Fund manager Mike Prentis is stepping off BlackRock Throgmorton (THRG) and handing the portfolio to co-manager Dan Whitestone as the investment trust looks to raise its profile and distinguish itself from the BlackRock Smaller Companies (BRSC) trust Prentis also runs.
In a bid to simplify the investment trust’s proposition the Throgmorton board, chaired by Chris Samuel, has decided to replace the fund’s current dual structure under which Prentis has run a portfolio of smaller company shares alongside a separate portfolio of contracts for differences (CFDs) under Whitestone.
CFDs are a form of derivative that enable Whitestone to either go ‘long’ on a smaller company share on conviction it will rise or go ‘short’ and profit from any fall in its price. While the CFD portfolio has added to Throgmorton’s returns, the board believes it has made the fund appear complicated to investors, leading to its shares trading at a wider discount than the Smaller Companies trust.
In future Throgmorton will have one single portfolio managed by Whitestone, who heads BlackRock’s smaller companies team. He will retain the flexibility to go short on individual stocks and use CFDs to reduce the fund’s overall market exposure to as low as 70%, a potentially useful defence, the company believes, should the recent sell-off develop into a more sustained bear market.
Prentis remains a key member of BlackRock’s smaller companies team and will continue to run BRSC. Whitestone, former head of small company sales at UBS, joined BlackRock as a smaller companies analyst in 2013 before becoming a fund manager and heading up the team.
In other changes, Throgmorton is proposing to scrap the limit on stocks on the Alternative Investment Market (AIM) that it can hold. The cap on stocks on the junior stock exchange was lifted to 35% last year but the board argues it should be removed altogether to give Whitestone the ability to back the growing number of quality businesses to be found on AIM, where reporting requirements are less onerous than on the main London Stock Exchange.
This would result in its benchmark being changed to the Numis Smaller Companies plus AIM index. It currently uses the Numis Smaller Companies index.
In addition, the board is proposing that Whitestone be allowed to invest up to 15% of the fund overseas with the manager said to be eyeing opportunities in Europe. Both proposals require shareholder approval.
The announcements came in full-year results showing Throgmorton enjoyed a strong 12 months to the end of November with a net asset value total return of 33.9% from its portfolios and a 43.8% return for shareholders.
Over five years, the Throgmorton trust has generated a 131% shareholder return, just behind the 136% from BRSC. Its shares trade nearly 14% below their NAV, a wider discount compared to BRSC’s 10%.
Last year the board halving the annual fee it pays BlackRock to 0.35% but agreed to raise the outperformance charge it pays the fund manager.