While the gap between share prices and NAV has widened in the first three months of the year for investment trusts, a handful of players have managed to issue new shares during 2024, according to research from Kepler Trust Intelligence, using data from Morningstar and the AIC.
By the end of March, the Morningstar Investment Trust All ex 3i cumulative fair NAV performance for the past 12 months sat at 9.2%, while the share price ended the month at 3.1%. Thomas McMahon, investment trust research manager at Kepler, pointed out the technology sector has returned 8.5% in NAV terms over the same time frame, but its share price has delivered only 3.8%. He says could present buying opportunities.
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“This is a phenomenon seen across major equity sectors: the UK, Europe, Japan, as well as the Global sector, have all seen good NAV gains and share price gains which, while positive, have not kept up,” McMahon said in a research note published yesterday (3 April).
However, trusts including JP Morgan Global Growth & Income, Ashoka India Equity, Invesco Bond Income Plus, and Rockwood Strategic have been able to issue shares in 2024.
The AIC reported JP Morgan Global Growth & Income raised £175.7m in 2024, although it noted a merger with MATE. The trust, which has holdings including Microsoft, Amazon, and Nvidia, placed 5.2 million shares following interest from a wealth manager and 1.3 million shares to retail clients, raising a total £34.5m. The trust continues to trade on a premium.
“One pattern is that excellent performance can still attract significant flows and see investors willing to invest at NAV. Perhaps differentiation of the strategy is important too,” McMahon said.
“JP Morgan Global Growth Income, for example, has outperformed its benchmark in each of the past five years, including the down year of 2022 in which it was almost flat. It also offers exposure to the large-cap tech trend from a vehicle which pays an attractive yield, thanks to the ability to pay a dividend out of capital reserves.”
The Ashoka India Equity trust has also issued shares in 2024, raising £31.6m as of the end of March. Its total assets now sit at £340m.
“While India has been in favour, the other all-cap vehicles in the sector have been trading on sizable discounts. AIE has been the outstanding performer in the sector since launch and has traded on a premium for most of the time since then,” McMahon said.
“One differentiating factor behind AIE’s success is the large team of analysts they have devoted purely to Indian equities. Additionally, the charging structure sees a management fee paid only if the trust outperforms the benchmark.”
Rockwood Strategic has raised £6.1m to the end of March, with Christopher Mills, chief executive of Rockwood’s manager Harwood Capital, purchasing 1 million shares. In total, near 3 million shares were issued. Mills owns over 25% of the company. McMahon also noted the strong track record of Rockwood, and the management of Richard Staveley, who took over in September 2019.
“He runs a highly concentrated portfolio of micro caps in which he invests with a private equity style approach, seeking to place representatives on the board and engage in order to unlock value in cheap companies,” McMahon said.
“It is interesting to see strong demand for RKW’s shares despite the small size of the net assets, and we note that as the trust grows a broader base of shareholders should be able to take a meaningful position.”
Bond funds have also found some success in the beginning of the year, with Invesco Bond Income Plus issuing shares as well as M&G Credit Income. McMahon notes that while M&G Credit Income has a “trailing” yield at 8.6%, it “understates the income being generated”.
“In recent weeks, the trust has slipped out onto a discount once more, but in our view it looks well suited to the current economic environment, although it is true its minimal duration means that it will not benefit from rising capital values much, as and when rates are cut,” McMahon said.
