The Results Round-Up: The week’s investment trust results

The pre-Xmas results dash is on! No shortage of trusts posting double-digit returns: Odyssean OIT, abrdn Equity Income AEI, Schroder UK Mid Cap SCP, Baillie Gifford UK Growth BGUK and European Growth BGEU, Asia Dragon DGN. abrdn New India ANII, the stand out with a +22.8% NAV total return. Other funds reporting include Caledonia CLDN, Biotech Growth BIOG, Utilico Emerging Mkts UEM and Hansa HAN.

By Frank Buhagiar

Asia Dragon’s (DGN) final bow?

DGN’s latest Annual Report may be its last as a standalone entity. That’s if the proposed combination with Invesco Asia (IAT) gets the green light from shareholders. In terms of the full-year performance, net asset value (NAV) and shareholder total return came in at +9.3% and +16.7% respectively. The MSCI AC Asia ex Japan Index, somewhere in between, up +12.0% (sterling).

Winterflood: “Biggest detractor was exposure to China, albeit this was ‘significantly reduced’ over the period.”

Utilico Emerging Markets (UEM) “should be a compelling investment”

UEM found the going hard over the latest half-year period due to what Chairman, John Rennocks, describes as “elevated volatility in most markets as uncertainty has dominated”: -1.4% NAV total return compared to the MSCI Emerging Markets’ +7.5%. Tables turned over the longer term though, +9.1% annual compound NAV total return since inception to 30 September 2024 compared to the index’s +7.6%.” Investment manager, Charles Jillings, points out this has been achieved “with a rising dividend payout; lower volatility; and with a portfolio which is significantly differentiated from the MSCI EM Index. For investors who want exposure to emerging markets, excellent performance and comparatively low levels of volatility, UEM should be a compelling investment.”

Winterflood: “-13.4% Real depreciation vs Sterling impacted as 26% of portfolio invested in Brazil”

Hansa’s (HAN) possible windfall

HAN’s NAV per share increase to 388.5p from 378.8p for the half year eclipsed by the post-period end news that portfolio holding Ocean Wilsons is selling its 56.47% stake in subsidiary Wilson Sons, the largest integrated provider of port and maritime logistics in Brazil. Oceans Wilsons accounts for 29.4% of HAN’s total assets and according to the Report the sale is expected to “realise net cash proceeds of at least US$593m.” Sounds like a windfall could be coming the fund’s way.

Winterflood: “The Ocean Wilson Holdings Board have indicated their intention to return a meaningful percentage of proceeds to shareholders, and HAN awaits further clarification as events unfold.”

Baillie Gifford European Growth’s (BGEU) performance-based challenge

BGEU’s +12.1% NAV per share total return for the year couldn’t match the benchmark’s +15.3%. Share price total return was lower at +9.3% which explains the Board’s commitment to a performance-triggered tender offer of 100% of the issued share capital if NAV total return per share underperforms the FTSE European ex UK Index’s sterling return over the next four years. The investment managers sound up for the challenge “The Board has set us a four-year performance-based challenge, and as Managers, we acknowledge and accept this. We strongly believe that the starting point for future investment returns hasn’t been this favourable for many years. We are confident that we will return to delivering the performance our shareholders have every right to expect.”

JPMorgan: “in addition to having a highly active approach and the commitment to a potential exit, BGEU also offers a low fee due to the management fee being linked to the lower of market cap and NAV. We think our Neutral recommendation vs peers in the AIC Europe sector remains fair.”

Baillie Gifford UK Growth’s (BGUK) performance-based challenge

BGUK’s new Chairman, Neil Rogan, chose a good time to take over the reins. “As Chairman, I am in the fortunate position of writing my first statement for the Company at a time when performance has improved.” Over the half year, NAV per share total return was +8.1% compared to +1.8% for the FTSE All-Share. Share price total return was +11.7%. No resting on laurels. As Rogan admits “There is still much work to be done by the Managers and by the Board to turn around this Company”- over three and five years, the fund has underperformed. And there’s every incentive for the managers because if performance doesn’t continue to improve then a 100% performance conditional tender will be triggered – shareholders will be given the chance to tender their holdings at a 2% discount to NAV if performance fails to beat the comparative index over the five-year period to 30 April 2029.

Winterflood: “Strong share price returns driven by good operational performance at Autotrader, Experian, Games Workshop, Volution, Just Group and AJ Bell.”

Caledonia Investments (CLDN) shows benefits of diversification

CLDN’s NAV Total Return (NAVTR) came in at +0.5% for the first half. Don’t be fooled by the performance. Below the headline number, NAVTR was negatively impacted by foreign exchange headwinds (-3.6%), private capital (-2.8%) and funds (-2.4%). All were offset by the public companies’ segment (+7%). As CEO, Mat Masters, explains, “This period has shown the value of our diversified, global and long-term portfolio.”

Numis: “We believe its record and unique approach, as well as its conservative approach to balance sheet management, leave it well-placed to deliver an attractive return profile to investors.”

Biotech Growth (BIOG) staying vigilant

BIOG outperformed the benchmark over the half year: +2.7% NAV per share total return compared to the NASDAQ Biotechnology Index’s +1.4% (sterling). As the numbers suggest, it’s been a tough time for the sector. Chair, Roger Yates, notes “For the past few years, biotech companies have had to show remarkable resilience in the face of significant macro-economic challenges, focusing on innovation while also adapting to a shifting economic landscape.” Light at the end of the tunnel though “There are signs that the long-awaited recovery in market conditions has begun.” But Yates is not being complacent, “our Portfolio Manager will need to remain vigilant as we navigate ongoing uncertainties.”

Winterflood: “Both Board and manager expect interest rate reductions to be beneficial to the portfolio and wider Biotech market, with a more stable macro environment expected to reward fundamental stock selection.”

Schroder UK Mid Cap (SCP) believes investors are starting to see the value

SCP’s NAV per share total return of +17.3% for the year, a little short of the FTSE Mid 250 ex-Investment Trusts’ +21.4% but over five and ten-year time frames, the fund has outperformed. As the report points out “There has been no change in the investment process which has delivered this successful investment performance.” Chairman, Robert Talbut, thinks investors are starting “to recognise the value on offer both relative to other regional equity markets but also compared to historical valuations. Within the wider UK market, the mid-cap sector is looking particularly attractive given earnings growth expectations and healthy dividend prospects.”

Winterflood: “Underperformance attributed to market rotation towards interest rate-sensitive businesses with weaker balance sheets, as well as Real Estate underweight.”

abrdn Equity Income (AEI) delivering income and capital growth

AEI’s full-year NAV total return of +13.3% fell short of the FTSE All-Share by the narrowest of margins -0.1%. Call that an inline performance. Investment Manager, Thomas Moore, has “listened to shareholders who tell me how important the high level of income is for them at a time of an elevated cost of living. I have also listened to shareholders who tell me that they want to see a growing NAV. This year we delivered both, helped by careful portfolio construction and improving market conditions. This shows that income and capital growth can be delivered hand in hand.”

Winterflood: “Stock selection within defensive mega-cap companies helped performance”

Odyssean’s (OIT) high-conviction strategy continues to deliver

OIT’s NAV per share was up +9.8% over the half year. The benchmark only managed +7.6%. Total net assets rose by an impressive +17.8% thanks not only to performance but also to new share issuance. OIT, one of a minority of funds to issue shares during the period, a vote of confidence in the fund’s “concentrated, high-conviction strategy” and investment process which, as Chair, Linda Wilding, explains, “applies a rigorous valuation methodology to ensure it acquires stock at a large discount to private market transactions, and avoids companies which are unlikely to be coveted by alternative owners to public market investors.”

Numis: “we believe that the stockpicking record speaks for itself and that Odyssean represents an attractive and differentiated addition to a portfolio.”

abrdn New India (ANII) well-protected from downside

ANII reported a +22.8% NAV total return for the half year (sterling), significantly more than the MSCI India Index’s +11.6%. According to Chairman, Michael Hughes, the outperformance was driven not only by the stocks held, particularly “in the energy, financials, and real estate sectors”, but also by what the fund didn’t hold, specifically “Benchmark bellwether Reliance Industries.” The investment managers note “India faces near-term external risks” but believe “The Company’s downside is well-protected given our quality focus”.

Winterflood: “Managers note ‘ample signs of a resilient domestic economy’ and believe that 12% medium-term earnings growth is achievable.”