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QuotedData’s Investment Companies Roundup – February 2022

Investment Companies Monthly Roundup

Kindly sponsored by Baillie Gifford and abrdn

Performance

Equity markets didn’t get off to the best start in 2022, with most sectors down (see Appendix) and growth companies at the tail-end of them. This came as the direction of inflation and interest rates took a turn, with heavy hints of multiple rate rises to come in the US this year causing a sharp rotation from growth-style investing. Accordingly, the growth capital sector was the worst performing for the month, joined by biotechnology & healthcare, global smaller companies and North American smaller companies, all of which contain high proportions of growth companies. Meanwhile the threat of a Russian invasion of Ukraine has not helped sentiment on a global basis. On the positive side, the commodities & natural resources and Latin America sectors recouped some of the losses they made over 2021 while debt funds and the UK commercial property sectors also fared well. In its annual UK Real Estate Outlook, CBRE said 2022 could be a year of recovery for the commercial property market with a renewed sense of optimism and growing economy (see Appendix for a breakdown of how all the sectors have performed this year).

January’s median total share price return was -3.1% (the average was -4.5%) which compares with a median of 2.4% in December. Readers interested in the most recent briefings from the industry can click here to access our economic and political roundup.

Best performing sectors over January

On the positive side

As already mentioned, Latin America funds did well in January and BlackRock Latin American and abrdn Latin American Income took the two top slots out of all investment companies in NAV return terms. This may well be a simple hope that the region’s fortunes are turning around after dismal performance over 2021. It will be interesting to see where it goes to next, especially as the IMF announced last month it had reduced its growth expectations for Mexico and Brazil by 1.2 percentage points each. The positive performance may have also boosted global emerging markets trust BlackRock Frontiers. Strong power prices boosted Greencoat UK Wind’s NAV. A higher oil price contributed to Gulf Investments and Riverstone Energy‘s returns but Riverstone also saw one of its holdings – Solid  Power – list at the end of December. Livermore announced a hefty dividend. UK commercial property funds BMO Commercial Property, UK Commercial Property REIT and BMO Real Estate Investment also featured in the list as the sector appears to be bouncing back. Value investing stalwart Temple Bar unsurprisingly performed well in January.

On the negative side

On the negative side, growth-focused Japanese trusts continued to suffer with the top four worst performing names in NAV terms – Baillie Gifford Shin Nippon, Fidelity Japan, JPMorgan Japanese and Atlantis Japan Growth – all from the region. Scottish Mortgage and Baillie Gifford US Growth, which are managed by famously growth-style investors Baillie Gifford, also suffered as the prospect of rising interest rates continued to dent valuations of high growth companies. The management house’s funds were also hit in share price terms as Edinburgh Worldwide and Keystone Positive Change made losses in excess of 20%. Meanwhile, growth capital names Schiehallion (another Baillie Gifford trust), Petershill Partners and Seraphim Space underperformed for the same reasons as did biotechnology & healthcare funds Biotech Growth, and RTW Venture.

Discounts and premiums

More expensive and cheaper relative to NAV

Riverstone Energy became more expensive in January though it remains on a wide discount of 31.9%. CQS Natural Resources Growth & Income also saw its discount narrow during the month as it announced its second interim dividend of 1.26p per share payable in February. Meanwhile UK commercial property trusts BMO Commercial Property and UK Commercial Property REIT also became more expensive. The former increased its logistics exposure last month with a £66m double buy while the latter acquired a COVID-19 lab in a £94m deal at the tail-end of December.

After seeing the biggest change in its premium rating over 2021, soaring from a 11.1% premium as at the end of 2020 to a 59.3% premium by the end of last year, Schiehallion saw the biggest tumble in January. It remains on a large premium of 33.6% but the size of the fall shows just how badly growth companies have been impacted by recent market movements and sentiment. Unsurprisingly, it was joined by fellow growth capital sector peers Seraphim Space, Chrysalis and Petershill Partners. All three trusts are now trading on a discount, with Seraphim Space taking the biggest hit as it said goodbye to its double-digit premium. Biotech name RTW Venture also saw its premium rerate to a discount in January.

Money in and out

Money coming in and going out

January was quiet for fundraising compared to recent months which have seen billions of pounds come in. Just £330m of net new money was raised, with Cordiant Digital Infrastructure topping the list thanks to an oversubscribed fundraise. Having only launched in 2021 and already conducted further fundraises, this latest placing brought in £200m while fellow digital infrastructure trust, Digital 9 Infrastructure which also launched last year, raised just under £96m. Smithson, BH Macro and Ruffer issued new shares over the month.

India Capital Growth returned almost £20m to investors following its December 2021 redemption facility. The redemption price was confirmed (after a 6% exit discount) at 126.26p per redemption share. Share buybacks were also led by F&C, Scottish Mortgage, Monks and SME Credit Realisation, the latter of which remains in the process of winding up.

Major news stories over January

Portfolio developments

Corporate news

Managers and fees

Property news

QuotedData views

Recently published research notes

Tritax EuroBox – Fast-tracked

Tritax EuroBox (EBOX) is continuing on its rapid growth path, having raised €250m of fresh equity in September 2021 and secured a private placement for €200m more in December. It has already acquired four assets with the proceeds and has a further pipeline worth €300m. Once the proceeds of the September capital raise has been fully deployed, the group’s assets will be worth around €1.9bn – remarkable growth from a portfolio value of just over €800m a year ago.

Edinburgh Worldwide – Tomorrow’s winners

Edinburgh Worldwide (EWI) invests in some of the world’s most exciting companies, many of which would otherwise be hard for investors to access. It seeks to identify tomorrow’s winners when they are still relatively small, and hang onto them as they become successful. The manager acknowledges that not every company will make it, but expects that the profits accruing to EWI from those that succeed more than make up for those that fall by the wayside. After a phenomenal 2020, sentiment switched against high-growth companies (for reasons that we explain on page 16) and EWI gave back some of its considerable outperformance. The manager is a long-term investor, however. EWI’s five-year numbers remain well ahead of benchmark indices and peers. The small discount that has opened up in recent weeks may provide a buying opportunity.

GCP Infrastructure – The future is brighter and greener

GCP Infrastructure (GCP) has seen a marked improvement in its net asset value (NAV) performance in recent months. The surge in UK power and carbon prices (see page 8) is working to the benefit of the entities behind many of GCP’s renewable energy infrastructure loans. The push to reduce carbon dioxide and other greenhouse gas emissions from the UK economy is likely to provide substantial new opportunities for the company. A £260m pipeline of potential investments identified by the investment adviser is likely to swell over time.

Urban Logistics REIT – In the sweet spot

It has been a whirlwind few months for Urban Logistics REIT (SHED) as it continues to grow rapidly in one of the best-performing real estate sectors in the UK. The group deployed the proceeds of a July capital raise in short order and earlier this month raised a further £250m to plough into a net asset value (NAV) accretive pipeline. The logistics sector is currently in the sweet spot, with high demand for space and a chronic lack of supply resulting  in strong and sustained rental growth.

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:

Interviews

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
2 July GSS, PCFT, SHED, BSIF David Conlon GCP Asset Backed Income
9 July AGT, DIGS Matthias Siller Baring Emerging EMEA Opportunities
16 July AGT, ABD, SONG, PRSR, RHM Nick Wood Quilter Cheviot
23 July RNEW, PSH Gareth Powell Polar Capital Global Healthcare
6 August AEMC, ANW, CREI, DRIP Matthew Howard BMO Commercial Property
13 August AIF, SSON Andrew Bell Witan
20 August APAX, ELTA, PSH Abbie Glennie Aberdeen Smaller Companies Income
27 August GRP, SHB David Smith Henderson High Income
3 September AIF, BRET Ian Lance Temple Bar
10 September GSEO, ASLI, SLI Craig Baker Alliance Trust
17 September APAX, GABI, SUPP Robin Parbrook Schroder Asia Total Return
24 September NCYF, RNEW, FEML, USF Peter Hewitt BMO Managed Portfolio
1 October AIE, CAT, IGC, VNH Tim Creed Schroder UK Public Private
8 October FEML, GRP Steven Tredget Oakley Capital
15 October ATS, CGL, GHS Nicholas Yeo Aberdeen China
22 October FEML, SCIN Claire Shaw Scottish Mortgage
29 October EPG, SHED Richard Pindar Literacy Capital
5 November UKW, GHS, ACIC Rory Bateman Schroder British Opportunities
12 November PINT, SMT, GSEO Helen Steers Pantheon
19 November TIGT, ROOF Iain McCombie Baillie Gifford UK Growth
26 November MTU, JLEN, GRIT, CORD David Cornell India Capital Growth
3 December AAS, TEEC Rob Crayfourd CQS Natural Resources Growth & Income
10 December EWI, TLEI Nicholas Ware Henderson Diversified Income
7 January QuotedData Andrew McHattie 2021 roundup
14 January ELTA, JLEN, HGEN, ASLI Jason Baggaley Standard Life Investments Property Income
21 January BSIF, RICA Keith Watson Geiger Counter
28 January FSF, CIP, SLPE Jonathan Maxwell SDCL Energy Efficiency
4 February PNL Sebastian Lyon Personal Assets
  Coming up  
11 February CCJI Richard Aston CC Japan Income & Growth
19 February MMIT Carlos Hardenberg Mobius
25 February NCYF Ian Francis New City High Yield

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 – January 2022 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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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.

Feb 2022 Investment Companies Monthly Roundup

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