Investment Trust Watch

Black: So, you're going to talk us through three stocks in the portfolio at the moment. Where should we start?

Lance: I'm going to start with the biggest holding on the Temple Bar portfolio which is Royal Mail (RMG) which is about 8.5% of the fund at the moment. And the reason I think it's interesting is it's a good example of what we think is a really misunderstood stock, and I think they'd probably help themselves if they change their name from Royal Mail. Because what that meant was that last year as we went into lockdown, I think people focused on the letter side of the business, thought that that was going to be really hit by lockdown, and it was. But what people completely ignored was the fact that Royal Mail have 50% market share of the parcels business in the U.K. And of course, as we were all at home last year shopping online, parcel volumes went through the roof. So, last year parcel volumes in the U.K. for Royal Mail were about plus 30% and so were parcel revenues. And they also own the European business called GLS, which again is a pure parcels business. And similar sort of effect there. So, volumes and turnover growing about 30%. And so, just after lockdown the share price of Royal Mail bottomed at about £1.20. And it was only as we went through the year that people began to realize that actually lockdown was a positive for Royal Mail as these parcel volumes soared and the share price today is well over £5. So, their share price is up a long, long way.

HillCloudHop wrote: »

About half my portfolio are in investment trusts, mainly Monks and some Scottish Mortgage. Also have Allianz Tech and Edinburgh Worldwide. Want to buy into Pacific Horizon, but waiting for its premium to drop. I'm aiming for growth and want to minimise dividends.

Robson99 wrote: »

Something similar here. Main ones I have are Monks, SMT and Allianz. Smaller amounts in Capital Gearing and Schroder Asian. Thinking of adding Temple bar as well. Investing into all these each month and try to time a dip

HillCloudHop wrote: »

Which broker are you using? I was with Degiro, but they've stopped allowing me to buy any of the investment trusts. Now with IBKR, which has access to most of them.

HillCloudHop wrote: »

What test is that? I already have the 'complex shares' permission on in my settings.

Can you buy ITs on Degiro as of today? I contacted Degiro a few months back and they said that no one had access to buy them, only sell. They couldn't confirm that it would change.

I'm staying with IBKR regardless, as they've got more access to other sectors (uranium mainly) I'm interested in. It's a publicly traded company with offices worldwide. Degiro is private company in the Netherlands with 300 employees.

Asset Value Investors (AVI), manager of the £1bn AVI Global (AGT) investment trust, has launched a campaign to oust the board of Symphony International (SIHL), a poorly-performing London-listed Asia private equity fund in which it has a 15% stake.

AVI, an activist investor in undervalued investment companies and holding companies, wants to gather the support of another 15% of shareholders to call an extraordinary general meeting (EGM) to replace Symphony’s directors who it says have failed to hold fund manager Anil Thadani to account.

AVI, led by AGT fund manager Joe Bauernfreund, usually prefers to work quietly behind the scenes to get the changes it wants at companies, but after nine years of what it calls ‘abject’ performance from Symphony, has decided to go on the attack....

....Launching the campaign, Tom Treanor, AVI’s executive director, said: ‘The poor performance of Symphony International Holdings Ltd has gone on long enough. We have two key aims and we need the support of our fellow shareholders to make them a reality.’

The aims are to highlight what AVI claims are conflicts of interest and poor stewardship by Symphony’s board, as well as call the EGM.

Thadani, founder of Symphony and leader of its investment team, hit back yesterday telling shareholders ‘many of AVI’s allegations are inaccurate and misleading’ and that its intention was to seize control of Symphony and liquidate its assets...

...At the end of March, AVI Global held 2.1% of its £1.1bn portfolio in Symphony.

investment manager's report
quoted portfolio UK
The year was very much a game of two halves. Substantial losses in the period to 31 July 2020, followed by a substantial recovery through to 31 January 2021. The Company was badly impacted through its exposure to leisure related stocks and in particular the fall in Ten Entertainment and Stobart Group resulted in a net loss to the Company of approximately £30 million, as key parts of their business were forced to close.

Fortunately, this was more than offset by the relatively high weighting in Life Sciences with Ergomed (prior to sale), EKF, Renalytix and Verici DX all performing notably well and collectively adding nearly £90 million to the NAV. Augean and Polar Capital rose modestly but the gain was offset by a fall in MJ Gleeson.

Smaller holdings such as AssetCo, Sureserve and Signature Aviation performed well and other holdings such as Frenkel Topping, Bigblu Broadband, Tribal and Benchmark made modest progress.

Finally, it is pleasing to note that both Oryx International ("Oryx"), our largest holding, and Odyssean Investment Trust, outperformed their benchmarks, in Oryx's case by a significant amount.

quoted portfolio USA
The portfolio remains relatively modest and had no major impact on the net asset value of the Company.

unquoted portfolio UK
Source Bioscience (previously Sherwood Holdings) went public during the period and with accrued interest is estimated to have added in total approximately £9 million to the net asset value. Hamsard was also written up but the impact was offset by the need to write down Specialist Components due to weak orders resulting from the COVID Pandemic. Viking was also written up modestly with further gains expected in the current year as the business hopefully enters a liquidity event.

Finally, it was necessary to write down Jaguar Holdings Group an inflight catering business as demands for its services collapsed due to COVID impact on the airline industry.

unquoted portfolio USA
The standout performer of the year was the IPO of Telos in the fourth quarter. In January 2021, the ordinary shares were valued at little over £1 million. With sales following the IPO of over £20 million and with the balance of the publicly listed shares worth over £5 million the investment made an outstanding contribution to the Company's performance in the year to 31 January 2021.

Performance Chemicals suffered due to the weak oil price but remained EBITDA profitable. Coventbridge and Utitec made modest progress again impeded by COVID issues. We do however expect liquidity events from both the investments in the current financial year which will boost both cash reserves and the net asset value.

liquidity
Cash and US treasury bills started the year at £82 million and fell initially as opportunity was taken to invest in companies where we believed there had been an overreaction in the share price compared to the intrinsic value of the business. Most recently however, the IPO of Source, the partial sale of Assetco, the partial sale of Signature following multiple ongoing bids and the sale of most of the Telos position has resulted in cash and US treasury bills at the end of January 2021 nearing £89 million. This is expected to increase still further as the balance of the Telos and Signature Aviation positions are realised.

Your Managers are constantly reviewing potential investment opportunities but markets have had a major recovery and in our opinion are running ahead of fundamentals even assuming a full vaccine roll out over the course of the coming year.

Christopher Mills
Chief Executive & Investment Manager

10 May 2021

During April, the Company’s net asset value appreciated by 0.9% and the share price rose by 0.5%.
This compared with a rise of 4.3% in the FTSE All-Share total return index.
After one of the worst quarters for US bonds this century, and the steepest fall in the Barclays Long
Treasury Index in 40 years, it was inevitable there would be some form of pause. Having peaked on 31
March at 1.74%, the US 10 year bond yield finished the month at 1.63%. This move lower boosted the
performance of the Company’s positions in gold and inflation-linked bonds. Earlier this year, gold had
been doubly punished by the combination of rising yields and a rallying US dollar, but two recent
tactical changes in the portfolio’s asset allocation have helped performance. First, we added to bullion
and selected gold mining equities during March and April, having reduced gold exposure last summer
in anticipation of a reflationary shift in markets ahead of the vaccine announcements in November.
Gold-related investments contributed 50bps to performance during the month. Secondly, we took
profits in some of the interest rate options that protected the portfolio so effectively as bond yields rose
during the first quarter of 2021, thereby allowing us to capture some of the rebound in inflation-linked
bonds. This combination of index-linked bonds, gold and interest rate protections, having been
essentially neutral during the first quarter, contributed positively as US bond yields receded.
So, where next? Was April a pause for breath before a further move higher in yields and
consequent move lower in bond prices? We think so but there will be an important shift in emphasis –
we have probably seen the end of US reflation in isolation. The next leg down for conventional bonds
will probably be driven by positive growth surprises from Europe, as the continent sees a sustained
pickup in vaccination rates and starts to exit from lockdown. At the same time there appears to be
growing political support for meaningful fiscal policy deployment in the coming months. This is a
playbook we have already seen, except the baton is being passed from the US to continental Europe. It
was instructive that the German 10 year bund yield rose 9bps over the month, in stark contrast to the
moves seen in the US.
The Company’s index-linked bonds, which we reduced slightly through sales of US TIPS during
April, are shielded by interest rate options so they retain their inflation protection, but are buttressed
against the powerful economic rebound we expect to see through 2021. Our equities remain
concentrated in economically sensitive and cyclical companies. This equity bias, combined with
protection against rising nominal bond yields, means the Company is positioned for reflation, but still
protected from inflation. In a world where fiscal policy dominates, inflation is the risk all investors
should be guarding against. But conventional portfolios, hamstrung by the fallacy of benchmarks, are
pointing in the wrong direction. They back-test well in the disinflationary world of the last 40 years,
but are institutionally wired to the assets that performed well in the last market regime rather than to
those opportunities which exist in the new one.