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QuotedData’s Investment Companies Roundup – April 2021

Investment Companies Monthly Roundup

Kindly sponsored by Baillie Gifford and Aberdeen Standard Investments

Research published over March

Aberdeen Emerging Markets Investment Company – Cautiously optimistic

“Aberdeen Emerging Markets Investment Company’s (AEMC’s) managers, Andrew Lister and Bernard Moody, note investors’ new-found enthusiasm for emerging markets, now that they have been outperforming for a while. Their long experience of investing in the space tells them that now is a good time to be cautious. They have been taking profits on some positions and reallocating funds to areas that are yet to feel the full benefit of the change in sentiment toward the sector.”

Aberdeen New Dawn – An ESG leader in Asian equities

“Despite the difficulties of COVID-19, Aberdeen New Dawn (ABD) has provided very strong absolute and relative returns during the last 12 months. These are markedly ahead of its benchmark, the wider Asia ex Japan region and global equity markets more generally. Asia is emerging from the pandemic in a position of relative strength and ABD’s manager thinks valuations are at attractive levels relative to global equities.”

Vietnam Holding – Leveraging Asia’s rising star

“Vietnam’s response to the COVID-19 pandemic has been very effective and, reflecting this, the International Monetary FUND (IMF) has predicted that it will post positive GDP growth of 1.6% for 2020, increasing to 6.7% this year and averaging 7.0% for 2021 to 2025. Indeed, Dynam Capital, Vietnam Holding’s (VNH’s) manager, believes that Vietnam will be one the 20 largest economies in the world by 2050.”

Jupiter US Smaller Companies – Over the pond

“From the beginning of April, Brown Advisory (Brown) is set to take over the management of Jupiter US Smaller Companies (JUS), following the retirement of the trust’s long-standing manager, Robert Siddles. Back in December, when JUS’s board announced its intention to appoint Brown, it said that the long and impressive track record of the new manager’s US small-cap growth strategy, with annualised returns of 14.5% over 10 years, stood out in a highly competitive field. It also said that it believed that the appointment of Brown should lead to strong performance, a narrower discount and ultimately the ability to grow the company over time.”

The North American Income Trust – Well-positioned as rotation gathers pace

“North American Income Trust (NAIT) stands apart amongst the AIC North America sector funds in combining an income focus with at least 90% of its portfolio invested in the US. NAIT’s manager, Fran Radano, believes that this should work in its favour, as there is a good chance that the market rotation back into sectors with attractive valuations, like financials, will continue over the rest of 2021.”

Weiss Korea Opportunity Fund – A remarkable success story

“Weiss Korea Opportunity Fund (WKOF) was one of the best-performing of all London-listed investment companies last year, and since its 2013 launch, it has delivered more than twice the return of its performance benchmark index, the MSCI Korea 25/50 Index. WKOF has a unique investment approach within the investment company sector. Not only is it the only UK-listed fund offering investors dedicated access to South Korean stocks, it has also adopted a differentiated investment approach that seeks to profit from the valuation gap between the non-voting Korean preference shares that make up substantially all of its portfolio and the common shares issued by the same companies.”

Performance

It feels as though the rotation from ‘growth’ to ‘value’ that began last November regained some momentum in March. Having been amongst the best performers over 2020, sentiment towards Chinese funds has deteriorated, China appears to be withdrawing stimulus, clamping down on lending and is targeting many of its leading companies with anti-monopoly probes. We note that the Association of Investment Companies (AIC) has made some changes to its sector classifications, headlined by the introduction of China/Greater China, India and Property – UK Logistics as separate sectors (see Appendix 1 for a breakdown of how all the sectors have performed this year).

On balance, it was a good month for investment companies, March’s median total share price return was 1.5% (the average was 2.4%) which compares with an increase of 0.7% in February. UK equity and property assets continued to rally while improved sentiment towards US cyclical sectors benefitted the North America sector, which includes a number of equity income strategies.

Readers interested in the most recent briefings from the industry can click here to access our economic and political roundup.

Best performing sectors over March

Worst performing sectors over March

On the positive side

The split capital structures operated by Aberforth Split Level Income and Chelverton UK Dividend has made them particularly strong beneficiaries of the ongoing rally in UK equities. We note that, as of 31 March, only Geiger Counter had a higher NAV return (minimum market cap of £15m) over the year-to-date. In fact, five of the 10 best performers, in NAV terms, were UK equity strategies. With the outlooks for many of their underlying cyclical sectors improving, North American income strategies, led by North American Income, performed well over March. Discounts have been narrowing across much of the private equity sector (arguably belatedly), with the majority of the underlying funds held by the fund of funds structures generating distributions well ahead of forecasts. BMO Private Equity and LMS Capital began March trading at discounts of close to and over 40% of their most recently published NAVs, but these have narrowed since. Drum Income Plus REIT’s shares shot up after announcing a strategic review that could result in it selling off all its assets. It has traded at a persistent discount since launching in 2015. After faring so well over 2020, sentiment towards Chinese stocks has deteriorated over recent weeks. Baillie Gifford China Growth led share price declines in the newly segregated China/Greater China sector classification. As shown in the Appendix section, in share price terms, China/Greater China has been the third-worst performing sector this year. This is primarily being driven by profit taking as the Chinese government withdraws stimulus. Investors also seem to be withdrawing money from growth sectors such as tech and biotech, hitting Baillie Gifford US Growth and Manchester & London. Biotech Growth and International Biotechnology have returned (9.5%) and (9.7%) over the year-to-date in share price terms, after a strong 2020. While UK property funds have been staging a comeback, this has not extended to Continental and Eastern Europe, where the vaccine rollout has been uneven. This was reflected in the share performance of Globalworth Real Estate. It is a major office-space investor in Poland and Romania.

On the negative side

Discounts and premiums

More expensive and cheaper relative to NAV

Schroder European Real Estate was the best performing European property fund in price terms over March, as investors saw value in the discount of (34.1%) and a yield above 7%, at the start of the month. Rent collection of 89% in the final quarter of 2020 was received positively and progress towards bringing the dividend back to its pre-COVID level has been encouraging, helped by the ability to dip into its capital following the timely sale of a Paris office block for a profit of around €70m. Chelverton UK Dividend was covered above while Gresham House Strategic has similarly benefitted from the marked improvement in sentiment. As of 31 March, only Drum Income Plus REIT has performed better than Geiger Counter over the year-to-date in share price terms. Uranium miners have been rallying considerably with Uranium supply constrained and demand benefitting from the increase in nuclear capacity across China especially, as part of its clean energy policy. It is also believed that the US and EU want nuclear to play an important part in the evolvement of the energy composition mix. Gore Street Energy Storage’s premium widened following its update on the National Grid’s new Dynamic Containment Service, which may have made battery storage a lot more lucrative.

Money in and out

Money coming in and going out

Following on from Cordiant Digital Infrastructure’s £370m IPO last month, Triple Point’s Digital 9 Infrastructure got off the ground, raising £300m. While this was below their £400m target, the issue size is still a very good result. It will invest in a range of digital infrastructure assets, which deliver a reliable internet including (but not limited to) subsea fibre, data centres, terrestrial fibre, tower infrastructure and small cell networks (including 5G). Elsewhere, Tritax EuroBox led capital raising amongst the existing funds, bringing in £198.4m in an oversubscribed issue. The logistics sector has taken off since the pandemic with online retailing growing exponentially and businesses responding by shoring up their distribution networks. EuroBox’s key developer relationships allow it access to investment opportunities that would never come to the market. Sequoia Economic Infrastructure Income’s £110m of new capital will be used to pay down debt and expand the portfolio.

Returns of capital were led by UK Mortgages, Scottish Mortgage, Witan, Troy Income & Growth, and Schroder Real Estate.

Major news stories over March

Portfolio developments

Corporate news

Managers and fees

Property news

QuotedData views

Events

Here is a selection of what is coming up. Please refer to the Events section of our website for updates between now and when they are scheduled:

Have you been listening to our weekly news round-up shows? Every Friday at 11 am we run through the more interesting bits of the week’s news and we usually have a special guest or two answering questions about a particular investment company.

Friday The news show Special Guest Topic
6 November RSE, LBOW, SONG, VIN Michael Bonte-Friedheim NextEnergy Solar
13 November RHM, VGEO, SHED, RDI Roger Clarke IPSX Group
20 November THRG, MTE, UKML Fran Radano North American Income Trust
27 November SBO, NAVF, CCJI Nicholas Weindling JPMorgan Japanese
4 December PCFT, IVI, GPM Denis Jackson & James Henderson Law Debenture
11 December KIT, JUS, RTW Steve Cook Sequoia Economic Infrastructure
8 January Review of 2020 Andrew McHattie Review of 2020
15 January GVP, SUPP, SBO James Robson RM Secured Lending
22 January SONG, JGC, RMMC Adam Khanbhai Strategic Equity Capital
29 January SLPE, FSFL, RSE Philip Kent GCP Infrastructure
5 February RHM, IPOs Dean Orrico Middlefield Canadian Income
12 February RTW, UKW, SEC, GVP Alan Gauld Standard Life Private Equity Trust
19 February JLEN, KKV, BH Global, EBOX/BOXE Matthew Tillett The Brunner Investment Trust
26 February LWDB, TIGT, BRFI, RDI Nalaka De Silva Aberdeen Diversified Inc. & Growth
5 March Review of February, CMHY, SEC, GSF, APAX Nick Brind Polar Capital Global Financials
12 March HOME, LXI, BBOX Stuart Young Phoenix Spree Deutschland
19 March CSH, APX, SUPR Richard Moffitt Urban Logistics REIT
26 March MATE, CHRY, DGI9, SYNC Ross Teverson Jupiter Emerging and Frontier Income
9 April Review of March, CBA, SEC, SEIT, SUPP Neil Hermon Henderson Smaller Companies

And here is what is coming up:

Friday   Special Guest Topic
16 April   Hugo Ure Troy Income & Growth

Guide

Our Independent Guide to quoted investment companies is an invaluable tool for anyone who wants to brush up on their knowledge of the investment companies’ sector.

Appendix – March median performance by sector

This note was prepared by Marten & Co (which is authorised and regulated by the Financial Conduct Authority).

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April Investment Companies Monthly Roundup

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