Alternative Income REIT PLC ex-dividend payment date Aquila European Renewables PLC ex-dividend payment date Baillie Gifford UK Growth Trust PLC ex-dividend payment date Balanced Commercial Property Trust Ltd ex-dividend payment date BlackRock Sustainable American Income Trust PLC ex-dividend payment date Fair Oaks Income Ltd ex-dividend payment date Greencoat UK Wind PLC ex-dividend payment date Henderson Opportunities Trust PLC ex-dividend payment date ICG Enterprise Trust PLC ex-dividend payment date Impax Environmental Markets PLC ex-dividend payment date Majedie Investments PLC ex-dividend payment date Montanaro European Smaller Cos Trust PLC ex-dividend payment date Murray Income Trust PLC ex-dividend payment date NextEnergy Solar Fund Ltd ex-dividend payment date Octopus Renewables Infrastructure Trust PLC ex-dividend payment date Pershing Square Holdings Ltd ex-dividend payment date Reach PLC ex-dividend payment date Renewables Infrastructure Group Ltd ex-dividend payment date Target Healthcare REIT PLC ex-dividend payment date Tritax EuroBox PLC GBP ex-dividend payment date VH Global Sustainable Energy Opportunities PLC ex-dividend payment date
Hi, i think that I saw you visited my web site thus I came to go back the desire? I am attempting in finding things to enhance my web site! I assume its good enough to use some of your concepts!!
It already feels a long time ago that Labour won a landslide election at the start of July, but this seems to have had a calming influence on the market. The long-awaited interest rate cut occurred at the start of August, but even before this, the average share price move amongst the listed property sector was +3.1%. Corporate activity was again the driver behind many of the largest share price gains, with European logistics landlord Tritax EuroBox revealing that it was in discussions with more potential suitors following initial interest from Brookfield. A conclusion to Balanced Commercial Property Trust’s strategic review seems to be close, with a bid still on the cards. European property securities trust TR Property posted a double-digit uplift in its share price, mirroring the performance of its portfolio companies during the month. Values were back trending upwards for many of the diversified REITs, with AEW UK REIT (which also reported progress on dividend cover), Schroder REIT and Picton Property all seeing impressive share price gains. Capital & Regional continues to be the subject of takeover discussions, with a second party entering the fray. Meanwhile, student specialist Unite Group raised £450m in a placing.
Worst performing funds
Office landlord Regional REIT saw another sizable drop in its share price following a dilutive £110.5m rights issue in June. The company now languishes on a monstrous discount to NAV of almost 80%. Real Estate Investors is in wind down mode and reduced its dividend to reflect lower earnings from its diminishing portfolio. Three other companies at various stages of winding up – Macau Property Opportunities, Palace Capital and Ground Rents Income Fund – also feature. The residual value of the latter’s portfolio continues to be negatively impacted by leasehold reforms, but in a much more buoyant environment, a flat NAV was enough to earn its and Cuban property investor Ceiba Investments’ places in the table. Many other thinly traded real estate companies also made the worst performing funds table in July, reflecting the volatile nature of their share prices. This was the case for UK investor/developer Conygar Investment Company, and pan-African real estate investor and developer Grit Real Estate Income Group. Having staged a mini share price revival in the wake of its strategic review, in which it vowed to continue in its pursuit of development returns, London office developer Helical gave up those gains and now trades on a circa 35% discount to NAV.
Valuation moves
Company
Sector
NAV move (%)
Period
Comments
AEW UK REIT
Diversified
3.1
Quarter to 30 June 24
2.4% like-for-like valuation increase for the quarter to £215.8m
Schroder REIT
Diversified
0.5
Quarter to 30 June 24
Portfolio value increased 0.3% to £461.6m
Picton Property
Diversified
(0.1)
Quarter to 30 June 24
Like-for-like portfolio valuation increase of 0.4% to £700.2m
Balanced Commercial Property Trust
Diversified
(2.1)
Quarter to 30 June 24
Value of portfolio fell 1.5% to £943.3m
Unite Group
Student accom.
5.3
Half-year to 30 June 24
Portfolio valued at £5.7bn, up 2.7% on a like-for-like basis
Shaftesbury Capital
Retail
1.6
Half-year to 30 June 24
Portfolio valuation increased by 1.4% on a like-for-like basis to £4.8bn
SEGRO
Logistics
(1.8)
Half-year to 30 June 24
Values were flat; however, NAV fall was largely due to the impact of an equity placing
Primary Health Properties
Healthcare
(2.8)
Half-year to 30 June 24
Value of portfolio declined 1.4% to £2.75bn
Hammerson
Retail
(25.5)
Half-year to 30 June 24
NAV hit by sale of Value Retail stake at 24% discount to book value (see page 4 for details)
Markets have suddenly turned very volatile. One explanation is that everyone seems to have forgotten that it’s not nominal but real rates that matter.
ByDavid Stevenson•08 Aug, 2024•
As I write, markets are in a volatile mood. None of this should come as any great surprise as markets have been in an unbearably bullish mood for far too long, with everyone and their aunt assuming that the U.S. economy might have escaped even a slowdown, let alone a recession. The source of this jittery market sentiment? Friday’s non-farm payrolls figure came in at 114 vs. a 175k expectation with U.S. unemployment rising to 4.3% from 4.1%. Markets reacted very negatively to the miss and while the case for a rate cut builds rapidly, the concerns around a hard landing and deeper recession for the US economy are also escalating. Add in concerns about the geopolitical environment and growing uncertainty about the US election, and you have the makings of a classic sell-off. Oh, and there’s the obvious issue that U.S. tech stocks were over-bought and over-owned.
But I would argue that investors have also indirectly acknowledged the importance of a little discussed term called the real interest rate. The mass media tends to focus on the nominal interest rate, which was reduced last week to 5%. But the real interest rate is far more important. This was first popularised by the economist, Irving Fisher, who argued that we need to consider the importance of inflation in understanding the return on cash rates. He suggested an equation which states that the real interest rate is the nominal interest minus the expected rate of inflation. That last variable, the expected rate of inflation, can be deduced from market measures of the breakeven rate (for anything from 1 to 30 years) for government bonds. That, in turn, can be sourced from the Bank of England’s website, which publishes data on the forward implied inflation rates based on UK bonds. These suggest, currently, that in the UK, the market has pencilled in a 3-year implied inflation rate of 3.84%, a 5-year rate of 3.62% and a 10-year rate of 3.47%. Plug this into the simple equation – let’s go with a blended medium-term rate of 3.7% – and we get a real rate of 1.25% in the UK. By contrast, the U.S. Federal Bank formally publicises its real rate based on forward numbers, with the current 10-year real interest rate running at 2.05%. It also publicises its 10-year breakeven rate, which is, coincidentally, running at 2.04%, with the US nominal interest rate running at 5.33% (which is the Federal Funds Effective rate). The US 1-year (forward) real interest rate is running at 2.5%.
This all sounds terrifically interesting to a dismal economist but the average reader is probably left wondering why it matters. The first point is that long term real interest rates have been heading down steadily for hundreds of years. We tend to think that the last decade of negative real rates (close to zero interest rates and inflation above 1 or 2%) was an unprecedented era, but a paper by Bank of England economists, available freely online, shows clearly and clinically that real rates have been trending to close to zero for decades now, across the world. They call it a supra-secular decline. What’s the driver? Put simply, in our more egalitarian world, its surplus of capital was always going to drive real rates lower. The author concludes, “my new data showed that long-term real rates – be it in the form of private debt, non-marketable loans, or the global sovereign “safe asset” – should always have been expected to hit “zero bounds” around the time of the late 20th and early 21st century, if put into long-term historical context.” As for causes, it’s better to look at the massive accumulation of capital and savings across many developed economies and the declining volatility of both real rates and inflation. The paper also argues that as the capital stock grows relative to labour and other factors of production, the marginal return on capital decreases, leading to lower interest rates. I would also add the idea of secular stagnation as one possible explanation—this once popular idea looks at declining productivity growth rates and lower GDP growth rates and argues that the UK, in particular, but Europe more generally, has struggled to grow at an above-average rate, forcing down real rates. Regardless of the causes, one fact stands out. UK and U.S. real rates are now strikingly positive, even after the recent small cut in the UK. This is fine and dandy for some months and maybe even a year, but eventually, high positive real rates start to have an impact, and I would suggest that the U.S. payroll numbers are the canary in the coal mine – and U.S. equity investors have reacted. They have twigged that there is a possibility that the U.S. Federal Reserve is too hawkish and that their central bankers will now be forced to reconsider and cut rates even quicker than expected. In contrast, in the UK, markets are already betting on more rate cuts in the next six months. Real positive interest rates matter because they throttle investment and act as a disincentive to borrow. That impact isn’t felt immediately, but over a sufficient period – say 1 to 2 years – the pain becomes real, and even governments struggle to find the money to fund their own huge fiscal deficits. Given these widely acknowledged facts, I would argue that a reasonable scenario goes as follows. Both the U.S. and the UK will find themselves in a difficult spot as central banks try and tamp down inflation without completely throttling investment growth. The natural middle ground is that you push the real interest rate closer to +1% in the U.S. – the U.S. economy has probably been overheating in the last year, helped by a massive government deficit, so could probably sustain a positive real rate for a little longer That might suggest a landing place of around 3.5 to 4% for U.S. interest rates by some point in the first half of next year.
Given the UK’s more anaemic growth rate, one might be tempted to bring the real interest rate back to neutral, i.e. close to 0% or possibly as high as +0.5%. Given our longer-term inflation expectations, which are higher than those of the U.S., that might imply interest rates around the 4% level by early 2025.
What does this mean for investment trusts? I would argue strongly that prospects for the myriad of alternative investment trusts, ranging from lending funds to renewable funds, yielding more than 6.5% and some as high as 10%, will now start to look up. Cautiously, I think it reasonable to pencil in some decline in net yields for these funds (especially if they have floating rate debts), but if UK nominal rates stabilise around 4%, then any fund yielding a robust and well-covered yield of above 7% starts to look very compelling. And that list is long and getting longer by the week.
Two JPMorgan Japan funds unveil tie-up, TRIG triggers buyback programme, Triple Point Social Housing keeps credit rating, while Henderson Smaller Companies makes it 21 years in a row of dividend increases.
ByFrank Buhagiar
Two more JPMorgan funds to tie up
JPMorgan Japan Small Cap Growth & Income (JSGI) and JPMorgan Japanese (JFJ), the latest two JPMorgan investment companies to propose joining forces. As per JSGI’s press release, “JSGI’s assets will be rolled into JFJ in exchange for the issue of new JFJ shares to the continuing JSGI shareholders.” JSGI shareholders will be entitled to realise up to 25% of their JSGI holding for cash. Lots of reasons cited for the merger – broad all-cap strategy; increased scale; and reduced fees and costs.
JSGI Chair, Alexa Henderson, and the board believe “the proposed combination will provide continuity of investment process and philosophy within a broader market opportunity. The proposed combination will provide a much larger investment trust with significantly lower costs for shareholders.”
Winterflood: “With JFJ trading at an 8.8% discount, and JSGI at a 13.5% discount, JSGI shareholders should expect to receive an uplift following completion. Finally, the scale benefits of the combination cannot be overlooked, especially given reduced management fees and ongoing costs, at a time when costs are at the forefront of many investors’ minds, and greater liquidity, when there exist too many sub-scale funds within the sector.”
The Renewables Infrastructure Group joins the buyback pack
The Renewables Infrastructure Group (TRIG) announced a £50million share buyback programme following progress made with the fund’s capital allocation strategy. This includes reducing TRIG’s Revolving Credit Facility (‘RCF’) to c. £150m during 2024. “Based on current cash flow projections, divestments agreed to date, and assuming that c. £25m of the buyback programme is completed in 2024, RCF drawings would reduce from £364m at 31 December 2023 to c.£220m at 31 December 2024.” That’s not all. Additional disposals are in the pipeline as well as portfolio-level financing opportunities that will further reduce RCF drawings as well as “create greater capacity for future investment activities.”
Liberum: “TRIG has increasingly appeared as an outlier in the sector for not having an active repurchase programme so this is a welcome development. Given its size, and the very strong capital allocation argument for repurchasing shares at the discounts it has traded at, we think the market has been disappointed with the lack of a programme to-date.” Appears the market can cast aside its disappointment now!
Triple Point Social Housing maintains credit rating
Triple Point Social Housing (SOHO) put out a press release announcing that Fitch Ratings has reaffirmed the existing Investment Grade, long-term Issuer Default Rating of ‘A-‘ and a senior secured rating of ‘A’ for the Group’s existing loan notes. That’s the same as the ratings given by Fitch first time round in August 2021.
There has been a change in outlook from stable to negative though “to reflect prolonged rent arrears from two Registered Providers, and the risk that the independent review of the investment management arrangements could result in a change of investment manager.” Thanks for the heads up, Fitch!
Dividend Watch
Henderson Smaller Companies (HSL) is on course to raise its annual dividend for 21 consecutive years. This follows the board’s proposal to increase the final dividend to 19.5p per share. Add that to the 7.5p interim dividend and the total payout for the year comes to 27.0p per share. That’s a 3.8% increase on 2023’s 26.0p per share. “This dividend will be fully funded from current year revenues. As an ‘AIC Dividend Hero’, this will be our 21st consecutive year of growth in the annual dividend.”
The Times thinks Alliance Witan will be a tried-and-tested machine once the merger completes, while The Telegraph believes the outlook for Edinburgh Worldwide has brightened.
By Frank Buhagiar 06 Aug, 2024
Tempus: Alliance Witan will be a tried-and-tested machine The Times’ Tempus Column is minded to give the proposed combination of Alliance (ATST) and Witan (WTAN) the thumbs up. After all, the new fund, which will be known as Alliance Witan, has a fair bit going for it. There’s the combined fund’s size – at £5 billion, the global investor will match F&C Investment Trust (FCIT) for size and will only be behind Scottish Mortgage (SMT). Qualification for FTSE 100 membership therefore likely which “will increase demand among institutions that are mandated to hold shares in the entire index and will match the Alliance management’s desire to put more pension funds, insurance companies and other investment groups on the share register.”
Then there’s the substantial overlap between the two trusts. The two portfolios share capital and income growth strategies that will enable costs to be spread more widely. Both also deploy a multi-manager approach, whereby several fund managers covering different specialisations, regions or industries are mandated to manage a portion of the funds’ assets. It’s an approach that has a track record of delivery: Alliance has generated a +105% shareholder total return over the last seven years; Witan, +65%.
The two funds also have a long track record of dividend growth: Alliance boasts 56 successive years of dividend increases; Witan 48 years. All of which leads Tempus to write “Alliance Witan is a tried-and-tested machine that will appeal primarily to institutions and investors content with a middling income level today on the assurance that it will rise steadily in future.”
Questor: Back this SpaceX investor before its shares rocket When The Telegraph’s Questor Column first published the above article on global small-cap investor Edinburgh Worldwide (EWI) on 17 July 2024, the message in the title could not have been clearer: buy before the shares go higher. At the time, EWI shares were trading at 154.4p. Two weeks on and the share price still trades at around the same level. Investors, it seems, haven’t missed the boat (or should that be rocket) yet then. Worth a revisit of the tip.
The trigger for the piece, reports that the valuation of Elon Musk’s SpaceX had reached $210bn (£161bn). That’s good news for the £587m fund – at 11.8% of total assets, SpaceX is EWI’s largest position. For the trust invests in both public and private companies that it believes “have exceptional long-term growth prospects, even if they are not necessarily currently profitable. It is more skewed towards younger, smaller businesses valued at under $5bn at the point of first investment and has a pronounced technology theme.”
Certainly, the shares could do with a boost. For over the past three years, EWI’s share price has halved. And in the latest half-year results, the trust posted a relatively pedestrian-looking +4.6% underlying return compared to the +15% gain clocked by the index. But at least that was an improvement on the -23% and -40% losses reported for the previous two financial years. What’s more, Questor believes that with, albeit limited, interest rate cuts on the horizon, the outlook for the growth fund has brightened. The article concludes “investors should be wary of committing too much money to Baillie Gifford if they already hold Scottish Mortgage for example. Nevertheless, viewed on its own merits, we have no hesitation in repeating our recommendation for this trust.”
Have environmental and renewable energy investment companies just been given the green light?
Following the Bank of England’s decision to cut interest rates for the first time since March 2020 and Labour’s landslide victory in the UK General Election could the stars be aligning for London’s environmental and renewable energy investment companies?
Have environmental and renewable energy investment companies just been given the green light? Following the Bank of England’s decision to cut interest rates for the first time since March 2020 and Labour’s landslide victory in the UK General Election could the stars be aligning for London’s environmental and renewable energy investment companies?
By Frank Buhagiar 07 Aug, 2024
It’s been a tough few years for those London-listed investment companies that have a somewhat green hue. Whether heralding from the Association of Investment Companies’ (AIC) three-fund environmental sector or the 20+ funds in the renewable energy space, all have seen their share prices regularly trade at stubbornly high discounts to net asset value. As recently as 30 June 2024, the average discount in the renewable energy subsector stood at -24.6%. The three environmental funds’ average discount was around half that level, but was still in double digits.
Hard to square those steep discounts with the scale of the global environmental emergency and the collective effort being made to tackle it. As the United Nations Sustainable Development Goal 13 states “To address climate change, we have to vastly raise our ambition at all levels. Much is happening around the world – investments in renewable energy have soared. But more needs to be done. The world must transform its energy, industry, transport, food, agriculture and forestry systems to ensure that we can limit global temperature rise to well below 2°C, maybe even 1.5°C.”
As the above paragraph from the UN suggests, action is being taken. In the US, the Inflation Reduction Act (IRA), which became law in August 2022, and the Bipartisan Infrastructure Law, which was enacted in November 2021, are helping to channel billions of federal dollars towards the development of clean energy. The numbers are eye-catching. Originally, estimated at US$391 billion over ten years, the cost of the IRA, including tax credits, loans and loan guarantees, is now forecast to exceed US$1 trillion. And according to Goldman Sachs, the IRA is already having an impact. “A total of 280 clean energy projects have been announced across 44 US states in the IRA’s first year, representing $282 billion of investment.”
Closer to home, the UK has set itself the target to reach net zero by 2050. The deployment of clean power generation clearly key here and 100% zero-carbon generation is being targeted by 2035. Step up all those renewable energy investment companies and their wind, solar, hydro, biomass and battery storage assets. Progress is being made. According to the National Grid, “2020 marked the first year in the UK’s history that electricity came predominantly from renewable energy, with 43% of our power coming from a mix of wind, solar, bioenergy and hydroelectric sources.” The National Grid goes on to add that in 2023 wind power accounted for 29.4% of the UK’s total electricity generation; biomass energy (the burning of renewable organic materials) contributed 5% to the renewable mix; solar power 4.9%; and hydropower, including tidal, 1.8%.
The UK has come a long way – renewables accounted for just 2% of all electrical generation in the UK as at end of 1991 and just 14.6% in 2013. But, as impressive as the above numbers are, there’s still clearly a way to go before zero-carbon generation hits 100%. Plenty of room for growth then for both renewable energy infrastructure companies and those funds, such as Impax Environmental (IEM) and Jupiter Green (JGC), that invest in clean energy and other environmental technologies and solutions.
And yet, the share prices of these funds continue to languish at discounts to net assets, thereby cutting off a vital source of funding, particularly for renewable funds. Indeed, unable to issue new shares to raise funds, renewable companies have had to adopt and announce capital allocation strategies. These are largely centred around reducing debt levels, returning capital to shareholders via buy backs, securing strategic partners and selling assets.
In black and white
The environment may well be a structural growth story underpinned by government backing and targets, but it is one that, based on prevailing discounts, has been largely shunned by investors in recent years. As for why this has been the case, over to the latest Annual Report from CT Global Managed Portfolio Trust (CMPI/CMPG), a fund which invests in other investment companies, including renewables, “A common theme amongst the underperformers in the Income Portfolio was widening share price discounts, much of which was the result of rising interest rates and importantly higher discount rates which are used to value future cash flows and assets for many alternative investment companies. The renewable energy infrastructure sector has been particularly affected”.
There it is in black and white – higher interest rates a major contributor to those wide discounts. As Jupiter Green’s Jon Wallace recently explained in an update recorded with doceo fund manager video update, “interest rates affect not just the rate at which a company will pay to finance itself but also ultimately the discount rate in the market place that’s applied to the long-term growth and structural growth for businesses.” Higher discount rates lead to lower valuations for the assets held by renewable funds and also for the growth stocks that environmental funds invest in.
But, if higher interest rates are to blame for the steep discounts, it follows that lower interest rates are key to an improvement in sentiment. CMPI/CMPG Chairman, David Warnock, agrees “Investors have been disappointed by the ‘higher for longer’ approach to combat sticky inflation. It may require actual cuts to be delivered for sentiment to improve”.
Welcome news
If that’s the case, then the 25-basis point cut in UK interest rates to 5% announced by the Bank of England on 01 August 2024, the first cut since March 2020, ought to be welcomed with open arms. And while the Governor of the Bank of England cautioned the market not to expect a flurry of further cuts in the coming months, he did nevertheless describe it as “an important moment in time”. Certainly, in the investment company space – a change in the direction of travel for interest rates should help narrow discounts and, eventually, reopen a much-needed source of funding.
That first cut in UK interest rates, not the only positive change for the environmental and renewables AIC sectors. So too, the more stable political backdrop in the UK, following the landslide victory for the Labour Party which, during the campaign, pledged to make Britain a clean energy superpower: “The climate and nature crisis is the greatest long-term global challenge that we face. The clean energy transition represents a huge opportunity to generate growth, tackle the cost-of-living crisis and make Britain energy independent once again. That is why clean energy by 2030 is Labour’s second mission.”
Back to Jon Wallace’s video update,
“Given the change in the UK Government and also the scale of the victory for the Labour administration, there is now an opportunity to add back some of the commitments around addressing climate change. In principle, that’s about decarbonising power systems. The commitment around onshore and offshore energy, in particular wind energy, is notably a positive for us.” As at 30 June 2024, Jupiter Green had 18% of its assets invested in clean energy. The election result is presumably a positive too for renewable energy companies such as Greencoat UK Wind (UKW) and The Renewables Infrastructure Group (TRIG).
On the up
Add the more favourable political backdrop and the first cut in UK interest rates to the global structural growth story that is the transition to net zero and the stars could well be aligning for London’s environmentally focused investment companies. And based on a recent narrowing in discounts, it would appear the market agrees. As the table below shows, current discounts in the environmental sector have bounced off their year highs (or lows depending on one’s perspective):
Fund
Current discount
52-week high discount
Impax Environmental (IEM)
-8.6%
-12.6%
Jupiter Green (JGC)
-18.0%
-33.4%
Menhaden Resource Efficiency (MHN)
-38.5%
-41.9%
Interestingly, all three funds’ discounts set their year-highs in May. Round about the time Rishi Sunak called the General Election, despite trailing heavily in the polls to Labour, and round about the time it was reported that inflation had fallen back to the Bank of England’s target rate of 2%, thereby opening up the possibility of a first rate cut. Market sensing change was in the air perhaps. It’s a similar story with the renewables sector. Earlier in the year when higher for longer was the prevailing interest-rate narrative, renewables regularly contributed the most names to Doceo’s Discount Watch List of funds trading at year-high discounts. For weeks now, no renewables have featured on the list.
So, it seems with share prices bouncing off the bottom and discounts narrowing, the environmental and renewables sectors may well have just been given the green light investors have been waiting for. And with discounts still on the steep side and with much work to do to put the world on a more sustainable path, there’s arguably a lot more to come from both sectors.
The Results Round-Up – The Week’s Investment Trust Results
Among this week’s results, Allianz Technology clocks up a +28% NAV total return in just six months; while Murray International is surprised at the strength of equity market returns; and The Renewables Infrastructure Group’s interims trigger a flurry of positive broker commentary.
ByFrank Buhagiar
Among this week’s results, Allianz Technology clocks up a +28% NAV total return in just six months; while Murray International is surprised at the strength of equity market returns; and The Renewables Infrastructure Group’s interims trigger a flurry of positive broker commentary.
Fidelity European (FEV) gearing up for a difficult environment FEV’s+7.6% NAV total return for the half year beat the +7.1% posted by the FTSE World Europe (ex UK) Index. Share price total return fared even better, up +10.6%. Portfolio managers put the outperformance down to the positive effect of the fund’s gearing in a rising market. Having large holdings in ASML and Novo Nordisk also helped, allowing the fund to jump on the AI and anti-obesity bandwagons.
As for the outlook, the portfolio managers are cautious and see the stock market as being vulnerable if the outlook worsens and sentiment shifts to be more negative. What’s more, “Ageing populations, low productivity, high and growing levels of government debt, etc., will mean that growth is likely to remain anaemic.” Because of the uncertainty, “We will continue to focus on attractively valued companies with strong balance sheets that should be resilient, and able to grow dividends, even in a more difficult environment.” Numbers good for a 5p rise in the share price on the day of the results – shares closed at 384.5p.
Winterflood highlights “the attractiveness of FEV’s quality growth bias, which in our view provides it with defensive characteristics to withstand an uncertain macroeconomic environment.”
Numis: “This is our favoured fund among the Europe ex UK peer group”.
Rights and Issues (RIII) hunting for value RIII Chairman, Andrew Hosty, described the UK small-cap fund’s half-year performance as “robust”. Easy to see why when NAV grew +13.2% and total shareholder return increased +15.8%, both outperforming the FTSE All-Share’s +7.4% total return. The outperformance can be traced back to “the work started eighteen months ago to thoughtfully diversify and modestly reduce concentration of the portfolio.”
According to the Investment Managers “the macroeconomic backdrop appears to be improving, with inflation under control and the potential for lower interest rates. This should create better conditions for equity investors. Clearly macroeconomic risks remain, however, we approach the remainder of the year with a degree of optimism and continue to look for attractively valued investment opportunities in our market.” Shares lost 30p on the day. Sounds worse than it is, as the shares are trading at the 2400p level. So, barely a 1% fall that was more than made up the following day.
Winterflood: “Outperformance driven by stock selection. As previously announced, at the end of the period RIII co-manager Dan Nickols, Head of Jupiter’s UK Small and Mid-Cap (SMID) equities team, retired. Co-manager Matt Cable will assume role of lead manager, ensuring continuity.”
European Assets (EAT), a leader in more ways than one EAT’s+3.5% NAV total return over the half year period to 30 June 2024 beat the benchmark’s +3.1% with room to spare. That’s not the only way the fund is leading the pack – EAT offers a peer-group leading 7.0% dividend yield based on a 5.9 per share dividend and 84.4p closing share price as at 6 August 2024. Good start for new lead manager Mine Tezgul who took over the reins on 2 May 2024. What’s more, according to Chair, Stuart Paterson, “there are reasons to remain optimistic. Earnings have been resilient despite higher interest rates and, over the longer-term, share prices tend to follow earnings. Good companies continue to grow, and we see opportunities in the current market.” Share price barely moved on the day – market adopting the wait and see approach perhaps.
Winterflood: “Share price TR +0.1%, as discount widened from 8.8% to 11.8%. Technology-related names drove outperformance.”
Allianz Technology (ATT) outperforms ATT posted a +28% NAV total return for the half year, outperforming the Dow Jones World Technology Index +27% in the process. The Portfolio Manager’s Report notes “The Company was a beneficiary of a number of tailwinds from exposure in key technology segments, including AI, cyber security, Internet of Things (IoT) and digital commerce, among others, and outpaced the benchmark due to stockpicking.” The outperformance is all the more impressive as the fund was underweight the mega-tech stocks “From a market capitalisation exposure perspective, our bottom-up selections in mega-caps overcame headwinds from a relative underweight to the segment, with bottom-up results in large caps also aiding performance. Meanwhile, our emphasis on mid-caps detracted from relative results due to the first half narrowness of the market.”
That “emphasis on mid-caps” could soon pay off though, as “We anticipate a potential broadening of performance across industries and market caps, consistent with a more normalised environment.” Share price tickled 2.5p down to 349p but resumed its upward path the following day to close at 359p.
Numis: “ATT takes a bottom-up stock picking approach driven by exposure to key themes, with relatively high turnover in what is a dynamic, fast-moving sector, and we believe that this approach and its mid/large cap bias may serve it well.”
Murray International (MYI) staying wary MYI Chair. Virginia Holmes. opens her half-year statement with something of a puzzle, “If a primary driver of solid equity market returns in 2023 was the expectation of easing inflationary pressures and central banks cutting interest rates, one could be forgiven for being slightly surprised at the strength of equity market returns, particularly in developed markets, in the first half of this year. Inflation has eased in some areas, proved stubborn in others and the six or seven interest rate cuts expected in the United States at the end of last year have yet to come to pass.” And yet, markets performed strongly, including MYI’s reference index, the FTSE All World TR Index which rose +12.2%. Go figure. The global equity income fund’s NAV total return meanwhile couldn’t match that, finishing the half up +5.5%.
The investment managers aren’t being fooled though, “while there are positive signs of economic recovery and growth in specific sectors, the global economy faces several significant risks and uncertainties. Inflation, geopolitical tensions, market concentration and consumer confidence are all factors that could derail equity markets trading at lofty levels and lead to increased volatility.” Because of this, the managers will “continue to seek companies robust enough to preserve capital in periods of market weakness, with attractive, growing, and sustainable dividends, exposed to strong structural drivers for long-term growth.” With the shares moving higher on the release of the report, market appears to have liked what it heard.
Winterflood: “Board optimistic that progressive dividend can be maintained. Bruce Stout has now departed; Martin Connaghan and Samantha Fitzpatrick have taken joint responsibility for the portfolio.”
Numis: “Martin and Samantha worked with Bruce for over 20 years and therefore, unsurprisingly, there are no significant changes to the portfolio. The results show a period of underperformance, primarily driven by a lack of exposure to mega cap US tech and the funds ‘value’ bias relative to the market.”
The Renewables Infrastructure Group (TRIG) in it for the long haul TRIG reported a 4.3p reduction in NAV per share to 123.4p for the six months to 30 June 2024 (31 December 2023: 127.7p). A combination of factors cited for the NAV decline: lower near-term power price forecasts, lower forecast inflation and below budget generation. Chair Richard Morse doesn’t sound too concerned though, “TRIG continues to offer investors scale, diversification and value.”
And in terms of shareholder value, the renewable fund continues to deliver “TRIG’s attractive dividend, which has been increased by 12.5% over the past five years, is being supplemented by a £50m buyback programme in recognition of the Company’s robust cash flows, balance sheet strength and the premium to carrying value achieved by the management team across £210m of successful divestments signed during the past 12 months.” Finally, the Chair reminds investors that TRIG’s balanced portfolio has been designed “to deliver long-term value to shareholders.” Shares opened largely unchanged. Steady as she goes, the name of the game.
Jefferies: “The previously flagged generation difficulties weighed on the NAV and cash flow generation during the half. However, progress continues to be made on the balance sheet side, with further disposals and possibly a terming out of a portion of the RCF expected over the course of the next 18 months.”
Investec: “The company has a stable and predictable revenue profile with 75% of forecast revenues fixed for the next 12 months and 70% fixed through to December 2028. We reiterate our Buy recommendation.”
Numis: “In our view this remains an attractive entry point for a portfolio that is diversified by both geography and technology managed by an experienced team.”
Liberum: “We view the 19% discount and 7.5% dividend yield as an attractive entry point for a company with a high degree of inflation linkage and strong track record.”
