Investment trust round up: Mark Barnett’s Keystone continues strong performance

16th May 2014

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New investment trust launches have been rare this year, but where fund managers have sought to raise cash it has generally been for funds focused on income or alternatives writes Cherry Reynard. A new trust from London Cornwall Property Partners aims to combine both.

The Empiric Student Property fund is focused on student accommodation across 11 properties and is seeking to raise more than £110 million in a June flotation. The London Cornwall team is hoping to generate a chunky annual dividend yield of 6% in addition to some capital appreciation. The yield is attractive, but investors might want to ensure London Cornwall has employed a good cleaner.

A couple of smaller companies trusts reported this week: the Aberdeen Smaller Companies and Standard Life UK Smallers trusts. The Standard Life trust continues to experience relatively weak performance that belies manager Harry Nimmo’s strong long-term track record. Over the quarter the net asset value rose 1.5% against a rise in the benchmark of 3%. However, the share price was hit by movement in the premium and dipped 1.9%. The trust remains substantially ahead of its sector over five years, but fourth quartile over one and three years.

Henderson High Income, managed by Alex Crooke, had a relatively busy quarter, buying a new position in global mining group Rio Tinto – a reflection that the worst may be over for the sector. He also bought into the IPO of Manx Telecom and added to BAT, Investec and AstraZeneca, selling out of more cyclical Greene King. The greatest worry for potential buyers of the trust remains the significant premium, now 4.1%.

The improving outlook for the commodities sector was also reflected in better performance for the City Natural Resources trust. The trusts NAV rose 3.5% to 154.1p over the quarter. The discount remains persistently wide, however, at 18.9%. The trust’s holdings in oil and gas stocks benefited from the unusually cold and protracted North American winter and nervousness around the situation in the Ukraine.

In contrast, Baring Emerging Europe was on the wrong side of the Ukraine situation. It had bet on the likelihood of a better economic environment in Russia during 2014 and was hit hard by the tension in the region. The net asset value fell 13.3% on a total return basis during the first half of the trust’s fiscal year while the benchmark limited losses to 10.3%. However, the trust is not changing its standpoint for the time being: “When markets react to geopolitical crises, there is often a random element in the impact on individual securities. It is only some time after the events that calmer analysis can allow the stock picking approach pursued by your manager to reassert itself.”

Featured trust: Keystone

When Neil Woodford left Invesco Perpetual and investors came to assess the track record of his successor Mark Barnett, the performance of the Keystone Investment trust was a notable string to his bow. It has consistently been one of the best-performing investment trusts in the AIC UK All Companies sector, and is around 30% ahead of the wider sector over the past five years.

Despite the distractions at the group, Barnett continued this run of performance in the six months to 31 March. The trust delivered a total return of 6% over the period and the underlying NAV return was even higher at 10.6%. This comprehensively beat the return on the FTSE All-Share of 4.8%.

Barnett received a ringing endorsement from the board on his performance: “We are very grateful to Mark Barnett, on behalf of shareholders, for the excellent performance he has produced since he took control of the portfolio on 1 January 2003…Mark will continue to manage the Company’s portfolio following his well-deserved promotion to Head of UK Equities at Invesco Perpetual in March this year.”

High praise indeed. The worry for investors is that Barnett now has other things – notably the giant Income and High Income funds – to distract his attention. It is perhaps better for shareholders that the Edinburgh Investment trust has moved to Woodford’s new outfit.

Fund pick: Jason Hollands, BestInvest

“For a long-term investors the Aberdeen Asian Smaller Companies Investment Trust looks interesting. The trust is managed from Singapore by one of the strongest Asian equity teams in the industry, headed up by veteran investor Hugh Young, and the shares are currently trading at a 6% discount to Net Asset Value. While that may sounds quite narrow compared to other investment trusts, Aberdeen Asian Smaller Companies has traded on a premium of up to 8% over the last year and on average it has been close to NAV.

The trust has a stellar long-term track record, outperforming the MSCI AC Asia Pacific Asset Index by a staggering 98% over the last five years with a total return of +266% but the last twelve months have been a bruising experience for Asia small-cap stocks as sentiment towards emerging markets has tanked.

Markets have a habit of overreacting on the way up and the way down, so for investors prepared to commit for a sensible time horizon and tolerate exposure to a very volatile assets class, this could be a an opportunity to access a strong trust at a point when the underlying shares it invests in represent decent value.”

No major upgrades or downgrades this month

Investment trust articles of interest:

the Telegraph on those 16 income paying trusts

Patrick Collinson talks to F&C’s Jeremy Tigue on Fundweb

New investment trust launches have been rare this year, but where fund managers have sought to raise cash it has generally been for funds focused on income or alternatives. A new trust from London Cornwall Property Partners aims to combine both.

The Empiric Student Property fund is focused on student accommodation across 11 properties and is seeking to raise more than £110 million in a June flotation. The London Cornwall team is hoping to generate a chunky annual dividend yield of 6% in addition to some capital appreciation. The yield is attractive, but investors might want to ensure London Cornwall has employed a good cleaner.

A couple of smaller companies trusts reported this week: the Aberdeen Smaller Companies and Standard Life UK Smallers trusts. The Standard Life trust continues to experience relatively weak performance that belies manager Harry Nimmo’s strong long-term track record. Over the quarter the net asset value rose 1.5% against a rise in the benchmark of 3%. However, the share price was hit by movement in the premium and dipped 1.9%. The trust remains substantially ahead of its sector over five years, but fourth quartile over one and three years.

Henderson High Income, managed by Alex Crooke, had a relatively busy quarter, buying a new position in global mining group Rio Tinto – a reflection that the worst may be over for the sector. He also bought into the IPO of Manx Telecom and added to BAT, Investec and AstraZeneca, selling out of more cyclical Greene King. The greatest worry for potential buyers of the trust remains the significant premium, now 4.1%.

The improving outlook for the commodities sector was also reflected in better performance for the City Natural Resources trust. The trusts NAV rose 3.5% to 154.1p over the quarter. The discount remains persistently wide, however, at 18.9%. The trust’s holdings in oil and gas stocks benefited from the unusually cold and protracted North American winter and nervousness around the situation in the Ukraine.

In contrast, Baring Emerging Europe was on the wrong side of the Ukraine situation. It had bet on the likelihood of a better economic environment in Russia during 2014 and was hit hard by the tension in the region. The net asset value fell 13.3% on a total return basis during the first half of the trust’s fiscal year while the benchmark limited losses to 10.3%. However, the trust is not changing its standpoint for the time being: “When markets react to geopolitical crises, there is often a random element in the impact on individual securities. It is only some time after the events that calmer analysis can allow the stock picking approach pursued by your manager to reassert itself.”

Featured trust: Keystone

When Neil Woodford left Invesco Perpetual and investors came to assess the track record of his successor Mark Barnett, the performance of the Keystone Investment trust was a notable string to his bow. It has consistently been one of the best-performing investment trusts in the AIC UK All Companies sector, and is around 30% ahead of the wider sector over the past five years.

Despite the distractions at the group, Barnett continued this run of performance in the six months to 31 March. The trust delivered a total return of 6% over the period and the underlying NAV return was even higher at 10.6%. This comprehensively beat the return on the FTSE All-Share of 4.8%. 
Barnett received a ringing endorsement from the board on his performance: "We are very grateful to Mark Barnett, on behalf of shareholders, for the excellent performance he has produced since he took control of the portfolio on 1 January 2003...Mark will continue to manage the Company's portfolio following his well-deserved promotion to Head of UK Equities at Invesco Perpetual in March this year." 
High praise indeed. The worry for investors is that Barnett now has other things - notably the giant Income and High Income funds - to distract his attention. It is perhaps better for shareholders that the Edinburgh Investment trust has moved to Woodford's new outfit. 
Fund pick: Jason Hollands, BestInvest
"For a long-term investors the Aberdeen Asian Smaller Companies Investment Trust looks interesting. The trust is managed from Singapore by one of the strongest Asian equity teams in the industry, headed up by veteran investor Hugh Young, and the shares are currently trading at a 6% discount to Net Asset Value. While that may sounds quite narrow compared to other investment trusts, Aberdeen Asian Smaller Companies has traded on a premium of up to 8% over the last year and on average it has been close to NAV.
The trust has a stellar long-term track record, outperforming the MSCI AC Asia Pacific Asset Index by a staggering 98% over the last five years with a total return of +266% but the last twelve months have been a bruising experience for Asia small-cap stocks as sentiment towards emerging markets has tanked. 

Markets have a habit of overreacting on the way up and the way down, so for investors prepared to commit for a sensible time horizon and tolerate exposure to a very volatile assets class, this could be a an opportunity to access a strong trust at a point when the underlying shares it invests in represent decent value."
No major upgrades or downgrades this month
Investment trust articles of interest:
the Telegraph on those 16 income paying trusts
Patrick Collinson talks to F&C’s Jeremy Tigue on Fundweb

2 thoughts on “Investment trust round up: Mark Barnett’s Keystone continues strong performance”

  1. Philidor says:

    “It is perhaps better for shareholders that the Edinburgh Investment trust has moved to Woodford’s new outfit.” Where are you getting this information? No one else has reported this change of management.

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