Investment Companies Roundup
Over June, we published notes on CQS Natural Resources Growth and Income, Standard Life Private Equity and Shires Income. You can read all these notes by clicking on the links above or by visiting www.quoteddata.com.
In this issue
- Performance data – there was a greater appetite for risk in June as the prospect of an interest cut in the US becomes more likely. The US dollar lost value following softer economic data and revised expectations over monetary policy, which benefitted emerging markets;
- Money in and out – net inflows into the sector totalled £354m with Troy Asset Management’s Cameron Investors Trust the one new issue in June, raising £10m. The fund is positioned as a merger vehicle targeting unviable listed funds. Elsewhere, Sequoia Economic Infrastructure and LXI REIT led inflows, raising £227.2m and £215.1m respectively;
- Discounts/premiums – the median discount for the funds covered in the roundup (market caps above £15m) decreased slightly over the month to (5.4%). Martin Currie Asia Unconstrained’s price increase came after its board decided to convert to an open-end structure, after battling a long-term discount. Phoenix Spree Deutschland sold-off heavily after Berlin approved a five-year rent freeze while Woodford Patient Capital was among the worst performers in price and NAV terms, as the crisis at Woodford Investment Management continued;
- Major news stories – Hipgnosis Songs reported maiden results while Montanaro European had an excellent year, outperforming its benchmark by 18.5%.
More information about the funds mentioned in this report is available on our website.
June’s biggest movers in price terms are shown in the chart below.
Looking first at the positive moves:
- The US/India private equity investor, Kubera Cross-Border, led performance in price terms, though it remains at a discount to its year-on-year valuation;
- The presence of emerging market and small cap/growth funds reflects the greater appetite for risk taking. In the case of BlackRock Latin American, it is heavily weighted to Brazil, where policy improvements are providing a catalyst for equities. Aberdeen New Thai had a good month too, though the almost $4bn foreign inflows into Thailand in June are thought to have been mainly influenced by central bank policy – the economic outlook remains poor.
On the negative side:
- While Woodford Patient Capital was the highest profile faller, CATCo Reinsurance Opportunities fared worse in price terms. Its challenges reflect an extremely difficult period for the industry following one of the worst years of insured losses in 2018;
- The sell-off in BMO Real Estate Investments might suggest it was targeted by short-sellers;
- Ceiba Investments, the Cuba-focused trust, is feeling the effects of Trump unwinding Obama’s work to warm relations.
Discounts and premiums
More expensive relative to NAV:
- Leaf Clean Energy’s ‘premium’ widened further after the Delaware Supreme Court ruled in its favour on a contractual damages claim. Morningstar is yet to reflect the award in its NAV estimate;
- Gore Street Energy Storage, the smallest fund in the renewable energy sector, secured backing from Ireland’s National Treasury Management Agency, which will invest £30m of new money, doubling the fund’s size;
- Finally, the mostly real estate and infrastructure-focused Alpha Real’s discount narrowed after it launched a share tender offer.
Cheaper relative to NAV:
- it was notable that Lindsell Train’s substantial premium reined in somewhat after the fund warned (in the chairman’s statement of the annual report published in June) on the risks faced by new investors buying at premiums. With the exception of Leaf Clean Energy, the Lindsell premium is still more than twice that of any of the other closed-end funds covered;
- The activist fund Crystal Amber was the other big mover, with its shares selling off most likely as a result of its association with Woodford Investment Management. As of 29 March 2019, WIM owned 17.2% of Crystal Amber, making it the second largest shareholder.
The table below shows the top five movers in either direction (more or less expensive relative to NAV):
|wdt_ID||Fund||28 Jun (%)||31 May (%)|
|1||Leaf Clean Energy||445.9||385.2|
|3||Martin Currie Asia Unconstrained||(2.4)||(14.7)|
|5||Gore Street Energy Storage||(1.0)||(10.8)|
|6||Woodford Patient Capital||(32.0)||(14.1)|
|7||Phoenix Spree Deutschland||(30.7)||(14.6)|
|9||BMO Real Estate Investments||(23.6)||(10.8)|
Money coming in:
- Troy Asset Management’s Cameron Investors Trust was the one new issue in June, raising £10m;
- Elsewhere, Sequoia Economic Infrastructure and LXI REIT led inflows, raising £227.2m and £215.1m respectively. Sequoia will deploy the proceeds towards a pipeline of economic infrastructure debt opportunities. LXI invests across the commercial property spectrum and by the end of June had already deployed around £135m of the raise across several acquisitions;
- BBGI SICAV is pursuing new primary and secondary infrastructure opportunities though it has also said it will be repaying some of its drawn down credit lines. HgCapital was the other top-five raiser, as it targets new opportunities.
- NB Global Floating Rate Income continued to be the largest returner of cash once again after repurchasing shares worth £25.2m on its sterling line;
- The other main funds to return capital through repurchases were VPC Specialty Lending, Pershing Square (which plans to return $100m in total), Third Point Offshore USD and Witan.
A number of funds announced their full year dividends in June, which is shown below. Please refer to the attached document for a list of the notes around the numbers.
|wdt_ID||Fund||Year ended||Dividend (pence)||Change over year (%)||Revenue / earnings (pence)||Cover|
|1||Aberdeen New India||Mar 2019||N/A||N/A||-0.35||N/A|
|2||Baillie Gifford UK Growth||Apr 2019||4.45||-21.93||5.12||1.15x|
|3||Civitas Social Housing||Mar 2019||5||67.00||3.63||0.73x|
|4||JPMorgan European Growth||Mar 2019||8.85||29.20||10.68||1.21x|
|5||JPMorgan European Income||Mar 2019||6.25||7.76||6.79||1.09x|
|7||Qannas Investments||Dec 2018||N/A||N/A||$-0.04c||N/A|
|8||Reconstruction Capital II||Dec 2018||N/A||N/A||€-0.03c||N/A|
|9||SDCL Energy Efficiency Income||Mar 2019||1||N/A||0.40||0.4x|
|10||Templeton Emerging Markets||Mar 2019||16||6.67||17.26||1.08x|