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Daniel Lockyer: my pick of cheap growth investment trusts
Markets
by James Phillipps on Sep 25, 2012 at 14:33
Investors’ insatiable appetite for income and income generating investment trusts has seen a whole swathe of more growth-oriented investment trusts fall out of favour. With the shares of these trusts trading at steeper discounts below the inherent value of their investment portfolios, fund managers like Hawksmoor’s Daniel Lockyer (pictured) are seeing opportunities.
Going against the crowd Lockyer has added several beaten-up well-known trusts for both the Phoenix Hawksmoor Vanbrugh , and the Hawksmoor Distribution fund which he he co-manages alongside Richard Scott. The managers have also taken some profits on several of the popular income-focused trusts.
Vanbrugh fund
In the group’s Citywire Selection Watchlist Vanbrugh fund, which is run as a balanced portfolio, the pair have added two new names after selling out of the Absolute Return Trust , which is being wound-up, and F&C Private Equity , which has just paid out cash following a large realisation.
‘We have had two holdings giving us back cash and with the markets potentially set to continue their recent good run, we felt we should invest this in the market,’ Lockyer said.
He has taken a stake in the Baillie Gifford-managed Monks investment trust, which had moved out to a 14% discount to the net asset value (NAV) of its investment holdings. The trust has had a tough year, falling by 0.4% over the past 12 months compared with a global growth sector average return of 9%, but Lockyer is backing manager Gerald Smith to turn this around.
‘We have not owned it for a couple of years, but we regard Baillie Gifford very highly as managers and felt that it was a good opportunity if the outlook for Europe turns more positive,’ he said.
He has also taken a position in Henderson Opportunities , managed by Henderson Global Investors’ James Henderson. The trust has had a stronger year than Monks, up 12.9% compared with the UK growth sector average of 13.8%, but its discount has moved out to 26%.
‘It invests in small and mid cap stocks and is a very growth-focused portfolio at a time when income portfolios are in demand,’ Lockyer says. ‘It is a small trust itself, but is managed by James Henderson who has performed very well on his open-ended UK fund and Lowland investment trust, which is trading on a very tight discount. It is the same manager on a 26% discount.’
Hawksmoor Distribution
Lockyer and Scott have been similarly active on the group’s Hawksmoor Distribution fund, adding to a couple of names on attractive discounts. Caledonia has traditionally traded on a wider discount than many of its global growth rivals, but Lockyer said that now at just over 28% and with turnaround plans in place, the trust is attractive.
‘It’s one we owned but added to a fortnight ago at a 28% discount when many of its peers are in the mid-teens,’ he said. ‘The discount has widened because performance has not been very good, but they are restructuring the underlying management of the portfolio. It was managed by region but they are bringing this together more and introducing an income portfolio. It will become more of an income and growth fund rather than just being driven by capital growth.’
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- Absolute Return Trust GBP (Ordinary Share)
- F&C Private Equity Trust (Ordinary Share)
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- Henderson Opportunities (Ordinary Share)
- Caledonia Investments (Ordinary Share)
- TR Property SIGMA (Ordinary Share)
- North American Income Trust (Ordinary Share)
- European Assets (Ordinary Share)
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