The Results Round-Up – The Week’s Investment Trust Results
Which fund has generated a 4,733% NAV per share total return since its inception in 1995? And will AVI Global Trust’s focus on the unfashionable pay off in the long run?

The Results Round-Up – The Week’s Investment Trust Results
Which fund has generated a 4,733% NAV per share total return since its inception in 1995? And will AVI Global Trust’s focus on the unfashionable pay off in the long run?

The Results Round-Up – The Week’s Investment Trust Results
Which fund has generated a 4,733% NAV per share total return since its inception in 1995? And will AVI Global Trust’s focus on the unfashionable pay off in the long run?

By
Frank Buhagiar
07 Jun

JPMorgan European Growth & Income (JEGI) cautiously optimistic
JEGI’s total return on net assets for the year came in at +16.8% (debt at fair value), outperforming the benchmark’s +12.7%. A tick in the box for JEGI’s investment process which, as the Investment Manager’s Review explains, focuses on ‘companies with improving operational momentum, higher quality characteristics, and lower valuations.’ And even though not all investments held satisfy all three criteria, in aggregate the portfolio does. Among the fund’s successes over the period, Novo Nordisk, thanks to its all-conquering diabetes and obesity businesses.

And the investment managers cite improving consumer confidence and moderating inflation in Europe as reasons why they are cautiously optimistic for the future. What’s more, valuations are cheap. Chair, Rita Dhut notes ‘Europe has truly world class companies attractively valued particularly in relation to the US equity market.’ In other words, the US without the froth.

JPMorgan: ‘JEGI’s relative NAV TR has continued to trend upwards representing an improvement in relative performance since a trough in mid-2020. If we look at the AIC Europe peer group on a rolling five-year basis (to 31/5/24) in NAV TR terms JEGI ranks 4 of 7 but on a rolling three-year basis it ranks 1 of 7 reflecting this improvement. JEGI’s 4% of NAV dividend policy means it has the highest yield of its peer group.’

Winterflood:’JEGI has generated long-term outperformance against the benchmark, testament to the approach, and we view the fund as offering solid core exposure to European equities.’

AVI Global Trust (AGT) focusing on the unfashionable parts
AGT’s+16% share price total return for the half year just missed out on the benchmark’s +16.1% (NAV total return was +13.9%). Decent outcome bearing in mind the Investment Manager’s broad-based approach. This generally sees the fund invest in stocks which, according to Chairman, Graham Kitchen, ‘combine growth prospects with attractive share price valuations’. Because of this, AGT tends to avoid the fashionable parts of the market and instead focuses on the less fashionable areas. One such area is closed-end funds. The Investment Managers have been increasing exposure to the sector over the last 18 months because, in their view, there is ‘a structural lack of interest in such companies, almost entirely for non-fundamental reasons, and we believe this to be an attractive opportunity set with discounts at wide levels’.

Numis: ‘We believe that AVI Global (£1,090m market cap) has an interesting and differentiated mandate. AVI typically focuses on overlooked and under-researched stocks that offer attractive value with a potential catalyst to narrow the discount and works actively to improve corporate governance to unlock value. Further, AGT’s portfolio is trading on c.32% discount, on a look-through basis, and believe that this offers a compelling entry point.’

Biotech Growth Trust’s (BIOG) win-win
BIOG had a good year – NAV per share return came in at +26.5% while the share price total return fared even better at +27.5%. By contrast, the Nasdaq Biotechnology Index (sterling adjusted) couldn’t get into double figures, up just 5% on the year. A tick in the box for the fund’s overweight exposure to small and mid-cap stocks. But, while encouraged by the strong performance, Chair, Roger Yates, acknowledges that ‘there is still some way to go before the Company fully recovers its relative and absolute losses from the past two years.’

Helpfully, Yates thinks there’s more growth to come in the global biotech industry thanks to ‘ground-breaking innovations and new technologies improving and saving lives, creating value for shareholders and, ultimately, driving performance.’

JPMorgan: ‘BIOG has been top of the peer group in share price TR terms. We remain Overweight.’

Winterflood: ‘The managers believe that improved performance has room to run after long drawdown; 15% of US listed Biotech continues to trade at market caps below net cash on balance sheet.’

Edinburgh Worldwide (EWI) taking the long-term view
EWI’s+13.6% share price gain over the latest half year, double the NAV per share return of +6.4%. Neither could match the benchmark’s +15.0% gain however. Chair, Jonathan Simpson-Dent, points out that because the fund invests in companies ‘that are addressing a variety of societal and business problems, utilising innovations and technology to address these challenges’, the portfolio managers’ investment horizon is ‘by necessity, long-term by the standards of the investment management industry’. That long-term focus has worked against EWI this time round, as higher interest rates have hit valuations and put off many private companies from coming to the public markets.

The portfolio managers add that with the mega-caps hogging the limelight, ‘our preferred hunting ground hasn’t had the attention it deserves and has been arguably shunned by many.’ Things might be changing though. If nothing else, because some of the themes have likely been pushed quite far.

Numis: ‘We believe that expectations for rates is likely to continue to be volatile and for sentiment to improve, we believe the portfolio needs to deliver on operational milestones and deliver the growth that the manager is expecting to drive longer time value, independent of interest rates.’

Worldwide Healthcare (WWH) sticking to the plan
WWH’s full-year+12% NAV per share total return, comfortably ahead of the MSCI World Health Care Index’s +10.9% (sterling adjusted). During the year the fund maintained its strategic overweight in biotech stocks, particularly emerging biotech. As at year end, 29% of the portfolio was invested in biotech, 20.7% above the benchmark.

Long-term numbers stack up too. Although the healthcare investor’s +45.8% return over five years is some way off the benchmark’s +68.3%, since the fund’s inception in 1995 to 31 March 2024, NAV per share total return stands at +4,733%. That compares to the benchmark’s +2,438%. And with several tailwinds behind the sector – global demographics, aging populations, persistent demand and continuing innovation – the sector looks to be set fair. No surprise then that the managers are sticking with the long-term investment strategy. If it aint broke, don’t fix it.

Numis: ‘The fund has a solid long-term track record through stock-picking based on fundamental research, and it has typically been less volatile than most of the listed peer group.’

JPMorgan Indian (JII) focusing on quality
JII’s+6.2% total return on net assets fell short of the MSCI India’s +14.7% for the half year. Chairman, Jeremy Whitley, puts the underperformance down to a quality issue. ‘In broad terms this underperformance is attributable to lower quality sectors of the market doing well, whereas your Portfolio Managers have favoured higher quality corporate names, a number of whose share prices have disappointed.’ The Portfolio Managers will however continue to focus on quality, as they believe ‘it will provide greater exposure to India’s growth story and lift performance over time.’

Numis: ‘The shares currently trade on a c.18% discount to NAV, which largely reflects disappointed performance under several iterations of management. That said, we believe there is limited downside given share buybacks and a performance triggered tender for 25% of share capital at NAV less costs.’

Barings Emerging EMEA Opportunities (BEMO) emerging on the other side
BEMO had a strong first half, +13.2% NAV total return easily trumping the benchmark’s +5.8%. Chair, Frances Daley, sounds relieved: ‘After the turmoil of the past two years, it is a pleasure to be able to report positive results’. For turmoil, read the fund having to write down the value of its Russian assets to zero. Looking ahead, Daley highlights how valuations in emerging equities look attractive, particularly when compared to developed markets, so much so that current levels suggest ‘investor expectations for the asset class remain overly depressed.’ This, Daley believes, has the potential to generate ‘increasing interest in the asset class in general and EMEA markets in particular.’

Winterflood: ‘Russian assets in portfolio continue to be valued at zero but Board remains focused on how to preserve, create and realise value from these assets. 3 Russian companies exited during HY (Magnit, X5 and TCS), releasing £2.3m of value back to BEMO.