Monks Investment Trust trailed its FTSE World benchmark as underperforming growth stocks “wiped out” gains from previous years, according to chair Karl Sternberg.
For the year to 30 April, the Baillie Gifford trust’s net asset value (NAV) total return was -1.6%, compared to the FTSE World which returned 3.2%.
Its share price dropped 7% over the period, while the trust’s discount widened to 9.7% after starting the financial year at 4.4%.
See also: Monks disappoints despite ditching Tencent and Peloton
The results follow last year’s underperformance, when the trust’s NAV fell -18.9% compared to the benchmark’s 6.1%.
Since the end of March 2015, when Monks changed its investment approach, the trust has returned 126.7% against the FTSE World’s 127.4%. Sternberg said: “We are very mindful of the need to return to outperformance, in a variety of market conditions.”
The Edinburgh-based trust’s managers Spencer Adair and Malcolm MacColl pointed to rising inflation and interest rates undermining investor confidence in earlier-stage, high growth companies which resulted in a “sharp contraction” of valuations within its portfolio.
The duo said: “Performance has been disappointing, and we recognise that we have made mistakes. We have taken decisive action in repositioning the portfolio and are excited by what we perceive to be a growing opportunity set.”
Adair and MacColl added: “Contrary to consensus, we believe the opportunity set is broadening and the prospects for growth companies are as compelling as ever. The operating environment for companies has undeniably changed. We have reflected on where we may have done better and adjusted the portfolio – we are confident that the companies we own for Monks are well-placed to adapt and thrive.”
In the firm’s first half results to the end of October, the managers revealed a “portfolio weeding” exercise had been undertaken, which saw the company ditch holdings including Tencent and KE Holdings, while it added positions in Adobe and semiconductor provider Analogue Services.
Over the period, the trust issued 16.7m new ordinary shares in return for £173.1 million of the Independent Investment Trust’s assets following its voluntary liquidation. It was agreed that the trusts would merge after the latter’s manager, Max Ward, announced his plans to retire last year.
Monks announced a single final dividend of 3.15p, compared to 2.35p last year.
