Investment Companies Monthly Roundup
Kindly sponsored by Baillie Gifford and Aberdeen Standard Investments
Table of contents
New research
Here is a list of research we published over October:
Herald Investment Trust – Hot chips
“Reflecting its focus on technology, Herald Investment Trust (HRI) has performed well, delivering an NAV total return of 26.1% over the past 12 months. HRI’s objective is to achieve capital appreciation through investments in smaller quoted companies in the areas of telecommunications, multimedia and technology. Investments may be made across the world, although the portfolio has a strong position in UK stocks.”
Civitas Social Housing – Solid foundations for future growth
“Civitas Social Housing (CSH) is one of only a small handful of Real Estate Investment Trusts (REITs) that have had a positive year in the face of the COVID-19 pandemic. Due to the nature of its income – which is ultimately paid through housing benefit from central government – CSH has continued to collect all its rents during the crisis.”
Polar Capital Global Financials Trust – Too much pessimism?
“Whilst there are some bright spots, such as payments companies, which are beneficiaries of the shift to online shopping, fears about the potential impact of COVID-19 have hit valuations across much of the financial sector. This has inevitably affected the performance of Polar Capital Global Financials Trust (PCFT). Investors may have been overly pessimistic in their views on financials, as PCFT’s lead managers, Nick Brind and John Yakas, explain.”
Seneca Global Income & Growth Trust – Knit one, purl one
“Seneca Global Income & Growth Trust’s (SIGT’s) UK-biased value style and mid-cap exposure suffered heavily as markets collapsed during the first quarter of 2020. However, the manager used the rout to take advantage of deep value opportunities, while adding risk to the portfolio, and SIGT has benefitted during both recovery phases.”
Montanaro European Smaller Companies Trust – Impressive returns in difficult market
“Montanaro European Smaller Companies (MTE) has generated impressive returns for investors over the past year and has outperformed its benchmark in four of the past five 12-month periods. The manager’s focus on high-quality and growing companies positioned MTE well when COVID-19 hit markets earlier this year. The portfolio includes many innovative and promising businesses, some of which are beneficiaries of the shift to home working and investment in healthcare that the pandemic has fostered.”
Performance
October’s median total share price return from investment companies was 0.3% (the average was 0.7%), which compares with (0.3%) last month. Over the year-to-date, median returns are down by (9.6%). It was another excellent month for Asia Pacific assets, led by China. Elsewhere, sentiment was palpably more cautious as the US election approached and several countries re-imposed restrictions in the face of a second wave of COVID infections. Next month’s roundup may look different as for the first time, a promising vaccine is on the horizon, following the 9 November announcement by Pfizer and BioNTech. It is still early days as further testing needs to be carried out and widespread distribution will present challenges.
Best performing sectors over October:
| wdt_ID | Sector | Median share price total return (%) | Median NAV total return (%) | Median discount 31/10/20 | Median discount 30/09/20 (%) | Change in median discount (%) | Median sector market cap 31/10/20 (£m) | No. of companies in the sector |
|---|---|---|---|---|---|---|---|---|
| 1 | Asia Pacific | 5.80 | 3.00 | -9.30 | -12.60 | 3.30 | 436.60 | 7 |
| 2 | Debt - Structured Finance | 4.80 | 1.40 | -11.70 | -15.60 | 3.90 | 170.80 | 7 |
| 3 | Infrastructure Securities | 4.70 | 2.00 | -5.50 | -8.20 | 2.80 | 89.70 | 2 |
| 4 | Environmental | 4.40 | 0.70 | -0.80 | -7.70 | 6.90 | 70.00 | 4 |
| 5 | Leasing | 3.50 | 1.20 | -51.40 | -48.40 | -3.00 | 84.70 | 7 |
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 October:
| wdt_ID | Sector | Median share price total return (%) | Median NAV total return (%) | Median discount 31/10/20 | Median discount 30/09/20 (%) | Change in median discount (%) | Median sector market cap 31/10/20 (£m) | No. of companies in the sector |
|---|---|---|---|---|---|---|---|---|
| 1 | Property - UK Residential | -9.00 | - | -19.80 | -15.50 | -4.30 | 389.20 | 8 |
| 2 | Commodities & Natural Resources | -4.90 | - | -11.50 | -11.90 | 0.40 | 59.90 | 11 |
| 3 | Europe | -3.80 | -5.6 | -9.10 | -11.80 | 2.70 | 312.30 | 8 |
| 4 | Global Equity Income | -3.40 | -2.5 | -1.40 | -2.50 | 1.10 | 378.00 | 6 |
| 5 | Growth Capital | -2.20 | - | -18.00 | -16.20 | -1.80 | 367.90 | 4 |
October’s biggest movers in NAV and price terms are shown in the charts below:
On the positive side:
- Schroder European Real Estate’s shares rose sharply after it announced the forward sale of one of its Paris office holdings for €104m.
- Baillie Gifford China Growth, formerly Witan Pacific, has made a strong start after its change of manager. Another Baillie Gifford-managed fund, Pacific Horizon, has been the best-performing investment company in total market returns over the year-to-date (YTD) to end-October. It has a strong allocation to mainland China and technology.
- Outside of China, further progress in returning to near normal economic activity across most of the emerging and frontier world, particularly benefitted JPMorgan Emerging Markets, Fidelity Asian Values, and Asia Dragon.
- Investors looked for value in some of the worst-hit alternative asset sectors, including leasing, where two of the Doric aircraft leasing funds feature in the top three best price performers. The ongoing resilience displayed by Emirates, a key lessee, in satisfying lease obligations, has helped to shape sentiment.
On the negative side:
- The market’s initial reaction to Baring Emerging Europe’s proposed widening of its mandate to include all of the EMEA region was lukewarm.
- European equity strategies, led by JPMorgan European Smaller Companies, Fidelity European, Henderson European Focus, were weighed down by the re-introduction of restrictions, while the immediate lead-up to the US election brought caution back into play more generally across markets.
- Elsewhere, Geiger Counter is sensitive to movements in the price of Uranium.
- It was another difficult month for oil and gas-focused Riverstone Energy, which saw it trigger a performance-driven discontinuation vote. In early November, it said it would be increasing its focus on clean energy. The potential impact of the vaccine could ultimately
see sentiment towards oil turn decidedly more positive. - KKV Secured Loan’s shares have been falling since late September after the board announced its intention to put forward proposals for a managed wind-down of the fund.
- It has been a tough year for GCP Student Living, though we note that its shares have bounced sharply following the month-end.
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 | 31 Oct (%) | 30 Sept (%) |
|---|---|---|---|
| 1 | Doric Nimrod Air Three | 3.70 | -14.50 |
| 2 | Schroder European Real Estate | -34.40 | -49.10 |
| 3 | Mercantile | -0.50 | -13.50 |
| 4 | Downing Strategic Micro-Cap | -15.20 | -28.00 |
| 5 | Life Settlement Assets A | -3.80 | -16.30 |
- We discussed Schroder European Real Estate and Doric Nimrod Air Three in the ‘winners and losers’ section.
- Shares in UK-focused Mercantile have been increasing since mid-September, with investors looking at the mid-cap area for value in advance of a potential recovery in UK equities. The Brexit overhang suggests there may be potentially more value available in the UK compared to most other developed markets.
Cheaper relative to NAV:
| wdt_ID | Fund | 31 Oct (%) | 30 Sept (%) |
|---|---|---|---|
| 1 | Riverstone Energy | -44.20 | -32.10 |
| 2 | CIP Merchant Capital | -42.40 | -32.50 |
| 3 | Geiger Counter | 5.60 | 14.50 |
| 4 | Ashoka India Equity | -7.40 | 0.80 |
| 5 | PRS REIT | -24.00 | -16.30 |
- Riverstone Energy and Geiger Counter were discussed ‘winners and losers’ section.
- Ashoka India Equity’s move to a discount over October was price-led. It is otherwise having a strong year and has been the best performing India specialist fund this year in both NAV and price terms.
- Private rental housing-focused PRS REIT has been amongst the better performing UK REITs this year.
Money in and out
Fundraising highlights over the month:
Money coming in:
- Supermarket Income REIT has been growing apace, with its tenants having no trouble meeting their rental obligations.
- SDCL Energy Efficiency Income and Merian Chrysalis raised an average of £100m between them. Merian’s proceeds will mostly be used to fund its investment in You & Mr Jones, a marketing technology company.
Money going out:
- Shareholders in Witan Pacific had the option to tender shares before the change in name and strategy to Baillie Gifford China Growth.
- Elsewhere, SME Credit Realisation returned close to £30m.
Major news stories
Portfolio developments
- Asia Dragon was held back by defensive holdings and exposure to India and Singapore
- Octopus Renewables Bought a French wind project
- NextEnergy Solar’s first half generation was 11.1% above budget
- BlackRock Greater Europe had another strong year
- Aberdeen Diversified Income and Growth said it would increase its focus on private market investments
- Jupiter US beat its benchmark, though its discount widened
- The Renewables Infrastructure Group acquired a 100% interest in Haut Vannier wind farm
- Growth and large-cap tide have been working against Fidelity Asian Values
- A. Reid joins the board of Hipgnosis Songs’s manager, and a deal was struck for his catalogue too
- Merian Chrysalis raised £95m across a share placing and offer to retail investors. It had initially targeted £50m
Corporate news
- Round Hill Music’s prospectus was published ahead of a planned IPO targeting $375m
- Premier Global Infrastructure provided an update on its name change to Premier Miton Global Renewables Trust
- There as an update on UK Mortgage’s ongoing review
- Augmentum Fintech held a placing, following a successful year-to-date
- Baring Emerging Europe proposed broadening its mandate to cover the whole of Emerging Europe, the Middle East and Africa
- Investment Company published a circular ahead of changing its investment objective and policy
Managers and fees
- JPMorgan European announced that Stephen Macklow-Smith was retiring after 23 years as manager
- Alliance Trust announced that its manager, Willis Towers Watson, had appointed Lomas Capital Management as managers to a portfolio for its multi-manager strategy
- Jupiter US Smaller Companies announced that Robert Siddles was retiring. Robert has managed the fund since 2001
Property news
- Impact Healthcare REIT’s NAV jumped
- CEIBA acquired a stake in a Cuban logistics development
- Home REIT made its first acquisitions, following its £240.5m IPO
- Supermarket Income issue raised £200m
QuotedData views
- Up in the AIRE – 30 October
- Money, money, money – 30 October
- US election, why worry? – 23 October
- Will Landsecs return to former glory? – 23 October
- Canada’s answer to UK dividend drought – 16 October
- Rent collection nuggets – 16 October
- Time to back unloved Britain? – 9 October
- International investors back for London offices – 9 October
Events
- Gulf Investment AGM 2020, 20 November 2020
- JZ Capital Partners EGM November 2020, 18 November 2020
- Jupiter UK Growth AGM 2020, 19 November 2020
- TR European Growth Trust AGM 2020, 23 November 2020
- Bluefield Solar Income AGM 2020, 26 November 2020
- QuotedData’s ESG Conference, 24 November 2020
- JPMorgan Smaller Companies AGM 2020, 24 November 2020
- Aberdeen Standard Asia Focus AGM 2020, 1 December 2020
- CQS New City High Yield AGM 2020, 3 December 2020
- Master Investor 2020, 5 December 2020
- Baillie Gifford Japan Trust AGM 2020, 4 December 2020
- VinaCapital Vietnam Opportunity AGM 2020,
4 December 2020 - Henderson International Income AGM 2020,
8 December 2020 - CQS Natural Resources Growth and Income AGM 2020, 9 December 2020
- Aberdeen Latin American Income AGM 2020, 10 December 2020
- Fidelity Special Values AGM 2020, 14 December 2020
- Jupiter US Smaller AGM 2020, 22 December 2020
- The London Investor Show, 23 April 2021
- Sustainable & Social Investing Conference, 21 May 2021
QuotedData’s ESG Conference – 24 November 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.
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