Investment trust insider on the New Year

Investment Trust Insider on Capital Gearing Trust

Investment trust insider on the New Year – James Carthew: The 2021 trust recovery stories I’m betting on

Last year will not be looked back on fondly by most people, but for many investors it ended up being a bumper 12 months. Those of us who had exposure to technology, biotech, gold, and Asia – China, Japan and Korea, in particular – will be patting ourselves on the back. By contrast, ‘value’ investments struggled in 2020, even after November’s bounce, and many sectors were hit hard by lockdown restrictions.

The first question for 2021, is: how quickly will Covid-hit businesses bounce back once vaccination programmes allow the resumption of ‘normal’ economic activity?

It feels to me as though the Doric Nimrod (DNA, DNA2, DNA3) and Amedeo (AA4) aircraft leasing funds that own A380s will not make a full recovery. As I said last month in connection to Baillie Gifford European Growth’s (BGEU) holding in Ryanair, short-haul and leisure-focused airlines may see a sharp bounce later in the year, but business travel may have taken a permanent hit.

Airlines are accelerating the retirement of their A380 fleet. That will leave a big hole in the net asset values (NAVs) of these funds.

The leisure sector was also a casualty. Symphony International (SIHL), Macau Property Opportunities (MPO) and Secure Income (SIR) real estate investment trust all feature among the list of worst-performing investment companies over 2020 and trade on wide discounts.

Asian private equity investor Symphony has big exposure to restaurants and hotels. Macau has placed restrictions on visitors, hitting its gaming revenue and much reducing MPO’s chances of selling its remaining property in its wind-down. Secure Income is exposed to Travelodge and the leisure business, Merlin Entertainments.

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