Last month was a great one for investment companies exposed to gold, biotechnology, emerging markets and corporate actions aimed at restoring shareholder value. Infrastructure fund prospects look less than golden with high interest rates and declining power price forecasts, but one £422m renewables portfolio perhaps deserves a closer look with shares on a wide 35% discount.

September’s risers and fallers 

The historic rally in gold, racing 11.5% to a new high in September, and up 57% this year, continues to propel listed mining funds with Golden Prospect Precious Metal (GPM) shares leaping 30.5% last month. That makes the New City managed closed-end fund the biggest riser in our table (see left column in our first table). 

After a 143% surge this year, the Guernsey investment company is rapidly closing in on a £100m market valuation that could put it on the radar of more investors.

Stable mate CQS Natural Resources (CYN) and BlackRock World Mining (BRWM), which also have exposure to smaller gold miners, gained 28.4% and 21.9% respectively. CYN’s recent run up may have frustrated Saba Capital as the activist hedge fund exited at a much lower price in a tender offer. Geiger Counter (GCL), a £70m uranium mining fund run by the Golden Prospect team, also put on 20%.

Best performers

Petershill pole vaults 

Elsewhere, investment company corporate actions aimed at remedying poor shareholder returns resulted in a spectacular change in fortunes for Petershill Partners (PHLL). 

Shares in the £2.5bn Goldman Sachs fund investing in alternative investment managers jumped 29% last month after unveiling plans to delist and return cash to shareholders. That more than halved the gap between the share price and underlying net asset value (NAV) with the discount falling from nearly 35% to under 16%. This puts it at the top of our list of “more expensive” London-listed funds (see right column of our third table below). 

Emerging markets and biotech funds were also in favour with JPMorgan China Growth & Income (JCGI) and UIL (UTL), a sister fund and investor in Utilico Emerging Markets (UEM), both rising over 13%. At the end of the month UIL issued proposals for an annual £4m return of capital for the next three years until it delists that QuotedData’s James Carthew thought “ungenerous“.

Worst performers

Russian doubts jolt JEMA 

The Russian court of appeal upholding $439m in damages to VTB Bank against eight JP Morgan entities, including the JPMorgan Emerging Europe, Middle East & Africa Securities (JEMA) investment trust, dented the speculative bubble around the £83m fund’s shares which retreated 20.5% last month. As a result the erratic share price premium tumbled from 332% over NAV in August to a slightly less enormous 231% (see last table below).

Infrastructure investment companies suffered another poor month as yields on 30-year UK government bonds, or gilts, maintained their highs of around 5.5%, diminishing the value of the funds’ long-term cash flows. 

Aquila European Renewables (AERS), down 13.7%, was the biggest faller in the peer group a month after writing down its valuation following the withdrawal of a potential bidder for some of its assets.

Gore Street Energy (GSF), the international battery fund under pressure from RM Funds, slid 10.7% before this month’s disclosure that activist investor Saba has also taken a 5% stake. 

Octopus Renewables Infrastructure (ORIT) declined 9.3% despite announcing a five-year recovery plan on 23 September. 

Share issuance and buybacks 

Data last month showed a spike in withdrawals from open-ended funds after jittery investors withdrew £1.8bn in August. These high outflows read across to investment companies whose average share price discounts, excluding highly-rated private equity giant 3i Group (III), widened to 14% from 13.1% in September, according to broker Winterflood.

That trend saw more share buybacks across the market as investment companies sought to draw a line in the sand under their share prices. Scottish Mortgage Trust (SMT), the £12.6bn Baillie Gifford flagship, bought back an estimated further £103m of its shares in response to the lack of investor demand. 

By contrast, Fidelity European (FEV) issued around £446m shares in nearing completion of its merger with Henderson European which swells its assets to over £2.1bn and leaves it trading close to NAV on a narrrow 1% discount.

Cheap (left) and more expensive (right)

Fallen Foresight fund offers 11.6% yield 

The continued derating of listed renewables funds last month has left eight of the sector’s 18 investment companies on double-digit dividend yields. That creates a fertile ground for bargain-hunting income investors.

One of those eight, Foresight Environmental Infrastructure (FGEN), catches our eye at the bottom of our last table after its share price discount widened from nearly 25% to 33% in September. The valuation gap has widened slightly since then with the shares trailing nearly 35% below net asset value where they offer an 11.6% yield against this year’s 7.96p dividend target.

Remarkably, the shares have slipped further since a continuation vote on 18 September when 94% of shareholder votes on a 59% turnout were cast in favour of the 11-year-old company’s continuation. Just over 6% voted to wind down the fund, slightly less than the 7.3% who did so last year.

At 69p, FGEN has fallen nearly 20% since the end of July and the shares have more than halved from their peak three years ago at 133p, having launched at 100p in 2014. Anyone thinking of buying now needs to consider two things: whether there will be further falls in the price, eroding the benefit of the 1.99p quarterly dividend; and whether the payout could even be cut in response to sector-wide pressures such as falling power price forecasts, low wind speeds and irradiation and grid constraints.

On the latter point, the company says its dividend in the last financial year of 7.7p per share was 1.3 times covered by earnings and it has consistently raised the dividend every year since launch. It operates a highly diversified portfolio, generating revenues from anaerobic digestion, bioenergy and hydro as well as wind and solar power. It expects 57% of next year’s revenues will be fixed on government subsidy or long-term contract, providing good visibility. 

Moreover, following a strategic review in June, it is focused on core renewable energy assets with secure, long-term, inflation-linked revenues. As a result, it forecasts the future payouts will remain “healthily covered”.

In terms of the share price, FGEN holds a continuation vote if its shares trade below an average 10% discount over one year. That makes a further vote in 2026 very likely as things stand, providing a backstop that, if the derating continues, the company could be wound up and the value of its assets released. Meanwhile, the company is buying back its cheap shares having extended a £20m programme by £10m in March.