Investment trust insider on Literacy Capital – James Carthew: Read up on Literacy Capital ready for the right moment
With markets as volatile as they are, and talk of recession getting louder, it is perhaps unsurprising that discounts are widening across the investment companies sector. Just under a quarter of funds are clinging onto a premium rating. The majority of these have prospective yields in excess of 3%, encompassing subsectors such as renewable energy, infrastructure, specialist property, some equity income funds and some debt funds.
There are some other outliers too and looking at those, some seem to be defying gravity. Chief among these is Schiehallion (MNTN), which is on a 19.6% share price premium to the reported portfolio value. Every other fund in the growth capital subsector is now trading at a meaningful discount, including the subject of last week’s column, Seraphim Space (SSIT).
In the private equity subsector, the surprise has been to see HgCapital Trust (HGT) move to trade on a double-digit discount. I am still a happy holder of this, taking comfort from the chairman’s recent message that the underlying operating performance of the portfolio remains extremely strong. The outlier in the sector is £228m Literacy Capital (BOOK), which I covered back in March 2021 ahead of its initial public offering (IPO). It is the only private equity trust trading on a premium, and a chunky 18.7% at that.
Both MNTN and BOOK could still be vulnerable to deteriorating investor sentiment, but I can’t help feeling more comfortable with the latter’s rating, as its net asset value (NAV) has doubled since its IPO on 25 June 2021, whereas MNTN’s NAV has fallen by 14.9% in dollar terms (the bulk of the portfolio is invested in US companies) over the same period. BOOK also has a charitable purpose to its credit. In addition to its work with UK literacy charities, it recently committed £250,000 towards an appeal to fund reading material for Ukrainian children fleeing the war.
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