Manchester & London (MNL), the best-performing UK All Companies investment trust in the past year, has more than halved its stake in Facebook in response to the data misuse scandal afflicting the social media giant.
Although the £100 million fund managed by Mark Sheppard uses the MSCI UK Investable Market index as its performance benchmark, it has big positions in US and Chinese technology stocks, drawing comparisons with the £6.2 billion Scottish Mortgage Trust (SMT) in which it also invests.
Sheppard, whose company M&L Capital Management owns over half of the trust’s shares, said he remained a firm believer in global tech stocks. However, he added he had ‘adapted to market conditions’ in slashing the position in Facebook from 8.6% to 3.3% as it appeared likely that it would face tighter regulation that could constrict future growth.
Sheppard said markets were falling on concerns that ‘appear to lie within the paradoxical themes of global growth is leading to global monetary tightening, trade wars will slow global growth, and Europe seems to be slowing down already’.
The manager, a qualified chartered accountant who previously worked at Deloitte, believed ‘more worrying’ was the problem that the US was losing the technology race to China.
‘This is a re-visit to the Cold War period of an expensive, worrying, and distracting race between two large, ideologically different superpowers,’ he said.
‘There is a shift in the global powers and this is being played out through technology. While China gives its tech companies free reign to increase their potency...the west is hell-bent on punishing, regulating, taxing, and de-fanging their tech majors,’ Sheppard commented.
Facebook’s founder and chief executive Mark Zuckerberg endured a two-day grilling from US lawmakers last week. The company is now the trust’s eighth largest holding, down from third at the end of February.
Shares in MNL are volatile and dropped 6.4% last month as a weak dollar exacerbated the tech sell-off. Its biggest of 25 significant equity positions are 14.4% in Amazon, 13.8% in Microsoft and 10.4% in Alphabet, the owner of Google.
Year to date the shares are down 2.7%, the falls limited by some profitable, small ‘short’ bets against the stock of a number of companies.
Over one year MNL has delivered a total shareholder return of 27.4%, the best of 15 trusts in the AIC’s UK All Companies sector. This performance has been driven by 18.5% growth in net asset value (NAV) compounded by a sharp re-rating in the shares following a tip in the Telegraph last year.
Having traded at a 15% discount to NAV last summer, the shares now stand just 2% below their asset value. The company is seeking shareholder approval to issue more shares to cater for increased demand at its annual general meeting next month.
MNL’s long-term performance is less impressive, largely due to the wide discount at which it previously traded. Over 10 years shareholders have received a total return of 81%, well below the 179.5% sector average.
Numis Securities places the trust in its Global Growth sector where it is also the leader over one year, outpacing the 22.3% return from Scottish Mortgage. Again over a decade it has achieved less than half the 164% return of other listed global growth funds.