The Results Round-Up – The Week’s Investment Trust Results
Which investment trust’s NAV total return has beaten the benchmark for four consecutive years? And which portfolio manager found it difficult to write his latest half-year report?

By
Frank Buhagiar

Doceo

Edinburgh’s (EDIN) excellent outcome
EDIN easily beat the benchmark over the full year – NAV per share (with debt at fair value) came in at +13.4% on a total return basis compared to the FTSE All-Share’s +8.4%. That makes it four consecutive years of NAV outperformance. The full-year dividend is on course to exceed its target too – up +3.8%, compared to the +3.2% rise in CPI inflation. Unsurprising then that Chair Elisabeth Stheeman described the performance as ‘an excellent outcome’.

Tough act to follow for the new portfolio managers but Imran Sattarr sounds up for it. For despite UK equities being out of fashion, for a host of well-rehearsed reasons and despite it being hard to spot a catalyst for a turnaround in sentiment, ‘strong businesses generating attractive returns don’t go unnoticed for long.’

Numis: ‘The fund seeks to deliver in a range of economic conditions, given its ‘all weather’ approach which offers exposure to growth, value, and recovery stocks.’

JPMorgan: ‘We think EDIN remains an attractive opportunity and it is our top pick for exposure to UK equities within the investment companies sector.’

Investec: ‘We regard Edinburgh Investment Trust as a strong investment proposition which is enhanced by both the current discount and the potential for an improvement in sentiment towards UK equites.’

Finsbury Growth & Income (FGT) should be able to do better
FGT’s +5.9% NAV per share total return for the half year couldn’t quite match the FTSE All-Share’s +6.9%. Portfolio Manager Nick Train admits he found ‘this a difficult report to write’ as ‘this was yet another six-month period when I, with my colleagues underperformed our benchmark. We really should be able to do better than this’.

A standout reason for the poor run, not enough exposure to technology companies or those well-placed to exploit it. Action has been taken though, with exposure to companies that stand to benefit from technology increased. So, while disappointed, Train is optimistic for the future, believing ‘there is tremendous value building in the portfolio. Specifically, I believe we own significant positions in a number of businesses that could grow their market capitalisations multiple times over the next decade or more.’ Bullish stuff.

Winterflood: ‘Technology allocation increased from c.30% of portfolio in early 2020 to over 55% today.’

Henderson European Focus (HEFT) staying out of trouble
HEFT’s NAV per share total return stood at +17.9% for the half year – the benchmark could ‘only’ muster +14.9%. All bodes well for the proposed combination with stablemate Henderson EuroTrust (HNE). As for the main driver of performance, according to the Fund Managers, ‘staying out of trouble felt like the most notable achievement’. HEFT has now outperformed the FTSE World Europe (ex UK) index over six months, one year, three years, five years, seven years and 10 years – the full house!

Numis: ‘The portfolio is positioned toward companies that the managers believe will benefit from the capital expenditure required to support themes such as: de-globalisation and the onshoring of supply chains, electrification/energy efficiency, automation, digitalisation, and artificial intelligence (AI).’

CT UK Equity Capital & Income’s (CTUK) pleasant surprise
CTUK’s+12.9% NAV total return for the half year, almost double that of the FTSE All-Share’s +6.9%. Chair, Jane Lewis, is surprised by the market’s positive performance, ‘it is perhaps surprising that the UK stock market has made any progress over the six months under review’, after all the UK was in recession, the reporting season was widely-viewed as disappointing and there was no shortage of geopolitical tension. And the Managers think UK stocks still offer good value. Because of this, Lewis thinks ‘This certainly provides scope for additional progress.’

Winterflood: ‘Strongest stock contributors were CRH (+54%), Intermediate Capital Group (+51%) and DS Smith (+41%).’

Majedie Investments (MAJE) maintaining discipline
MAJE reported a +13.3% NAV total return for the latest half-year period. Total shareholder return fared even better up +28.1%. Both comfortably above the long-term target of CPI plus 4%. The fund generated returns from areas as diverse as biotech and software as well as Chinese and copper stocks. The Investment Managers are not taking anything for granted, ‘this is no time for complacency’. They go on to cite the number of elections due, stress in commercial real estate markets, geopolitics and full valuations. But the managers have a plan – ‘focus on our best ideas, demand a wide margin of safety, and maintain discipline.’

JPMorgan: ‘The portfolio is mostly listed equities on a look through basis and the six months to 31/3/24 were a strong period for global equity markets although the MAJE portfolio looks very different to a typical global market cap weighted index with no exposure to mega cap technology names’.

HarbourVest Global Private Equity’s (HVPE) reasons to be optimistic
HVPE’s 4% NAV per share growth for the year brings the 10-year return up to +251%, considerably more than the FTSE All-World Index’s +138% (USD) Total Return. Chair, Ed Warner, thinks the private equity fund’s investment case remains compelling, ‘the Company has outperformed public equity markets over the past ten years, and we are optimistic that this will continue in the long term.’ Reasons to be optimistic include not just HVPE’s track record and diversified portfolio, but also the rising number of IPO and M&A transactions which are easing valuation concerns. Speaking of transactions, exits during the year were secured at a 24% premium to carrying value – always helpful to have the numbers on one’s side.

JPMorgan: ‘HVPE is a good product for investors wanting a diversified private equity investment but we prefer other names.’

JPMorgan Asia Growth & Income (JAGI) riding Asia’s powerful drivers
JAGI’s +4.6% return on net assets for the latest half year, a little short of the MSCI AC Asia ex Japan Index’s +5.3%. Chairman, Sir Richard Stagg, puts this down to being underweight, ‘the thriving Indian market’. Several Chinese stocks also underperformed. Longer-term track record stacks up though with JAGI outperforming over five- and ten-year periods. And there’s more to come, if the Portfolio Managers’ Review is anything to go by. For despite persistent uncertainties, both globally and regionally, ‘Asia’s powerful combination of strong growth, innovation, favourable structural trends, and attractive valuations’ will continue to generate ‘many attractive investment opportunities.’

Winterflood: ‘Share price TR +3.4% as discount widened from 9.2% to 10.4%; Board repurchased 5.6m shares (6.2% of issued share capital).’

JPMorgan China Growth & Income (JCGI) believes the worst is over
JCGI’s half-year Chair’s Statement highlights how it was a tough period for Chinese stocks. And it shows in the numbers – the MSCI China Index was down -9.5%. JCGI fared worse as the fund’s growth bias worked against it – total return on net assets (with net dividends reinvested) was -13.1%. Six months’ performance does not make a summer though – over ten years the fund has comfortably outperformed the benchmark.

Chair, Alexandra Mackesy, notes that the investment managers are ‘determined to recover lost performance’ by taking advantage of current low valuations to build up stakes in ‘quality companies that offer robust long-term growth.’ Helpfully, according to the investment managers, ‘the worst is probably behind us both in terms of the slowdown of China’s economic growth, and the derating of Chinese equities.’ Here’s hoping!

Winterflood: ‘Underperformance attributed to growth style bias, as the MSCI China Growth Index declined by -11.6% (in GBP terms), lagging the MSCI China Value Index (-4.8%).’

CT UK High Income (CHI) sees fantastic opportunities
CHI posted a double-digit return for the year (+11.8% NAV total return per share). That compares to the benchmark’s +8.4%. In their review, the Portfolio Managers put the outperformance down to ‘the judicious use of gearing’ and ‘strong stock selection’. Both could well come in handy as the managers plan to take advantage of low valuations in the UK Stock Market to capitalise on what they see as ‘fantastic opportunities’.

JPMorgan: ‘CHI is a unique company in the AIC UK Equity Income sector with its split structure that allows for shareholders to pick between receiving their income in the form of dividends or as capital.’

BlackRock Frontiers’ (BRFI) five out of six
BRFI, another fund to outperform – a +12.0% NAV total return for the latest half year, comfortably ahead of the benchmark’s +8.6% (in US Dollar terms with dividends reinvested). This means BRFI has outperformed the benchmark in five of the past six half-year periods. According to Chair Katrina Hart, the fund has outperformed by +47% over the last five years. As you’d expect, the Investment Managers have a positive outlook for emerging and frontier markets. Not only are equity markets undervalued but they are under-researched too making the investment universe ‘the perfect hunting ground’.

Numis: ‘We believe BlackRock Frontiers offers highly differentiated exposure and is run by a management team that we rate highly, meaning we believe it warrants a place in many portfolios.’