctive as GIF’s merits continuation. Details of the proposed windup measures and our opinions can be read on page 3.

The GCC (Gulf Cooperation Council) nations continue to demonstrate the benefits of emerging market investing (for example, growth that on average exceeds that offered by developed markets by a margin as they place catch up alongside less-well researched equity markets), with GIF still one of the best ways to access this market. It is managed by one of the top teams in the sector, based on their historical performance and ability to generate alpha.

As we show on page 15, Oakley Capital Investments (OCI) delivered solid net asset value (NAV) growth over the first half of 2024, a period that also saw significant investment activity.

OCI invests in funds managed by Oakley Capital (a list of these is in Figure 8 on page 11), which in turn invest in unquoted, profitable, pan-European businesses with recurring revenues, and across four core sectors: technology, education, consumer, and business services.

This note focuses on education, a sector in which Oakley has developed a strong track record as one of the continent’s most experienced and largest investors. Leveraging the knowledge gained from its investment in Inspired Education in 2013, OCI has established a portfolio of six companies in the education sector. These address the educational needs of a complete range of age groups across many geographies.

In recent years, we have highlighted the success of Alliance Trust’s (ATST) investment approach, which has, on average, outperformed the MSCI All Countries World Index (MSCI ACWI) over any given 12-month period (sampled weekly – see page 12). This success was an important factor in ATST’s selection as a merger partner for Witan (WTAN), another global multi-manager investment trust with ATST’s manager, Willis Towers Watson (WTW), continuing to manage the combined entity. Assuming the merger proceeds, as seems very likely, ATST shareholders can anticipate the benefits of a larger trust, and one that could enter the FTSE 100 as a result, as well as a reduced management fee.
Beyond the merger, a new manager has been added to ATST’s line up: ARGA Investment Management. ARGA, a global value investor, will replace the team at Jupiter, who were removed from the roster following the resignation of their lead manager.

Henderson High Income (HHI) may represent one of the better opportunities for income investors to capitalise on the resurgence of the UK market. Thanks, in part, to its historically wide 8.7% share price discount to net asset value (NAV) and enticing 6.3% dividend yield, but also given that its long-term NAV returns have outperformed not only the broader UK market but also both its closed- and open-ended peers.

With this dramatically expanding access to space and the growing requirements and use cases for space technologies in virtually every industry on our planet, the space sector is projected to grow into a trillion-dollar market opportunity.There are many companies with rapidly expanding revenues and profits derived from this sector, however most of these are currently unlisted. SSIT provides a unique way for ordinary investors to access these potential world changing opportunities.

The supply-demand dynamics that exist in the uranium sector, in which Geiger Counter (GCL) invests, are as strong today as they have ever been. Having been made a keystone of global efforts to decarbonise the global electricity supply, nuclear energy is now benefitting from favourable government policy and vast investment. To meet an international agreement to triple nuclear capacity by 2050, which was reached at COP28, trillions in investment is needed in infrastructure spend, while demand for uranium to meet the growth in capacity is set to soar. Supply-side constraints, including a downgrade in production guidance from the world’s largest uranium producer and a pact by many established western nuclear markets to wean themselves off dependence on Russian enrichment, means that further appreciation in the uranium spot price should follow. Sitting on a 13.5% discount makes GCL’s share price an attractive entry point.

Upcoming events

Here is a selection of what is coming up. Please refer to the Events section of our website for updates between now and when they are scheduled:

Appendix 1 – median performance by sector, ranked by 2024 year to date price total return

Guide

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