Investment trust insider on JZ Capital and Doric Nimrod – James Carthew: my two investment trust clangers leave me at a loss
I think it is important to acknowledge that with my portfolio, as with most investors, things go wrong, sometimes spectacularly. In part, I bring this on myself as I have a penchant for esoteric, interesting funds making innovative investments and also funds trading on big discounts. Fortunately, I tend not to go overboard with investments such as these. There are two that I want to own up to and discuss this week. The first is JZ Capital Partners (JZCP) and the second is Doric Nimrod (DNA).
JZCP and its forerunners featured in portfolios that I managed in the ‘90s at M&G and 2000s at Progressive and were profitable investments. I bought some for my pension fund back in May 2015, about three months after I wrote about it here. The attraction was the enormous discount that it was trading on, plus the bias to US dollar assets. The managers had a fairly good track record too.
One alarm bell sounded early on, in September 2015. Faced with the looming maturity of their zero dividend preference shares, the managers raised money via a dilutive issue of shares – issuing nine new shares for every 25 held at a 39.7% discount to net asset value (NAV).
I topped up the holding at the time to avoid being diluted but resolved not to suggest it to you as a potential investment again. Being strong armed into investing money in this way always leaves a sour taste in the mouth. To my mind, dilutive issuance is a sure sign of an asset manager looking to bulk up assets under management at the expense of existing investors.
The shares achieved pariah status for a few months in the wake of this but rose sharply over the second half of 2016, helped by post-referendum sterling weakness. Had I sold out early in 2017, I could have booked a decent profit. However, the more than 25% gain on the shares had been driven largely by NAV appreciation, and I still had one eye on the discount and the hope that they would tackle this…. read more here