May

Monthly | Investment companies 

Winners and losers in April 2025

April’s top performing sector, Infrastructure Securities, was buoyed by improving sentiment around interest rate stability and a broader rebound in risk appetite. Although these funds typically move in line with bond markets, their equity-like traits may have drawn income-seeking investors back into the fold as inflation expectations settled. It should also be said that Premier Miton Global Renewables was boosted by its highly geared structure. The strong showing from Japanese Smaller Companies reflects the benefits of continued corporate governance reforms despite a weaker yen. These stocks are cheap, as evidenced by their low price to book ratios. Moreover, despite the market slumps following US president Trump’s “Liberation day”, there was relative optimism that Japan’s leadership might be able to negotiate the lowering of tariffs on auto manufacturers, which reversed earlier price losses.  

European Smaller Companies also performed well, likely fuelled by signs of improving economic data across the eurozone, stimulus from Germany, and easing recession fears. European stocks were also encouraged by a calmer end of the month to the US trade saga, seeing the European STOXX Europe 600 rising by 2.8%. Small caps have appeared especially cheap recently, helped by the expectation of outperforming their larger peers amid rate cuts, which the European Central Bank continued to execute in April.

Best performing sectors in April 2025 by total price return

Interestingly, Renewable Energy Infrastructure made the list despite a negative NAV return, suggesting that discount narrowing might have played a major role as investors revisited the recently challenged sector on valuation grounds. As the AIC noted, tariff related sell offs propelled the sector’s yields to an all-time high in April, reaching 10.6%. Finally, UK Commercial Property’s recovery could be reflective of tentative optimism about the outlook for interest rates, in addition to strong rental growth off the back of its sector’s positive first quarter performance.

Worst performing sectors in April 2025 by total price return

In terms of the worst performing sectors, China trusts were hit hardest, amid underwhelming economic data and investor doubts over the effectiveness of Beijing’s stimulus efforts. The major cause for concern was the escalating trade tensions with the US, which was met with a sharp fall in Chinese markets, indicated by the Shanghai Composite Index’s daily drop of 12% on 7 April, the largest fall since the 2008 global financial crisis. Funds with exposure to Hong Kong would have also been affected, with the Hang Seng Index posting a daily fall of 13.2%, the largest since the 1997 Asian financial crisis.

The Country Specialist sector also struggled due to its majority exposure to Vietnamese funds. An entirely unexpected proposal for 46% US tariffs on Vietnamese goods led to significant losses. In fact, between 15 and 19 April, approximately $20bn was wiped off Vietnamese market caps, as foreign withdrawals exacerbated these falls.

North American Smaller Companies suffered as the market priced in fewer rate cuts from the Fed, there were increased concerns about a US recession, and small-cap earnings guidance disappointed. The country’s small caps are particularly vulnerable, due to their heightened sensitivities to domestic conditions. The Russell 2000 Index, the benchmark for US small caps, dropped by 6.6% on 3 April, a 20% plummet from a previous high. For the third straight week through to 30 April, US focused funds saw major outflows, with $3.9bn coming directly out of small cap funds.

Meanwhile, Growth Capital trusts struggled due to illiquidity, a more difficult environment for portfolio exits, and widening discounts, a theme that has persisted despite efforts to reassure investors. Early stage high growth companies will have also been susceptible to tariff related downturns. The Debt – Structured Finance sector saw its share prices slide despite modest NAV gains, reflecting growing caution around credit quality, especially in real estate-linked assets. Investor appetite for complex debt strategies appears to have waned as macro uncertainty continues.

Best performing investment companies

It was a strong month for Geiger Counter, which possibly benefitted from the renewed interest in nuclear as a clean energy source amid Europe’s lingering energy security concerns. The trust has also been helped by stabilising uranium prices and sustained demand forecasts driven by reactor restarts and new builds in Asia and the Middle East.

In the case of BlackRock Latin American, commodity prices and a rebound in Brazilian equities were strong influences on its NAV. Progress on interest rate cutting cycles across the region and improving currency stability also bolstered returns. Notably, Mexican equities, which make up a considerable portion of the trust’s portfolio, were reportedly the world’s best performing country asset class in the wake of 3 April’s tariffs. This was due to Trump’s exemption of the US’s neighbours as they had already received levies in previous weeks. The benchmark Mexbol Index rose 2%, to its highest level in nine months.

Although UK small caps have faced recent challenges, a relative rotation into cyclical names and clearer macro signals from the BoE may be refocusing investor attention back into the sector, raising JPMorgan UK Small Cap Growth and Income’s NAV. This will have been the same for Mercantile’s returns, alongside better than expected earnings from some of the trust’s core holdings in industrials and financials. Aurora UK Alpha’s gains, especially in its share price, may have been supported by anticipation for the outcome of its upcoming continuation vote. In terms of UK property, LondonMetric said it was keen to takeover Urban Logistics. Regional REIT’s pricing uplift is likely on the back of a modest NAV gain and some confidence returning to the UK regional office market.

Premier Miton Global Renewables Trust’s share price could have been helped by talk of a wind up. Downing Renewables and Infrastructure will have benefitted from improving sentiment towards renewables. Moreover, investors may be expecting potential interest rate cuts in the coming weeks. Bluefield Solar Income will have been exposed to similar tailwinds, whereas Harmony Energy Income’s price growth was propelled by a cash offer received from PP Bidco (a new company formed by two funds managed by Foresight LLP). This bid came in higher than the 88p per share offered by Drax in previous weeks. The competing bids highlight the valuation upside in the sector.

International Biotechnology’s superior stock picking skills shone through again as it outperformed peers by a wide margin.. 

As discussed, European smaller companies experienced a positive month of growth, as European Assets’ NAV will have grown with the stronger than expected economic data in the Eurozone. For Golden Prospect Precious Metals, continued geopolitical uncertainty, fuelled by tariff concerns, underpinned strong gold and silver prices. It is not the first time this year that the price of gold has hit an all-time high, which occurred on 22 April, a positive development for the trust.

Best performing trusts in total NAV (LHS) and share price (RHS) terms over April 2025

There was no news of significance from Social Housing REIT, but it had looked oversold. The aforementioned rallies for Japanese smaller companies were instrumental for Nippon Active Value Fund but also news of its annual results, which indicated strong NAV growth over the year ended December 31, 2023, notably outperforming the trust’s MSCI Japan Small Cap index benchmark.

Worst performing investment companies

The already discussed headwinds affecting Vietnamese markets will have been the reason for the significant NAV and share price drops of Vietnam Holding and Vietnam Enterprise. As mentioned, the imposition of 46% US tariffs on Vietnamese goods hit market sentiment hard, wiping out billions in market cap, with many of the companies affected appearing in the three trust’s portfolios.

The Chinese equity downturns were led by large cap tech such as Alibaba and Tencent, both major positions in the portfolios of Fidelity China Special Situations, Baillie Gifford China Growth Trust and JPMorgan China Growth and Income. Alibaba’s share price fell by nearly 10% on 7 April, with the e-ecommerce giant being subject to potential renewed regulatory crackdown. Fidelity China Special Situations’ overweight to smaller, higher-growth companies might have been a negative influence due to more severe corrections that state backed companies were less exposed to.

Worst performing trusts in total NAV (LHS) and share price (RHS) terms over April 2025

Manchester and London’s underperformance likely stems from its high conviction positions in US large cap technology stocks, namely the ‘Magnificent 7’. Nvidia and Alphabet both sold off during April, a trend that has continued since the beginning of the year as Trump’s derailing of the US economy has gathered pace, shifting investor attention away from the country. JPMorgan US Smaller Companies may have been affected by stronger US employment data and sticky inflation, which might have delayed market expectations for rate cuts by the Federal Reserve.

An announcement from Chelverton UK Dividend Trust that its proposed placing of new zero dividend preference shares (ZDPs) in 2031 ZPDCo will not go ahead due to a lack of demand, will have been detrimental to its share price. This comes on top of the cancellation of a recently proposed scheme of reconstruction.

Whilst the renewables sector saw a price rally, HydrogenOne lagged behind, most likely due to its focus on early-stage technologies and companies not yet generating material cash flow. The trust’s largest holding, Sunfire GmbH (an industrial electrolyser company), was rumoured to be facing funding delays.

Schroder British Opportunities was hit by the woes of widening discounts and investor disillusionment with growth capital trusts more broadly. This could have been exacerbated by a lack of exits and persistent illiquidity. For NB Distressed Debt, recent mixed performance during the planning for its wind down may have dampened investor interest.

BlackRock Energy and Resources may have been impacted by its exposure to stocks sensitive to the underwhelming Chinese government stimuli and the correction in iron ore prices. The trust holds positions in diversified mining companies such as Rio Tinto and Glencore, which were adversely affected by weakening demand signals from Asia and declining base metal prices.

Moves in discounts and premiums

More expensive (LHS) and cheaper (RHS) relative to NAV over April 2025

Investors seem to be warming to Majedie’s new investment approach. Livermore regularly features in this table. Weiss Korea is supposed to be winding down so its discount widening seems odd. Literacy Capital has de-rated since it cut its charitable donations and upped its management fee.

For JPMorgan Emerging EMEA, its premium jump might be reflective of hopes of an end to the war with Ukraine and a normalisation of relations with Russia – but we are probably some way off that.

Money raised (LHS) and returned (RHS) over April 2025 in £m

Globalworth Real Estate was the standout for capital raised, reflecting the issue of shares in relation to a scrip dividend. There is a clear bias for income producing investments in the rest of the money raising table.

Meanwhile, Scottish Mortgage continued its programme of buybacks amid persistent discount pressure. Smithson, JPMorgan European Discovery, and Monks also returned capital, signalling outflows from growth-heavy global and European strategies.

Major news stories and QuotedData views over April 2025

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Vietnam still offers one of the most compelling macro stories across emerging markets. In the short term, concerns over China, US trade policy and a focus on large(cap US tech have seen it left behind, but its fundamentals remain very attractive, and the government is making major structural reforms to support very ambitious GDP (gross domestic product – a measure of a country’s economic output and health) growth targets.

VNH’s portfolio has been repositioned to take advantage of the expected acceleration in GDP growth, with increased weightings in banking and retail, for example, which are already paying off. Foreign investor flows have not suited VNH’s portfolio, but VNH’s manager sees this as a short(term issue and observes it is creating opportunities. Ongoing uncertainty around Trump’s tariffs has caused VNH’s previously tight discount to NAV to widen but its annual redemption facility (a mechanism that allows shareholders to sell back their shares to the trust at or near NAV once a year) and targeted repurchases should see this narrow again, particularly if Trump is forced to rethink or Vietnam achieves a better outcome than the very negative case scenario the market seems to be currently pricing in.

Montanaro UK Smaller Companies (MTU) has adopted a new enhanced dividend policy, paying out 1.5% of net asset value (NAV) every quarter. This will make it one of the highest(yielding UK equity strategies on the market. For traditional equity income investors, whose portfolios tend to be tilted towards more value(focused cash(generative stocks, MTU’s combination of a high dividend yield and a strong focus on quality growth stocks differentiates it from peers.

UK equities were cheap relative to their history and to developed market peers prior to the tariff(related sell off; now they are even cheaper. In addition, the quality(growth small(cap stocks in which MTU invests have been out of vogue recently, with the market favouring large(cap value stocks instead.
As MTU’s manager Charles Montanaro points out, the historic valuation gap provides investors with an attractive entry point. History has shown that buying stocks on these sorts of valuations can produce attractive long(term returns, and the magnitude of the discount of the UK’s equity market relative to other developed global equity markets could in itself be a catalyst for the UK market to rerate.

BlackRock Throgmorton’s (THRG) manager, Dan Whitestone, has recently celebrated his 10th year at the helm of the trust, as well as his ninth financial year of outperformance, with THRG’s recently released full(year results showing outperformance of 2.2% over its benchmark (the Deutsche Numis Small Cap ex Investment Companies plus AIM Index).

These results not only highlight Dan’s skill in stock selection, having adapted THRG’s portfolio to accommodate for changing market dynamics, but also the significant valuation opportunity presented by the UK market. UK small caps now rank as some of the cheapest stocks in developed markets, trading on a low forward price(earnings ratio (based on earnings expected in the next 12 months) relative to peers and to historic values.
This valuation opportunity is amplified in the case of THRG, given the superior earnings potential of its portfolio, as well as the 12% discount to net asset value (NAV) that it currently trades on.

Caledonia Investments’ (CLDN’s) recent Private Capital Spotlight provided an opportunity to deep dive into the company’s private capital pool investments. In this part of the portfolio, it has a target of up to 10 companies and currently it accounts for 29% of CLDN’s NAV. This note explores the private capital pool in more detail.

Over the past decade, this part of CLDN’s portfolio has generated an impressive NAV total return of 12.4% per annum, highlighting the value of the company’s patient and consistent investment strategy.

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Appendix 1 – median performance by sector, ranked by 2025 year to date price total return

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