Baillie Gifford Japan (BGFD), the worst performer in its sector over one, three, five and ten years, has introduced a conditional tender offer, offering shareholders a 25% exit in three years’ time if performance does not improve. Up to a quarter of shares in the £688m investment trust will be eligible for repurchase at a 2% discount if Baillie Gifford fund manager Matthew Brett cannot beat the TOPIX index in the 36 months to 31 August 2029. Annual results showed the trust recorded a total net asset value (NAV) return of 17.7% in the year to the end of August that trailed the benchmark’s 26.7%. However, after severe underperformance in the first half of the year, the second half saw a significant improvement with a 12.7% return that beat the benchmark’s 3.5%.
Richard Williams, senior analyst at QuotedData, said: “Another disappointing year for BGFD, with its return trailing the TOPIX benchmark by nine percentage points, extending a prolonged period of underperformance. There are encouraging signs, however, with the trust outperforming strongly in the second half, helped by holdings exposed to AI and industrial automation. The board is understandably keen to see this improvement sustained, and the introduction of a conditional tender offer for up to 25% of shares if BGFD fails to outperform over the three years to August 2029 represents a significant step in holding the managers accountable. The scale of buybacks is also striking, with £116.9m spent repurchasing 16.3% of the company’s shares, adding 1.7% to NAV per share. Yet the discount remains around 9%, highlighting the difficulty of rebuilding investor confidence through buybacks alone. The managers see attractive opportunities in Japanese growth companies, particularly those benefiting from AI, and the recent recovery will be important to monitor as the trust seeks to rebuild its longer-term performance record.”
AEW UK REIT (AEWU), the £162m real estate investment trust that withdrew from a bid battle for Alternative Income REIT in the summer, saw a small fall in net asset value in the third quarter. NAV per share dipped 0.35p to 107.45p in the three months to 30 September mainly due to £2m finance costs lifted by the interest rate cap the company bought in June to protect it from higher interest rates when it refinances its debts next summer. With the inclusion of the 2p quarterly dividend, the total investment return was 1.5%. The underlying property portfolio saw a 0.09% valuation decline that beat the 0.9% capital fall in the CBRE UK index as active asset management and gains in retail warehousing and high street retail offset a 2.9% fall in offices, the REIT’s smallest sector exposure at 10.5%. There was good news this month as Martin Property Group bought National Car Parks (NCP) out of administration, buying 93 of its sites including AEWU’s Tanner Row in York, which generates 4.1% of its annual rental income. AEWU said the outcome underlined the “strength of the asset … particularly in relation to occupier performance and underlying trading”.
Richard Williams, senior analyst at QuotedData, said: “Active asset management continues to support performance at AEWU, despite the difficult macro environment for real estate. With the shares trading at a discount of less than 3%, AEWU’s consistent income generation and asset management record are clearly being recognised by investors. Refinancing its unusually cheap 2.959% debt facility in July 2027 presents a challenge, however. Restoring full dividend cover while absorbing the potentially higher financing costs will be an important test of the strategy, with the manager targeting future income growth through active leasing and recycling capital into higher-yielding assets.”
Molten Ventures (GROW), the £1.2bn high-tech venture fund in which activist Saba Capital has a 16.7% position, says its £15m share buyback programme is nearly complete and will be extended by £10m. The investment company’s share price discount has halved from 37% to 19% since March when Saba doubled its holding to 10%. In a half-year trading update the company expected net asset value per share would rise 14% to 869p at 30 September from 760p on 31 March, having advanced from 724p at the previous September, driven by strong performance in the core portfolio from holdings in ICEYE, Revolut and its fund of funds. The partial sales of ICEYE and Revolut helped lift cash proceeds to £109m from £62m a year ago. “In addition to positive portfolio performance, we successfully broadened Molten’s capital base. The first close of our Growth Fund, with the British Business Bank as cornerstone investor, is an important step as we scale third-party capital alongside our balance sheet,” said chief executive Ben Wilkinson.
