Alastair Mundy’s Temple Bar Investment Trust has significantly upped its cash holding after selling off a number of stocks hit hard in recent weeks by the coronavirus outbreak.
In an investment update on Wednesday, the company said Covid-19 and the resulting extreme market volatility had proved an “exceptionally difficult backdrop for the portfolio with many of the trust’s holdings falling significantly”.
According to the update, £130m (22%) of the portfolio’s total £580m assets was in cash, as of 23 March, up significantly from the 2.5% position reported in an update on the company’s website dated 29 February.
It said: “After lengthy discussion, the manager and board decided to increase significantly the liquidity on the portfolio thus immunising the gearing on the trust. This was conducted through sales of the least cyclically exposed of the stocks on the portfolio. This maintained much of the sensitivity to a market, and in particular to a value recovery.”
According to the Association of Investment Companies (AIC) website, Temple Bar’s gearing, net of cash, is 21% as at close on Tuesday, which is within its range of zero to 30%.
AIC head of intermediary communications Nick Britton said increasing cash levels by selling holdings will neutralise some of the gearing, noting gearing figures are usually quoted for investment companies net of cash.
“So if a company has borrowed 6% of its net assets but has 4% of its net assets in cash, the gearing is effectively 2%,” he said. “It follows that you can reduce your gearing in at least two ways: by paying some money back, or by keeping borrowings as they are but increasing cash levels.”
Portfolio breakdown as at 23 March
| Total Assets | £580,066,575 |
| Debt | £113,000,000 |
| Equities | £393,679,179 |
| Gold/Silver | £56,339,124 |
| Cash | £130,048,272
|
Source: Temple Bar
Capita has been dropped from being the portfolio’s largest holding at 7.1% at the end of February to its 10th largest at 2.6%. Easyjet, which was the 10th largest position at 2.9%, has dropped out the top 10, as has Tesco which was the sixth largest position in February at 4%.
Easyjet’s share price has dropped 55% since 26 February while Capita’s is down 73% over the same period.
Top 10 holdings as at 23 March
| Travis Perkins | 6.2% |
| Royal Dutch Shell | 4.6% |
| BP | 4.4% |
| Royal Bank of Scotland Group | 3.7% |
| Grafton Group | 3.6% |
| Barclays | 3.3% |
| Kingfisher | 3.3% |
| TP ICAP | 2.8% |
| Forterra | 2.8% |
| Capita | 2.6% |
Source: Temple Bar
Gold and silver has jumped to 9.7% of the portfolio, up from 3.4% at the end of February.
The trust share price has fallen -45.8%, over one year, compared with the FTSE All Share’s -21.4%, and has fallen even further over shorter time periods.
Since 20 February when coronavirus related volatility hit markets, it has returned -44.7% versus the sector’s -35.4% and the index’s -28%.
Temple Bar Investment Trust performance versus sector and benchmark
| 1m | 3m | 6m | 1yr | 3yr | 5yr | 10yr | |
| Temple Bar Investment Trust PLC TR in GB | -48.52 | -53.55 | -44.87 | -45.78 | -39.05 | -31.02 | 23.26 |
| IT UK Equity Income TR in GB | -32.96 | -36.25 | -28.75 | -28.69 | -23.59 | -15.84 | 55.90 |
| FTSE All Share TR in GB | -25.25 | -29.24 | -24.57 | -21.39 | -16.21 | -4.95 | 46.84 |
