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 September:
Standard Life Investments Property Income Trust – Building for a new normal
“Unlike many of its peers, Standard Life Investments Property Income (SLI) has a 52.7% portfolio weighting to the buoyant industrial sector, which has performed positively during the pandemic due to an acceleration in online retailing and is forecast to grow further. It has also been on the front foot in the investment market, taking advantage of buying opportunities that would not have existed six months ago. We explore these themes in our latest annual overview note.”
Temple Bar Investment Trust – Keeping faith
“Temple Bar Investment Trust’s (TMPL) board recently reiterated its commitment to a value style of investing. The management contract has been handed to Nick Purves and Ian Lance of RWC Partners, two managers with considerable experience of managing income portfolios using a value-style approach. The RWC team says that value stocks have never looked more unloved in the 30-odd years that they have been managing money.”
Home REIT – Tackling Homelessness – IPO
“We explored Home REIT’s prospects in a recently published IPO note. It is a newly-established closed-ended investment company. It is looking to raise £250m to acquire and create a portfolio of homeless accommodation across the UK, let on long-term index-linked leases and delivering a much-needed positive social impact. It will aim to achieve a total shareholder return of 7.5% per annum over the medium term.”
Aberdeen Emerging Markets Investment Company – Peer group leading China exposure
“With 38.9% of Aberdeen Emerging Markets (AEMC) now allocated to China and 72.5% to wider Asia-Pacific, extensive exposure is provided to the region that has been the quickest to return to near-normal economic activity. AEMC continues to trade at what seems an excessively wide discount to its peer group, particularly when also factoring in its dividend yield and low ongoing charges.”
JPMorgan Japanese Investment Trust – Number one for a good reason
“Over three years, JPMorgan Japanese Investment Trust (JFJ) is the best-performing trust in its peer group of competing funds by some margin (see page 15). The trust’s remarkable performance record has been achieved by following a convection-driven stock-picking approach that focuses on quality and growth, two aspects that have been in demand in a world tackling COVID-19.”
Performance data
September’s median total share price return from investment companies was (0.3%) (the average was +0.1%), which compares with +2.4% last month. Over the year-to-date, median returns are down by (9.2%). Japanese funds shone brightest over a month whether the hitherto technology-led rally took pause. Biotech and healthcare funds continued to fare well, with the outcome of the US presidential election not expected to significantly affect healthcare policy. UK assets were amongst the worst performers, hit by the combined impact of a second wave of COVID-19 and the lingering risk of a hard Brexit.
Best performing sectors over September:
| wdt_ID | Sector | Median share price total return (%) | Median NAV total return (%) | Change in median discount (%) | Median discount 30/09/20 | Median discount 31/08/20 (%) | Median sector market cap 30/09/20 (£m) | No. of companies in the sector |
|---|---|---|---|---|---|---|---|---|
| 1 | Japanese Smaller Companies | 15.30 | 11.10 | -1.70 | -6.40 | -4.70 | 126.90 | 5 |
| 2 | Japan | 7.40 | 8.40 | 0.20 | -10.40 | -10.60 | 239.90 | 6 |
| 3 | Biotechnology & Healthcare | 5.40 | 3.60 | 1.50 | 1.10 | -0.40 | 538.20 | 7 |
| 4 | Hedge Funds | 5.10 | 2.40 | -0.30 | -22.90 | -22.70 | 63.80 | 11 |
| 5 | Property - Rest of World | 4.10 | 0.00 | 1.70 | -49.50 | -51.20 | 47.80 | 4 |
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 September:
| wdt_ID | Sector | Median share price total return (%) | Median NAV total return (%) | Change in median discount (%) | Median discount 30/09/20 | Median discount 31/08/20 (%) | Median sector market cap 30/09/20 (£m) | No. of companies in the sector |
|---|---|---|---|---|---|---|---|---|
| 1 | Infrastructure Securities | -6.70 | 1.00 | -5.8 | -7.10 | -1.20 | 86.60 | 2 |
| 2 | Property - UK Commercial | -3.60 | 0.00 | -6.2 | -33.20 | -27.00 | 282.60 | 16 |
| 3 | UK Equity Income | -3.00 | -2.20 | -0.4 | -8.10 | -7.70 | 246.90 | 27 |
| 4 | Latin America | -2.90 | -3.10 | nil | -13.00 | -13.00 | 73.90 | 2 |
| 5 | Property - Debt | -2.80 | 0.00 | -2.4 | -15.60 | -13.20 | 89.50 | 5 |
September’s biggest movers in NAV and price terms are shown in the charts below:
On the positive side:
- It was almost a clean sweep for Japan funds over September, with 7 out of the top 10 best performers in NAV terms coming from the country. Flows into Japanese strategies were mainly driven by the relatively attractive value on offer, a corporate sector in better balance-sheet health than the vast majority of the developed world, and the belief that new Prime Minister, Yoshihide Suga, will continue Shinzo Abe’s policy agenda. NAV performance was led by smaller companies-focused Baillie Gifford Shin Nippon and Atlantis Japan Growth, both of whom have a significant allocation to the industrials sector.
- Witan Pacific’s shares have been increasing after shareholders backed proposals to shift to a Baillie Gifford-managed China-only strategy.
- Shares in Gulf Investment rose over 8% following the release of its annual results, which included a comparatively resilient outlook for the region.
- Shares in Infrastructure India surged after it announced that it expected its annual NAV to increase. Earlier in the month, it was granted a 3-month extension to publish its annual results.
On the negative side:
- Geiger Counter’s shares are sensitive to the uranium price.
- Though Temple Bar’s NAV declined by (8.3%), the shares have recently built up a head of steam (click here to access our initiation note).
- Aurora’s reflects the souring in sentiment towards UK assets, as the second wave of COVID-19 struck and the UK remained at an impasse with the EU.
- After a strong August, UK commercial property funds, including Regional REIT and Standard Life Investments Property Income, sold off. Canada has also seen a considerable increase in COVID-19 cases over recent weeks.
- Shares in Middlefield Canadian Income, are down by about 23% so far this year. Real estate and financials represent its largest sector allocations.
Discounts and premiums
The tables below show the top five movers in either direction (more or less expensive relative to NAV):
More expensive relative to NAV:
| wdt_ID | Fund | 30 Sept (%) | 31 Aug (%) |
|---|---|---|---|
| 1 | BlackRock Income and Growth | 6.70 | -4.20 |
| 2 | Honeycomb | -10.20 | -20.00 |
| 3 | BH Macro GBP | 13.40 | 3.90 |
| 4 | Marble Point Loan Financing | -9.60 | -18.10 |
| 5 | Geiger Counter | 14.50 | 6.00 |
- In price terms, BlackRock Income and Growth has been the second-best performing UK equity income fund, over the year to date.
- Direct lender Honeycomb’s shares have come back strongly since late August, with cash collection holding up well.
- Macro hedge funds, BH Macro GBP, benefit from large moves in bonds and currencies in particular, so the environment this year has been fertile.
Cheaper relative to NAV:
| wdt_ID | Fund | 30 Sept (%) | 31 Aug (%) |
|---|---|---|---|
| 1 | BMO Real Estate | -46.20 | -29.60 |
| 2 | FastForward Innovations | 19.00 | 33.20 |
| 3 | Alternative Income REIT | -37.60 | -27.00 |
| 4 | Regional REIT | -33.20 | -23.10 |
| 5 | GCP Student Living | -27.50 | -19.00 |
- Discounts in Alternative Income REIT and BMO Real Estate widened for the same reasons as the other UK REITs discussed above.
- The return to university has been chaotic, hitting GCP Student Living.
- FastForward Innovations’s premium had widened to over 30%, so some profit-taking likely took place.
Money in and out
Fundraising highlights over the month:
Money coming in:
- The market for new issues returned with a vengeance, with several funds hoping to launch. They include Tellworth British Recovery and Growth, Buffetology Smaller Companies, Home REIT, and Mailbox REIT.
- Existing funds, led by Greencoat UK Wind and Hipgnosis Songs, raised considerable capital too. There continues to be significant capital available for sectors that provide alternative sources of income, like renewables and royalties.
- Smithson, Personal Assets, Worldwide Healthcare, and Pacific Horizon also issued shares.
Money going out:
- Buybacks were led by NB Global Monthly Income GBP, Scottish Mortgage, and Amedeo Air Four Plus.
Major news stories
Portfolio developments:
- It was an excellent year for tech-focused Manchester & London
- North American Income managed to grow its revenue income, aided by flows generated by writing options
- 3i Infrastructure said its portfolio was holding up well but lower power prices would affect valuation
- BioPharma Credit invested $236m over its interim period
- Pacific Horizon had a remarkably strong year
- Gulf Investment discussed its cautiously optimistic outlook
- The Japan fund, Nippon Active Value, released maiden interims
- India Capital Growth displayed promising early performance signs, after successfully passing its continuation vote earlier this year
- European Opportunities discussed Wirecard, which is previously had a large stake in
- Baillie Gifford US Growth had a stellar year
- JZ Capital breached one of its loan covenants
Corporate news:
- Tellworth British Recovery & Growth said it was seeking an IPO raise of £100m. It also published its prospectus
- Another UK-focused fund, Buffettology Smaller Companies, also announced its intention to float. It is seeking to raise a minimum of £100m
- Greencoat UK Wind launched a major fundraise, subsequently raising £400m
- Merian Chrysalis announces £50m placing and follow-on investment in leading European digital insurance platform
- JPMorgan Brazil lost its continuation vote
- Hipgnosis Songs raised £190m in 72 hours
- In a surprise move, Jupiter UK Growth is to liquidate the fund after deciding it was unlikely to succeed in growing the fund below its currently small size
- Aquila European Renewables is looking for cash is looking to raise around €150m
- Gabelli Value’s liquidation was blocked by Associated Capital Group
Managers and fees:
- Troy asset management won the mandate for Securities Trust of Scotland
- Temple Bar appointed RWC Asset Management, while also confirming its decision to sticks with a value style
- Ken Wotton replaces Jeff Harris at Strategic Equity Capital
Property news:
- Supermarket Income REIT published a prospectus for its £150m equity raise
- A prospectus for Home REIT was published. The fund will look to provide dedicated accommodation to the homeless
- QuotedData spoke with the manager of Ceiba, the Cuba-focused property company
- RDI REIT sold its six-asset UK retail park portfolio for £156.9m
- Shaftesbury revealed the full scale of the pandemic’s impact
- British Land appointed a new CEO
Events
Here is a selection of upcoming events:
- Growth Strategies Conference, 14 October 2020
- Tufton Oceanic AGM 2020, 23 October 2020
- City of London AGM 2020, 27 October 2020
- The London Investor Show, 30 October 2020
- Mid-Wynd International AGM 2020, 10 November 2020
- Gulf Investment AGM 2020, 13 November 2020
- Bluefield Solar Income AGM 2020, 26 November 2020
- CQS New City High Yield AGM 2020, 3 December 2020
- Sustainable & Social Investing Conference, 3 December 2020
- CQS Natural Resources Growth and Income AGM 2020, 9 December 2020
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 – September performance by sector
| wdt_ID | Sector | Share price total return YTD* (%) | NAV total return YTD* (%) | Share price total return September (%) | NAV total return September (%) | Change in discount (%) | Discount 30/09/2020 (%) | Discount 31/08/20 (%) | Market cap 30/09/20 (£m) |
|---|---|---|---|---|---|---|---|---|---|
| 1 | Technology & Media | 30.20 | 39.40 | 0.00 | 2.30 | -0.90 | -0.40 | 0.60 | 1,025.00 |
| 2 | Japanese Smaller Companies | 17.10 | 18.30 | 15.30 | 11.10 | -1.70 | -6.40 | -4.70 | 127.00 |
| 3 | Unclassified | 16.30 | 16.30 | 2.60 | 2.60 | 2.60 | 3.10 | 0.60 | 140.00 |
| 4 | Growth Capital | 14.90 | 9.60 | -0.30 | 0.00 | 0.30 | -16.20 | -16.50 | 371.00 |
| 5 | Biotechnology & Healthcare | 14.80 | 14.20 | 5.40 | 3.60 | 1.50 | 1.10 | -0.40 | 538.00 |
| 6 | Hedge Funds | 13.60 | 12.70 | 5.10 | 2.40 | -0.30 | -22.90 | -22.70 | 64.00 |
| 7 | Commodities & Natural Resources | 13.30 | -0.40 | 0.00 | -0.70 | -0.20 | -11.90 | -11.70 | 62.00 |
| 8 | Global Smaller Companies | 10.40 | 17.50 | 0.00 | 1.30 | -1.10 | -9.80 | -8.70 | 1,016.00 |
| 9 | Royalties | 10.00 | 11.40 | -2.90 | 0.00 | -3.10 | 2.40 | 5.50 | 933.00 |
| 10 | Asia Pacific | 7.30 | 7.80 | 2.70 | 3.00 | -2.10 | -11.30 | -9.20 | 357.00 |
The legal bit
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