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Miton’s 10 'special situation' investment trusts
by Robert St George on Oct 30, 2013 at 13:10
Wealth Manager reveals the 10 'special situation' investment trusts backed by Miton's + rated investment team of Nick Greenwood and Martin Gray.
A fund of funds is a familiar concept; an investment trust of investment trusts less so. But that is what Miton Worldwide Growth does. ‘The trust provides exposure to a portfolio of predominantly less liquid, deep-value funds that most investors will find difficult to trade,’ says Monica Tepes, an analyst at Cantor Fitzgerald.
Managed by Nick Greenwood and Martin Gray (pictured), + rated by Citywire, the trust’s premise is that themes or sectors regularly fall in or out of market favour, which gives rise to mispricing and the opportunity to buy and hold undervalued funds until they re-rate. At the moment, the managers believe that investors’ search for yield has pushed them into taking equity-like risks for bond-like returns, typically over paying for income trusts.
Greenwood and Gray also feel they are being adequately compensated for taking on liquidity risk: Miton itself consistently trades on a discount of around 10%, but its average holding has a 30% discount.
A further attraction is the diversification the trust confers. Tepes (pictured) has found that its correlation over both three and five-year periods to the FTSE All Share has been approximately 0.6. The typical constituent of the Global Growth sector is 0.95 correlated to the index.
This strategy has rewarded investors with a 189% share price rise and 190.4 net asset value (NAV) gain over the last five years, although this is not quite impressive as the 206% rise in the FTSE World and a peer group average NAV return of 206.2% over the same period.
Wealth Manager looks at 10 of the trusts Miton has bought as ‘special situations’: those with a good chance of significantly re-rating in the short to medium term and keep its performance ticking higher.
Phaunos Timber (41% discount)
This fund was launched at the peak of the US housing market in 2006, and then crashed alongside it. But construction is now picking up there, and Phaunos has a new chairman working to improve its corporate governance.
Henderson Value (14% discount)
This was reconstructed out of the failed SVM Global fund, with the new managers swiftly writing down its net asset value to a very conservative level. However, its share price has yet to move equivalently, and a continuation vote in 2014 could provide the opportunity for a quick double-digit return.
Aurora (18% discount)
Despite a straightforward UK growth mandate and traditional style, Aurora has been a persistently weak performer and could be forced to wind itself up by activist shareholders.
Alternative Asset Opportunities (15% discount)
This former Kleinwort product invested in US traded life endowments and was on the brink of collapse until an injection of fresh capital allowed the fund to hold its portfolio to maturity.
New Star Investment Trust (36% discount)
John Duffield (pictured) took this trust with him from New Star to Brompton, and owns 60% of it. Net asset value performance has improved since the switch, but the share price has yet to catch up.
Dolphin Capital Investors (52% discount)
Asset managers including Toscafund and Third Point have recently provided funding to Dolphin, a developer of residential resorts, which diluted its net asset value but removed the risk that it would fail to complete its property projects.
TR European Growth (13% discount)
This European small-cap fund has suffered from the unpopularity of its asset class, but it now seems to be returning to favour. It faces a continuation vote next year if things don’t work out.
Terra Catalyst (42% discount)
Managed by Laxey Partners, this property fund is in the final stages of realising its portfolio. One of its largest remaining assets is Spazio, which owns several of Telecom Italia’s exchanges, and whose shares are very modestly priced at €2.47 despite a net asset value of €7.20.
Infrastructure India (66% discount)
Run by Guggenheim, this trust bought some poor assets in India and had to turn to a dilutive rights issue in 2012, leaving it looking very cheap.
International Oil and Gas Technology (63% discount)
Another trust laid low by an equity issue, this time brought about to finance a court case with its former manager, its underlying portfolio of proprietary oil and gas technology businesses is being liquidated.
More about this:
Look up the shares
- Alternative Asset Opportunities PCC Ltd (TLI_p.L)
- Dolphin Capital Investors Ltd (DOLC.L)
- Terra Catalyst (TCFD.L)
Look up the investment trusts
- Miton Worldwide Growth (Ordinary Share)
- Phaunos Timber (Ordinary Share)
- Henderson Value Trust (Ordinary Share)
- Aurora (Ordinary Share)
- New Star Investment Trust (Ordinary Share)
- TR European Growth (Ordinary Share)
- Infrastructure India (Ordinary Share)
- International Oil & Gas Techno (Ordinary Share)