Weekly 360 – the week’s Investment Trust results
According to the AIC which fund is the third best performing investment trust since the launch of ISAs 25 years ago? And which Investment Trust has bounced back impressively after a difficult 2022?

By
Frank Buhagiar

Octopus Renewables Infrastructure (ORIT) sends a message?

ORIT’s full-year highlights include a 2.1% NAV Total Return, 28.6% total return since the Dec 2019 IPO; and a 4% increase in the 2024 dividend target. Chairman Phil Austin thinks “ORIT has demonstrated resilience”. Meanwhile, on the previously announced possible tie-up with Aquila European Renewables, Austin thinks “a larger, more liquid combined vehicle would benefit both sets of shareholders and help address some of the continuing challenges in the investment trust sector.” A message not just to ORIT shareholders?

Liberum sees “exceptional earnings visibility for investors and together with the NAV upside from declining discount rates makes us BUYers of the fund with a TP of 115p.”

US Solar Fund (USF) on a firmer footing

USF puts a 20% decline in NAV to $258.2m for the year down to “discount rate widening ($36.7m), updates to operating cost assumptions ($41.9m) and dividend payments ($18.7m)”. Chair Gill Nott is happy to see the back of 2023 “The last 12 months will be remembered as a challenging year.” Wasn’t all bad though “The end of 2023 sees the Company in a stronger position having secured a new Investment Manager, Amber”, putting the fund on a firmer footing.

Numis “The Board and manager are currently analysing available options to return capital, including share buybacks, as well as the refinancing of existing debt to optimise capital structure and improve operational cash flows.”

Princess Private Equity (PEY), farewell Princess hello Partners?

PEY clocked a 32.6% share price total return for the full year. NAV performance was more sedate, including dividends paid, NAV total return came in at 1.8%. Short and sweet announcement, although there was room for a detailed capital allocation statement and news of a possible name change to Partners Group Private Equity Limited.

Jefferies focuses on the capital allocation policy “once the share price is at a discount of more than or equal to 30% to the last reported NAV, 75% of ‘Free Cash Flow’ will be used to acquire issued shares until the discount is less than 30%. Where the discount is between 20% and 30%, 50% of ‘Free Cash Flow’ will be used to acquire issued shares until the discount is less than 20%.” Everyone get that?

Baillie Gifford Shin Nippon (BGS) has been here before

BGS’ new Chair Jamie Skinner “had hoped to report an improvement in performance by the end of it. However, this has not materialised. ‘NAV’ per share declined by 14.9% and share price by 20.5%. The comparative index (MSCI Japan Small Cap Index, total return in sterling terms) appreciated by 6.3%.” The investment managers blame the underperformance on the outperformance of Japanese large-cap value stocks – BGS has a philosophy of investing in high growth small caps. But the investment managers have been here before and think “that investor interest will refocus on the prospects for dynamic small cap growth companies in Japan”.

Winterflood “We think that there is scope for a notable re-rating if underlying NAV performance improves, while the newly introduced performance-related tender offer should also be supportive for the rating over the next three years”.

JPMorgan “Our Overweight recommendation has proven to be somewhat overoptimistic, but we are inclined to give the managers the benefit of the doubt”.

JP Morgan UK Small Cap Growth & Income (JUGI) hearing positive noises

JUGI had a busy half year – name change, merger with JPMorgan Mid Cap – but still managed to outperform. Chairman Andrew Impey “total return on net assets of +8.5% outperformed the benchmark which returned +1.0%.” As for the outlook “Overall the message we are hearing from our holdings is a positive one”.

Winterflood “JUGI will introduce an enhanced dividend, paying out 4% of NAV as at 31 July each year”.

VinaCapital Vietnam Opportunity (VOF) broadly unchanged

VOF’s NAV per share for the half year was broadly unchanged. Chairman Huw Evans said: “Taking account of the dividend paid in December, the total return was 1.9% in USD terms and 1.0% for sterling investors.” Still beat the index though which was off 1%. Evans thinks things are looking up “liquidity is beginning to return to the market and confidence is being restored. Against this background, the Board is cautiously optimistic”.

Numis “The NAV is up 8.5% year to date, however share price returns have been impacted by a large holder reducing exposure to Vietnam. This has resulted in the shares trading on a c.23% discount to NAV, which we believe offers an attractive entry point.”

BioPharma Credit (BPCR) delivers again

BPCR posted a 1.5% increase in NAV per share from 101.39 cents to 102.93 cents for the full year, while total dividends paid amounted to 10.21 cents per share. The investment managers “are happy to have again delivered dividends that were in excess of our annual target with 10.21 cents per share paid to shareholders as a result of income received during the period”.

JPMorgan sounds underwhelmed by the new Discount Control Mechanism (DCM) “We believe that NAV total returns will be attractive and although the new DCM is clearly softer than before, it is more flexible, and on balance we remain Overweight.”

JPMorgan American (JAM), comfortably ahead

JAM clocked up a 24.7% NAV total return for the year, comfortably ahead of the S&P500’s 18.9%. The longer-term performance is not bad either “Since the change in investment approach on 1st June 2019 to the end of February 2024, JAM has generated a NAV total return of +116.3% compared with +97.3% for its benchmark”.

JPMorgan “relative to peers we continue to like JAM that offers a diversified proposition and one consciously balanced between value and growth”.

Fidelity Japan’s (FJV) long-term record remains intact

FJV’s +12.2% NAV total return for the year fell marginally short of the TOPIX Index’s 13.3% (sterling terms) but that hasn’t derailed the longer-term track record. As Chairman David Graham explains, since fund manager Nicholas Price took over “in September 2015 and up to the end of December 2023, the NAV has returned 112.5% against the Index Return of 95.5%.” Underperformance this year is down to large-cap value names outperforming higher-growth small-caps. Still, Graham doesn’t sound overly concerned “We share the Portfolio Manager’s view that there is significant scope for a rerating of these businesses which now look undervalued”.

Winterflood “FJV has authority to invest up to 20% of assets in unlisted companies, but given weak IPO market the Board has limited this to 10% at present”.

abrdn Asian Income (AAIF) outperforms over 1, 3 and 5 years

AAIF’s 2.5% NAV total return for the year, a tad higher than the MSCI AC Asia Pacific ex Japan Index’s 1.6% return. That means “NAV and share price total returns have now outperformed the Index over one, three, and five years. Our structural underweight exposure to China continues to contribute to performance”.

Chairman Ian Cadby doesn’t sound surprised about the continued outperformance “the Investment Manager has a strong record of finding those proven, quality companies that benefit from structural trends while generating healthy income and capital growth for investors”.

Winterflood “As previously announced, fund has reduced its management fee by 23%, expected to reduce OCR from 1.00% to 0.83%, resulting in one of the lowest fees in the peer group”.

Aurora (ARR) bounces back

ARR’s 36.3% NAV per share total return for the year, easily beat the FTSE All Share’s 7.9% and more than made up for 2022’s 19.1% decline. Good news for the investment managers at Phoenix who, as Chair Lucy Walker explains “uniquely receives no annual management fee. Instead, they are solely remunerated from an annual performance fee, equal to one third of any outperformance of the Company’s NAV against its benchmark”.

Question is does Phoenix’s Gary Channon have a ball of elastic bands on his desk? “If intrinsic value keeps growing without an accompanying rise in share prices, the invisible elastic that connects them becomes stretched. That’s where we were when we wrote at the end of 2022, and in 2023 that force finally resulted in the price of the Company’s portfolio holdings performing ahead of the growth in intrinsic value. That said, the elastic remains very stretched, with 130% upside in our view”.

Winterflood “Annual dividend of 3.45p per share proposed (FY22: 2.97p), in line with expectation to distribute substantially all net revenue proceeds”.

abrdn Asian Focus (AAS) the third best-performing investment trust over 25 years

AAS’s -0.7% NAV total return per share (sterling) for the half year fell between the MSCI AC Asia Pacific ex Japan Small Cap index’s +4.5% and the MSCI AC Asia ex Japan index’s 7.3% fall. Over the long-term though, AAS is a stand out. As Chair Krishna Shanmuganathan notes “According to the Association of Investment Companies (AIC), as the 25th anniversary of the inception of the Individual Savings Account (ISA) approaches, the Company is ranked third best performing investment trust. Based upon a single investment of the full £7,000 ISA allowance on 6 April 1999, the day ISAs came into existence, with dividends reinvested until 5 March 2024, an investment in the Company’s shares would have generated a tax-free pot of £273,758”.

Winterflood “The managers note that ‘In the short term, the active nature of the portfolio can often lead to divergence from the index’”.