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QuotedData’s Investment Companies Roundup – August 2020

Investment Companies Roundup

Kindly sponsored by Baillie Gifford and Aberdeen Standard Investments

 Table of contents 

 New research

Here is a list of research we published over July:

Seneca Global Income & Growth – On the rebound

“Seneca Global Income & Growth Trust’s (SIGT’s) UK-biased value style and mid-cap exposure suffered heavily during the first quarter of 2020 as markets collapsed. However, the manager used the rout to take advantage of deep value opportunities and SIGT has benefitted as markets have rebounded. The manager believes there is much more to come.”

20200805 SIGT Rebound

Shires Income – Preference shares paying dividends

“Shires Income (SHRS) has been weathering the storm of dividend cuts better than many of its peers. Holding a portfolio of preference shares, which contribute over 30% to income generation – and, crucially, have not been affected by regulatory restrictions on dividends – has proved to be a major competitive advantage.”

Henderson Diversified Income Trust – Favourable style and structure

“Henderson Diversified Income (HDIV) is managed with a distinct investment style which favours businesses with sustainable cash flows. The managers took advantage of HDIV’s closed-end structure to make some opportunistic investments and increase gearing close to the bottom of markets. These transactions help lay the foundations for future outperformance and underpin HDIV’s dividends.”

Standard Life Private Equity Trust – Share price out of sync?

“Annualised returns over the past five years have been in the double- digits, while nearly half of SLPE’s portfolio is in the more resilient consumer staples, technology, and healthcare sectors. SLPE provides underlying company exposure to European success stories such as Action (non-food discounter) and TeamViewer (remote support software).”

Grit Real Estate Income Group – Africa, substantially de-risked

“Grit Real Estate Income Group (GR1T) is flying the flag for African real estate investment. The significant growth potential of the continent’s emerging economies has always come with some degree of risk attached to it. However, Grit’s investment strategy enables it to retain exposure to that growth potential, while substantially de-risking it by leasing property to blue-chip multinational corporations, including government embassies, on US dollar and euro-denominated leases.”

Grit Real Estate Income Group - Africa, substantially de-risked

 Performance data

July’s median total share price return from investment companies was 0% (the average was +0.3%), which compares with +2.8% last month. Over the year-to-date, median returns are down by (11.6%). Commodities and natural resources had the best month, led by the funds that invest in gold. The merits of infrastructure-based investments continue to look strong given the relative scarcity of equity income funds that have not been hit hard by the pandemic. Japanese stocks had a tougher month after cases of COVID-19 rose sharply. Japan had otherwise not been overly affected.

Best performing sectors over July:

wdt_ID Sector Median share price total return (%) Median NAV total return (%) Change in median discount (%) Median discount 31/07/20 (%) Median discount 30/06/20 (%) Number of companies in the sector Median sector market cap 31/07/20 (£m)
1 Commodities & Natural Resources 11.80 3.30 5.30 -9.70 -15.00 10 50
2 Infrastructure Securities 8.10 6.70 2.10 -4.40 -6.50 2 91
3 European Smaller Companies 6.40 4.30 0.50 -14.10 -14.60 4 399
4 Debt - Structured Finance 4.40 -0.20 1.20 -11.80 -13.00 6 177
5 Property - UK Healthcare 3.40 0.00 3.10 0.30 -2.80 2 416

Please refer to the ‘appendix’ section for a comprehensive list of sector-specific performance. Readers interested in the most recent briefings from the industry can click here to access our economic and political roundup.

Worst performing sectors over July:

wdt_ID Sector Median share price total return (%) Median NAV total return (%) Change in median discount (%) Median discount 31/07/20 (%) Median discount 30/06/20 (%) Number of companies in the sector Median sector market cap 31/07/20 (£m)
1 Insurance & Reinsurance Strategies -5.90 -5.90 1.90 -19.2 -21.10 4 42
2 UK Equity & Bond Income -5.30 -1.90 -3.30 -14.2 -10.90 2 106
3 Hedge Funds -4.60 -1.50 -5.80 -27 -21.20 11 66
4 Japan -4.40 -5.70 2.20 -8.6 -10.80 6 211
5 North American Smaller Companies -3.40 -2.20 -1.20 -12.8 -11.60 2 142

July’s biggest movers in NAV and price terms are shown in the charts below:

On the positive side:

  • Shares in CQS Natural Resources Growth and Income and Golden Prospect Precious Metals had another strong month, with gold in particular riding on a crest of wave. The gold price is up over 30% this year
  • Geiger Counter is benefitting from a fall in global uranium production as a result of the pandemic
  • Shares in the debt fund, HWSI Realisation, nearly doubled after it was subject to a cash offer from Cubitt Trade Holdings. The bid swiftly followed news that M&G had made several proposals to acquire UK Mortgages. Interest in the sector raises the spectre that investors have mispriced these debt funds
  • Augmentum Fintech has featured regularly in the ‘winners’ section since April, with digitisation take-up being propelled by the pandemic
  • Property funds have been suffering the brunt of the economic fallout, so there was some welcome respite for UK Commercial Property REIT and Schroder Real Estate, as the UK began to re-open its retail and on-trade sectors
  • JPMorgan Brazil’s board are recommending the fund be wound up, with the recent revival in its performance coming too late. With a market capitalisation below £25m, the fund has struggled to grow, having been hampered in this respect by historically poor performance against its benchmark
  • Price rises in Fidelity China Special Situations and JPMorgan China Growth and Income came as the Chinese market had a very strong month, with a significant pickup in foreign capital and renewed interest in stocks by Chinese retail investors, with new trading account numbers up considerably

On the negative side:

  • NAVs in VietNam Holding, Vietnam Enterprise, and VinaCapital Vietnam Opportunity declined in response to the country’s first outbreak of COVID-19
  •  It was a similar story in Japan, which like Vietnam had previously not been overly impacted. Over July, daily new cases in Japan climbed above a thousand for the first time, hitting the NAVs of Schroder Japan Growth, Aberdeen Japan, and Baillie Gifford Shin Nippon
  • Already down by about 20% by mid-July, Riverstone Energy’s shares fell further after its manager (Riverstone Holdings) completed a $1.1bn recapitalisation in Enviva, the world’s largest supplier of utility-grade renewable biomass fuel in the form of wood pellets
  • DP Aircraft 1 is trading at a near 90% discount. Over July, shareholders granted it permission to issue new shares at a discount to NAV, which though unusual for investment companies, reflects the unique challenges facing aircraft leasing companies. Most of the increases in flight volumes around the world have been driven by cargo rather than commercial
  • Aurora has a lot of exposure to sectors that have been particularly hard hit, through holdings that include EasyJet, Ryanair, Barratt Developments, and Frasers Group (formerly Sports Direct International)


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 Discounts and premiums

The tables below shows the top five movers in either direction (more or less expensive relative to NAV):

More expensive relative to NAV:

wdt_ID Fund 31 Jul (%) 30 Jun (%)
1 HWSI Realisation -10.20 -53.50
2 UK Mortgages -20.00 -37.90
3 AEW UK REIT -13.30 -28.70
4 Golden Prospect Precious Metals -2.20 -17.30
5 Merian Chrysalis 19.70 5.40
  • The widening in Merian Chrysalis’s premium was share price led following the announcement that it had generated a significant return by partially realising its stake in TransferWise. The sale was the fund’s first since launching in late 2018
  • AEW UK REIT has been faring better than most of its peers in the UK commercial property sector. Over July, it reported an increase in its quarterly NAV while announcing that its dividend would be maintained
  • The other funds listed were discussed in the ‘winners and losers’ section above

Cheaper relative to NAV:

wdt_ID Fund 31 Jul (%) 30 Jun (%)
1 Riverstone Energy -44.30 -12.80
2 BH Macro USD 4.40 16.60
3 Chelverton UK Dividend -9.60 2.10
4 Gabelli Merger Plus+ -31.40 -21.20
5 Crystal Amber -25.50 -15.60
  • Chelverton UK Dividend’s shares are down by over 40% so far this year. It runs a split capital structure and has a heavy bias to smaller companies
  • Hedge fund sector company, Gabelli Merger Plus+’s shares were down 17.1%. It has been a tough year for its US-focused catalyst style
  • BH Macro USD, which invests in the Brevan Howard Master Fund, has otherwise had a very good year, with its USD and GBP share classes among the top 15 best-performing investment companies so far this year, in price terms


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 Money in and out

Fundraising highlights from the month:

Money coming in:

Money going out:

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 Major news stories

Portfolio developments:

Corporate news:

Managers and fees:

Property:

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 Dividends

The following funds announced their full-year results (and accompanying dividends) over July (please refer to the attached PDF document for a list of the notes around the numbers):

wdt_ID Fund Year ended Dividend (pence) Change over year (%) Revenue/earnings (pence) Cover
1 Chelverton UK Dividend 30 Apr 2020 9.60 7.00 9.50 0.99x
2 Gabelli Value Plus+ 31 Mar 2020 1.00 33.30 1.10 1.10x
3 Invesco Asia 30 Apr 2020 7.00 22.80 7.80 1.11x
4 Invesco Income Growth 31 Mar 2020 11.80 2.60 11.10 0.94x
5 Monks 30 Apr 2020 2.50 35.10 4.20 1.68x
6 Securities Trust of Scotland 31 Mar 2020 6.40 1.60 6.50 1.02x
7 TwentyFour Income 31 Mar 2020 6.40 -1.50 -0.10 N/A
8 Value and Income 31 Mar 2020 12.10 2.50 10.20 0.84x

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 Events

Here is a selection of upcoming events:

Master Investor – the UKs largest private investor show – 5 December 2020

 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 – July performance by sector

wdt_ID Sector Share price total return YTD to 31 July 2020 (%) NAV total return YTD to 31 July 2020 (%) Share price total return July (%) NAV total return July (%) Change in discount (%) Premium/discount as at 31 July (%) Premium/discount as at 30 June (%) Market cap at 31 July (£m)
1 Technology & Media 32.2 36.7 -0.4 2.7 -3.1 -3.2 -0.1 1,805
2 Global Smaller Companies 12.8 11.6 2.9 2 3.6 -7.1 -10.7 899
3 Royalties 10 4.8 1.9 1.3 2.5 18.9 16.4 721
4 Biotechnology & Healthcare 9.4 10 -2.9 -5.9 2.3 1 -1.3 481
5 Insurance & Reinsurance Strategies 9 -0.2 -5.9 -5.9 1.9 -19.2 -21.1 42
6 Growth Capital 7.9 1.3 -1.8 0 7.1 -12.5 -19.7 335
7 Hedge Funds 5.8 8.6 -4.6 -1.5 -5.8 -27 -21.2 66
8 Commodities & Natural Resources 5.3 -0.9 11.8 3.3 5.3 -9.7 -15 50
9 Infrastructure Securities 4.6 2.5 8.1 6.7 2.1 -4.4 -6.5 91
10 Renewable Energy Infrastructure 0.8 1.4 2.1 0 5.4 17.9 12.5 496

 The legal bit

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

This note is for information purposes only and is not intended to encourage the reader to deal in the security or securities mentioned within it.

Marten & Co is not authorised to give advice to retail clients. The note does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.

This note has been compiled from publicly available information. This note is not directed at any person in any jurisdiction where (by reason of that person’s nationality, residence or otherwise) the publication or availability of this note is prohibited.

Accuracy of Content: Whilst Marten & Co uses reasonable efforts to obtain information from sources which we believe to be reliable and to ensure that the information in this note is up to date and accurate, we make no representation or warranty that the information contained in this note is accurate, reliable or complete. The information contained in this note is provided by Marten & Co for personal use and information purposes generally. You are solely liable for any use you may make of this information. The information is inherently subject to change without notice and may become outdated. You, therefore, should verify any information obtained from this note before you use it.

No Advice: Nothing contained in this note constitutes or should be construed to constitute investment, legal, tax or other advice.

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No information contained in this note shall form the basis of, or be relied upon in connection with, any offer or commitment whatsoever in any jurisdiction.

Investment Performance Information: Please remember that past performance is not necessarily a guide to the future and that the value of shares and the income from them can go down as well as up. Exchange rates may also cause the value of underlying overseas investments to go down as well as up. Marten & Co may write on companies that use gearing in a number of forms that can increase volatility and, in some cases, to a complete loss of an investment.

August 2020 Investment Companies Roundup

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