Doceo IT results

The Results Round-Up – The Week’s Investment Trust Results

Another bumper week of results, but which two funds from two different sectors each posted an impressive +21% NAV total return for their respective full years and which fund says its North Star currently sits high and shines brightly?

By Frank Buhagiar

Brown Advisory US Smaller Companies (BASC) and long-term compounders

BASC’s +2.8% NAV per share return for the full year couldn’t match the Russell 2000 Index’s +10.7% (£). Chairman Stephen White puts this largely down to the fund’s “strategy of identifying long-term compounders that offer durable growth, good governance and a strong ‘go-to-market’ position”. This focus “meant missing out on some of the more momentum-driven and speculative stocks that have led the smaller companies market more recently.” It’s a strategy that requires patience. Cue the portfolio managers thanking shareholders for their “patience with short-term performance fluctuations”. Our enduring objective is to outperform small-cap benchmarks with reduced risk, a goal we’ve achieved as an investment team over the past 18 years.”

JPMorgan: “BASC has now had just over three years under new management at Brown Advisory. This has been a difficult period, with BASC lagging its smaller cap US benchmark, while also seeing larger caps perform better still, and is around 7% behind the Russell 2000 since Brown Advisory took over. The Board is confident that its investment style will come good, and that small caps will outperform large caps.”

BioPharma Credit (BPCR) has it covered

BPCR’s half-year highlights include a 6.15 cents net revenue per share which, in just six months, almost fully covers the 7 cent annual dividend target; becoming debt free; and the recovery of an anticipated 96% of its investment in LumiraDx. Chairman Harry Hyman points out that “With 94 per cent. of its portfolio consisting of loans with floating interest rates, the Company has benefited from the recent period of rising interest rates.” The thing is, interest rates are heading down. Not to worry “with an overall expectation of decreasing interest rates, the Company benefits from the interest rate floors in its portfolio that set minimum coupons.” Sounds like the life sciences debt investor has it all covered.

Liberum: “The net revenues of 6.15 cents are 14% ahead of the same period last year and investment returns of $82.9m are 7.7% ahead of the same period last year despite the non-performing loans to LumiraDx. A company that can show these kinds of growth rates despite the difficult environment it operated in deserves to trade at a much lower discount to NAV than the 9.8% it currently does.”

JPMorgan: “We see no reason to change our Overweight recommendation.”

NB Private Equity Partners (NBPE) get active

NBPE posted a +1% NAV per share return for the half year, as a +4.3% increase in private company valuations was partially offset by the quoted holdings and foreign exchange headwinds. That +4.3% return was driven by a strong operating performance by the private companies themselves which delivered 11% aggregated weighted average revenue growth over the year and 16% aggregated EBITDA growth. Managing Director Paul Daggett puts the strong operating performance down to “active ownership of our underlying private equity managers.”

Numis: “The shares trade on a 23% discount to NAV, which appears cheap for a diversified portfolio of private equity interests.”

JPMorgan: “We see no reason to change our Overweight recommendation.”

North Atlantic Smaller Companies (NAS) sees no cause for alarm

NAS’ +8.3% increase in NAV (dividend-adjusted) for the half year couldn’t match the S&P’s +12.9% (£). The fund’s large cash weighting along with the underperformance of the private equity holdings, was blamed for the shortfall. A lack of realisations held back the UK portion of the unquoted portfolio, although this is expected to change after at least one holding has since received a bid. As for the quoted holdings, CEO CHB Mills has been busy, “I have had a chance to meet with all our major quoted holdings over the past three weeks and in not a single case do I see cause for alarm.”

Winterflood: “Share price +17.9% as discount narrowed from 31.6% to 24.6%. Dividend in respect of FY25 expected to ‘comfortably exceed’ that paid in respect of FY24 (68.50p).”

Schroder Japan’s (SJG) chalks up four years of outperformance

SJG posted an impressive +21% NAV total return for the full year, comfortably ahead of the benchmark’s +16.4%. That means SJG has outperformed the benchmark for four years now. Deserved mention in despatches for the portfolio manager from Chairman Philip Kay “The Investment Manager has produced excellent relative performance over each of the last four financial years when market conditions have remained challenging. He has achieved this by adopting a clear, well defined investment strategy centred on his disciplined bottom-up stock picking approach.” Bravo.

Winterflood: “The manager noted that ‘recent volatility has taken the market back to a reasonably undervalued level’.”

Invesco Global Equity Income (IGET) shows Its class

IGET’s new structure got off to a good start. During the year, the multi-share class fund consolidated the UK Equity, Balanced Risk Allocation and Managed Liquidity shares into the Global Equity Income share-class, thereby, creating a one share-class vehicle. The restructuring didn’t distract from the day job though, as the Global Equity Income Shares clocked up a +21% NAV total return, a smidgeon below the MSCI World’s (£) +21.6%. Not bad going, all things considered.

Winterflood: “Underperformance driven by benchmark agnostic nature of portfolio allocation, as the Magnificent 7 drove 60% of the total return.”

Strategic Equity Capital’s (SEC) concentrated approach pays off

SEC’s concentrated portfolio generated a +16.6% NAV total return for the full year. Chairman William Barlow notes the NAV performance was a little off the FTSE Small Cap’s (ex-Investment Trusts) +18.5% total return. But this “reflects the Manager’s strategy of avoiding more cyclical sectors which outperformed during the period.” Besides “Over the past three years, the NAV per share has grown by 15.6%, significantly outpacing the FTSE Small Cap (ex-Investment Trusts) Total Return Index’s 0.8% growth.” What’s more, the fund manager believes “our focus on business fundamentals will continue to deliver long-term outperformance. We see many opportunities to back high-quality growth companies at attractive valuations.”

Winterflood: “At 30 June, the portfolio contained 16 holdings and had c.5% of NAV in cash. Revenue return per share was 4.15p (FY23: 3.53p). Final dividend of 4.15p proposed (FY23: 2.5p).”

Aurora’s (ARR) North Star

ARR’s+36.3% 2023 return was always going to be a tough act to follow and so it has proved. Over the latest half year, NAV per share total return came in at +0.3%, while the share price total return was up +1.6%. Both are some way off the FTSE All-Share’s +7.4%. Despite the flat performance, progress is being made on the corporate front, specifically the proposed combination with Artemis Alpha. As Chair Lucy Walker notes, “If approved, this will add over 50% to the Company’s market capitalisation, leading to improved liquidity, and lower fees for shareholders.” As for the existing portfolio, the investment manager points out “We have a very UK focused portfolio, which is priced attractively, generating profits, and buying back shares. If the UK economy continues to pick up momentum as it has done this year, then they will benefit from that. As always, Intrinsic Value is our North Star, and right now it sits high and shines brightly.”

Numis: “We believe Aurora IT has the potential to be an interesting addition to a portfolio, given few funds with a ‘value’ approach, although we note that investors need to be prepared for performance to deviate from the index, given the highly concentrated and active approach.”

Pantheon Infrastructure (PINT) shows confidence

PINT’s Chair Vagn Sørensen described the +8.5% NAV total return for the half year, as a “strong performance”. That’s triggered a 5% increase in the dividend to 4.2p per share. This “demonstrates our confidence in, and commitment to, the portfolio strategy”. And presumably in the sector too, for “Infrastructure remains a key driver of economic growth, and the need for investment into new infrastructure is arguably stronger than ever.”

Investec: “We regard PINT as a core holding for infrastructure exposure and reiterate our Buy recommendation.”

JPMorgan Emerging Markets (JMG) focused on the long-term

JMG’s NAV total return of +7.2% for the full year fell short of the MSCI Emerging Markets Index’s +13.2% (£). Chair Aidan Lisser doesn’t sound overly worried, “Although short-term performance has been disappointing, the Company’s long-term track record is testament to the effectiveness of the Managers’ approach.” That approach is based around the investment philosophy which “can be summarised in simple terms-to take a long-term view, to find great businesses, not to overpay for them and to hold for as long as possible.’ The focus is therefore less about ‘value’ or ‘growth’ and much more about ‘quality’.” As for that long-term track record, over the 10 years to 30 June 2024, JMG’s NAV total return of +121.1% beats the benchmark’s +78.1% with room to spare.

Numis: “We continue to rate the management team highly and JMG remains our top pick for diversified Emerging Markets exposure.”