The Results Round-Up – The Week’s Investment Trust Results
Impax Environmental Markets is staying optimistic after a difficult half year; Witan looks like it’s going out with a bang after posting an 11% NAV total return for what could be its last half year subject to completion of the merger with Alliance; while, JPMorgan American does even better, clocking up a +19.1% NAV total return.
ByFrank Buhagiar•16 Aug, 2024Share
Impax Environmental Markets (IEM) Staying Optimistic
IEM reported a flat(ish) NAV total return per share of -0.5% for the half year,some way off the MSCI World’s +12.2% and the FTSE Environmental Technology 100 Index’s +7.4%. The investment managers put this down to the fund’s bias to mid and small caps, “IEM invests in companies which generate at least 50% of their revenues from Environmental Markets. These tend to be mid and small caps. Small and mid-cap companies have suffered disproportionately from the ‘higher for longer’ interest rate environment, underperforming their large cap counterparts by over 8% over the Period.” And the underperformance was not just down to what IEM held, but also what it didn’t have, specifically notholding AI chip-designer Nvidia, along with Apple, Microsoft, Amazon, Meta and Alphabet, accounts for a -5.7% drag on relative performance.
Despite the shortfall, Chairman, Glen Suarez, continues to have “great confidence that the hypothesis underpinning the Company’s investment strategy – that sustainability pressures create opportunities for companies providing environmental solutions – remains well positioned to deliver financial outperformance over the long-term.” Until then, the investment managers are taking comfort from the fact that performance within the portfolio has been encouraging. Earnings growth has been above that of the broader market. And then there is valuation, “the portfolio’s valuation premium relative to global equity markets has fallen to below its ten-year average.” Underlying portfolio company growth, below average valuation, no surprise “the Manager remains optimistic.” So too does the market, it seems – share price tickled higher over the course of the week.
Investec: “we believe that entrenched secular drivers continue to strengthen. However, this specialist sector is now experiencing a painful valuation normalisation process after a wall of liquidity drove valuations to unsustainable levels. We maintain our Buy recommendation.”
Witan’s (WTAN) Final Results?
WTAN released what could be its last Half-year Report as a stand alone investment company. That is, if its proposed combination with fellow global multi-manager investor Alliance (ATST) gets the green light from investors. And if it is the last, then the fund is going out with something of a bang after reporting a +14.3% shareholder total return and an 11% NAV total return for the half year compared to the benchmark’s +11.7%.
Easy write-up for Chairman, Andrew Ross, but when it came round to writing the outlook section of his statement, was the Chairman in the middle of his supper? “Notwithstanding a sharp bout of volatility in early August, equity markets as a whole seem to have taken the view that, whatever flies there may be in their proverbial soup, they are focused on the substance, not the swimmer. This insouciance, complacency to some, is helped by the increased proximity of easier monetary policy, after the prospect of rate cuts retreated for much of early 2024.” Investors weren’t put off by talk of flies, the results were good for a marginal uptick in the share price.
Winterflood: “Proposed merger with Alliance Trust (ATST) to create c.£5bn multi-manager investment trust, following current ATST strategy. Assuming shareholders approve the transaction, total dividends for FY24 are expected to be at least 6.28p per share, +4% from FY23 (6.04p), marking 50th consecutive year of dividend increases.”
JPMorgan American (JAM) Today and Tomorrow
JAM’s new Chairman, Robert Talbut, had a relatively straightforward first half-year statement to write courtesy of a +19.1% total return on net assets per share in sterling terms. That’s 3% above the total return of the S&P 500’s +16.1% in sterling terms. According to the Investment Managers “The large cap portion of the portfolio, which, at over 94% of the Company’s assets is its biggest allocation, added the most value over the period. Gearing was also slightly additive given the market’s rally. The Company’s small cap allocation, which averaged approximately 5.7% over the period, modestly detracted from relative returns.”
In terms of outlook, the Investment Managers went all nautical “with economic growth solid, unemployment low, most of the journey back to 2% inflation completed, and rates set to decline, the US economy should continue to provide a rising tide to support most investment boats for the rest of this year and into 2025.” JAM one of those investment boats on the rise – share price tacked on 13p on the day of the results to close at 1002p.
Numis: “JAM has built a strong track record since a strategy change in May 2019, shifting to a higher-conviction approach for the large cap component, combining the ‘best ideas’ from JPM AM’s growth and value investment teams. Since then, it has produced NAV total returns of 124.0% (16.5% pa), which compares to 107.2% (14.8% pa) for the S&P 500 and the fund has been one of the standout performers in the universe in recent years.”
abrdn Asian Income (AAIF) – Incoming!
AAIF’s +6.8% NAV total return for the half year, a little behind the MSCI AC Asia Pacific ex Japan’s +9.6% increase. Tables turned over longer timeframes though: AAIF has outperformed the Index over 3 and 5 years in both NAV and share price total return terms. According to Chairman, Ian Cadby, income is playing an increasing role in both the markets and the company’s respective total returns. That’s because “More than 50% of Asian equity total returns now come from dividends and dividend growth.” And in terms of AAIF, based on lastyear’s 11.75p dividend, as at 30 June 2024, the shares were trading on a 5.5% dividend yield. Income by name, income by nature.
And yet, as Cadby points out, “we believe little of this significant progress is priced into markets, with the MSCI Asia Pacific ex Japan Index trading on just 13xPE, compared to the S&P 500 Index on nearly 21xPE. We believe that the often overlooked dividend credentials of Asian equities will become ever more attractive, with investors increasingly recognising the income potential of some of the world’s most exciting companies.”Based on the positive reaction of AAIF’s share price to the results, perhaps investors are now starting to take note.
Winterflood: “Board intends for FY24 dividend to exceed FY23 (11.75p). Net gearing at period-end 7.1% (31 December 2023: 7.5%), as £32.2m of £50m RCF drawn. Ongoing charges 0.86% (FY23: 1.00%) following fee reduction.”
Invesco Bond Income Plus (BIPS) Adopting a Defensive Stance
BIPS’ NAV and share price total return for the first half came in at +3.6% and+3.9% respectively – pretty much in line with the ICE BofA European Currency High Yield Index’s +3.9%. According to the Portfolio Managers’ Report credit-risk assets, rather than bonds, were the main drivers over the period. “The better performance for credit-risk assets reflected changing investor perceptions of the key macroeconomic drivers – growth and inflation. Data on economic activity has generally been a bit stronger than predicted, increasing confidence in corporate earnings and the consequent ability of companies to repay.”
Looking ahead, the portfolio managers are prepared for potential bumps in the road “there is potential for economic activity to weaken. This poses a challenge to corporates, who could face a difficult re-financing environment along with weaker earnings. The balance sheets of more leveraged or weaker businesses may come under strain in these conditions.” As a result “We have reduced our exposure to credit risk in this environment while also maintaining liquidity so that we can take advantage of opportunities that may arise in such weaker market conditions.” Share price too adopting the wait and see approach – shares largely unchanged on the day.
Winterflood: “Managers noted that investment grade market total returns were largely flat in H1, while sovereign (Gilt) returns were mildly negative. High yield spreads over government bonds tightened over the period, reflecting increased risk appetite as economic data was somewhat stronger than anticipated.”
