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Why you shouldn’t give up on Temple Bar despite a rough six mont

The trust has fallen out of the FTSE 250 index, but market commentators have faith in the new management team.

By Jonathan Jones, Editor, Trustnet, 07 September 2021

It has been a tumultuous year for the RWC Temple Bar Investment Trust after fund manager Alistair Mundy stepped down last year to pursue a career in teaching.

The board swiftly moved the mandate from Ninety One – formerly Investec – to rival asset manager RWC, with managers Nick Purves and Ian Lance taking charge, but despite a strong start, the performance has tailed off in recent months.

Indeed, last week the £721m trust dropped out of the FTSE 250 index in the latest quarterly reshuffle, after three months in which it lost investors 5.5%. It crashed out just six months after being admitted to the index in March, following a strong back end to 2020 when its value style of investing took off.

However, despite its recent poor run over the past year, the trust has made investors 56.5%, a top-quartile performance in the 23-fund strong IT UK Equity Income sector…

Jayna Rana, investment companies analyst at QuotedData, said much of this was due to value stocks failing to match the returns of their growth counterparts, which have dominated since the financial crisis of 2008.

Some feel that the six-month value rally reprieve at the end of 2020 and start of 2021 has now run its course and the world will return to the conditions of the past decade, but the managers disagree.

They argued that as UK stocks continue to be valued at a marked discount to world equities, this offers an opportunity at a time when interest rates are low and private equity has significant resources.

“As a result, merges and acquisitions (M&A) activity in the UK has picked up since the start of 2021 (which has benefited a number of Temple Bar’s holdings) and the managers think that there should be plenty more to come,” Rana said.

“Short-term, the emergence of new variants remains a risk to value but, with dividends recovering and strong figures within its portfolio, investors in Temple Bar are being paid to wait. Beyond this, the value discount looks too wide and so Temple Bar appears on track to gain even more.”

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