The duo is responsible for the smaller companies portfolio of the £101.6m investment trust.
“We had held Conviviality since its IPO in 2013, and we are very sorry to have exposed shareholders to such an experience,” Moon and Mackersie (pictured) said in the fund’s monthly fact sheet, which was distributed on Wednesday.
Conviviality announced on 5 April administrators from PwC had been appointed and the Nomad for the Aim-listed company, Investec Bank, had resigned. Several weeks earlier it had announced it had identified a £30m bill owed to HMRC, which had not been accrued for within its short-term cashflow projections.
The pair said they wrote the position down to zero following a series of disappointing market updates leading up to the alcohol wholesaler entering administration.
“The fall in value of this holding accounted for a significant proportion of the underperformance experienced during the month. It appears that Conviviality’s executive management team had misunderstood the full extent of the serious operational and financial issues within the business,” the pair said.
The latest factsheet for the £688m UK Income fund also stated Conviviality had been a detractor from performance and included the same apology to investors included in the Acorn Income monthly update.
However, the low-cost alcohol business was screened from the Unicorn UK Ethical Income fund, which therefore did not suffer the same hit to performance.
Despite the calamitous end to the Conviviality holding, Moon and Mackersie said they had made a modest overall net profit on the investment, through partial disposals and dividends.
Architas investment director Adrian Lowcock said that highlights the importance of good portfolio management.
Lowcock said: “They’ve taken profit when the company has performed. It’s a diversified portfolio, they currently have no holdings larger than 5%. Part of that is risk management within the portfolio.
“It shows you the importance of dividends as well.”
Lowcock met with Moon and Mackersie earlier this month and said they acknowledged they need to do “as much as they can to learn from that experience”.
“They felt the pain on Conviviality.”
Portfolio Adviser reported earlier this month the alcohol business was the largest contributor to performance at Blackrock Throgmorton, where fund manager Dan Whitestone had shorted the stock.
Premier Asset Management runs the investment trust, but outsources the smaller companies allocation in the portfolio, which is up to 80% of the allocation, to Moon and Mackersie. Paul Smith, from Premier, runs the remainder of the portfolio, which invests in fixed interest securities and high yielding investment company shares (up to 15% of the portfolio).
