Investment Trust thread ......

27th May '21 by gus 1065

117 comments 6800 reads

Prompted by some recent discussions on the SCVR board, I’ve initiated a discussion thread here to bring together thoughts and ideas, positive or negative, about things Investment Trust related. At risk of upsetting the purists, can I suggest we add REITs (real estate ITs) and appropriate ETFs to the list on the grounds that they share many of the DNA of ITs (collective investment pools of shares (or derivatives thereof) evidenced by shares freely traded on a relevant exchange).

Feel free to post about specific ITs, the sector in general or shared resources (preferably freely accessible) that might be useful for other users. It’s not a sector that is particularly well covered by Stocko (hopefully at the moment and will improve in due course) so an initial plug is to provide a link to the AIC site that is very good for those ITs that are members of the Association and reasonably good for the others that aren’t.

https://www.theaic.co.uk/aic/f...

If anyone has either created or found useful an article, comment or discussion in the past tag it on below.

Gus.

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Howard Adams

9th Aug '21

As previous recent posts have discussed fintech related products and services and the thread is about Investment Trusts, some might like to take a look at Augmentum Fintech (LON:AUGM) as it is the only UK-based trust which invests into fintech.

To dig deeper to get an overview (the easy way), their YouTube channel has some useful results vids as well as some quite interesting pitching to Augmentum Fintech (LON:AUGM) vids. Their portfolio is quite interesting as well.

https://www.youtube.com/channe...

I hold

Regards

Howard

pka

Hi Howard,

Thanks for mentioning Augmentum Fintech. I've just had a quick look at it on the AIC website. It's interesting, as you wrote, however there are a couple of things that would deter me from investing in it at present:

- It's on a 24% premium to NAV, according to the AIC.

- The charging structure seems to me to be over-generous to the IT's management. According to the AIC:

"Subject to certain exceptions, the Investment Adviser will receive, in aggregate, 15% of the net realised cash profits from the investments and follow-on investments made over the relevant period once the company has received an aggregate 10% p.a. realised return on investments and follow-on investments made during the relevant period."

But Money Week likes it more than Chrysalis, a rival private equity IT:

https://moneyweek.com/investments/funds/investment-trusts/603649/two-private-equity-trusts-one-to-buy-one-to-avoid

gus 1065

Re. Augmentum Fintech (LON:AUGM) , I’m not sure the AIC discount is correct. When they did the placing at the end of June the NAV was quoted as being £144.25p per share as of 11/6/21. I don’t think this has been updated since - not unusual since most of the holdings are unlisted private companies. Assuming the effect of the cash raised in the issue is roughly neutral, with a current share price of 162.2p this would suggest the shares are at a premium of about 12%, still high but possibly not 24%.

I looked at the issue when it was announced via PrimaryBid but didn’t invest. Probably a mistake since they were being offered at 135p/6% discount although I recall the offer was heavily oversubscribed so I would presumably have been heavily scaled back. I like the idea of the IT (investing in mostly unquoted Fintech) but felt the recurring fees were high and that there seemed to be a lot of hot money in the sector the prices up. Will possibly buy at some point but probably look for a better entry point both in terms of a better price/NAV ratio and also when/if some of the general froth in the sector has blown away. That may never happen!

Hi pka

Thanks for your detailed analysis. It offers me a useful prompt to recall my own investment thoughts on my Augmentum Fintech (LON:AUGM) holding.

I agree with all your points and had reservations for quite some time before finally taking a position.

In my particular case, I fully expect to hold for at least five years (unless significant adverse change to an upward trajectory).

I believe fintech in UK and Europe (where Augmentum Fintech (LON:AUGM) are also beginning to explore) is establishing itself as a strong contender in fintech at the global level and thus inward investment into UK and European early stage fintech companies is a tailwind.

London/UK is traditionally a strong player in financial services and fintech is now the next evolution in that sector, thus I expect this sub-sector to attract investment, experience M&A and continuously throw up new innovative companies. Which I cannot access easily without using a PE IT. In this case one which is a specialist in this fintech space.

I have also (through my other innovation investments) noted that innovative companies are staying private for longer periods of time than in the past and are coming to market as more mature but quite highly valued entities (I cite Ballie Gifford, Cathie Wood amongst others who have commented on this behaviour) and thus saw Augmentum Fintech (LON:AUGM) as a vehicle to join in on the early stage investment portion of the lifecycles of these companies.

In short, I accept I am investing in the 'story' of £AUGM over and above the fundamentals as I categorise it as an innovation investment. It also offers me a niche diversification within my overall portfolio design.

Hi again pka

Thanks for the Money Week link, I had missed reading that Max King article. It's interesting to me as it echoes several of my own thoughts.

I too had looked closely at Chrysalis Investments (LON:CHRY) but felt it to be less diverse than £AUGM. Also, Augmentum Fintech (LON:AUGM) had published several useful vids on YouTube which helped me to better understand who they were and what their strategies were. Chrysalis Investments (LON:CHRY) don't seem to have done such a strong job on communications.

With reference to the Max King article, I also hold Hgcapital Trust (LON:HGT) and Draper Esprit (LON:GROW) which he mentions.

Again with both these I found their published materials to be particularly helpful in disclosing in depth information about themselves. This 'qualitative' assessment has actually become quite an important tool for me and I hope more companies invest in video presentations to help us private investors get to know them better (Baillie Gifford do quite a good job in this area, but US commentators do a far better job. I hope UK & Europeans catch up soon).

11th Aug '21

Hi Howard,

As previous posts have mentioned the fintech company Revolut, I today noticed a Citywire article which says the Schroder UK Public Private (SUPP) investment trust , formerly the Woodford Patient Capital trust, has invested $13.7m (£9.8m) in Revolut:

https://citywire.co.uk/investment-trust-insider/news/schroders-takes-big-revolut-stake-in-former-woodford-fund/a1541209?re=88033&ea=104441&utm_source=BulkEmail_Investment+Trust+Insider+Daily&utm_medium=BulkEmail_Investment+Trust+Insider+Daily&utm_campaign=BulkEmail_Investment+Trust+Insider+Daily

However, I would be very cautious about buying SUPP shares, because it probably still contains a lot of dubious investments made previously by Woodford, such as the 'cold fusion' company Industrial Heat.

If you’re interested in Schroder Uk Public Private Trust (LON:SUPP) and it’s investment portfolio there’s quite an extensive thread with some interesting discussions/links here:-

https://www.stockopedia.com/co...

Agree with pka that Industrial Heat is a dead duck (currently still on the books with a „hope“ value of £4m) but Schroder Uk Public Private Trust (LON:SUPP) also has a decent chunk in Oxford Nanopore that is due to IPO later this year at a value that could (DYOR!) have a material upward impact on Schroder Uk Public Private Trust (LON:SUPP) ˋs NAV. Much of the Woodford dead wood has now been disposed of/written down, the IT has been deleveraged and the new Schroders’ management appear to be getting on top of things with new investments such as Revolut.

letap73

12th Aug '21

The performance of Schroder UK Public Private Trust (LON:SUPP) has been rather moribund recently - there seems to be recent uptick for IP (LON:IPO).

timarr

I think investors are bored waiting. The recent underlying news is generally good, especially if you think the downward revaluation of Atom Bank and Rutherford Health was pandemic driven and is likely to reverse.

The remaining Woodford era investments are either performing well, are being taken over (Kymab, Inivata and Kuur this year so far), have been flogged off at a discount (mainly via the Rosetta transaction) or are now an insignificant part of the overall NAV (e.g. Industrial Heat), so this is now all about the new managers (as seen in the recent investments in Tessian and Revolut).

But really everyone is just waiting for the Oxford Nanopore IPO to see exactly how insane the valuation is.

Thank you for highlighting Schroder Uk Public Private Trust (LON:SUPP) I did consider it during last year but held back as I felt other ITs offered more defined investment cases.

The fact that Schroder Uk Public Private Trust (LON:SUPP) values its investment in the 'cold fusion' company Industrial Heat at £4 million, when it is obvious that Industrial Heat is in reality worth zero, makes me doubt its valuations of the rest of its unquoted portfolio. So what reliance can one put on its estimated Net Asset Value or on its published discount to NAV?

Well, individuals need to make their own assessments.

The valuations on SUPP's unquoted investments are made by Link - companies aren't allowed to mark their own work - which saw significant downward valuations in a number of major holdings at the last count. The rules around revaluations mean that are limits to what they can do - so, for instance, writing Industrial Heat to zero while it's still trading isn't possible. But that doesn't stop us doing it ourselves, wiping 0.9% off the NAV.

The top 10 holdings at last valuation were worth 75% of the NAV:

kymab (16.5%) - sold at NAV
Oxford Nanopore (16.2%) - worth between 20% and 100% more than NAV
Atom Bank (9%) - significant downward revaluation, pandemic impacted
Rutherford Health (8%) - significant downward revaluation, pandemic impacted
Inivata (6%) - sold at NAV
Immunocore (6%) - IPO'd, currently 20% premium to IPO price and quoted NAV
Benevolent AI (5%) - no news
Reaction Engines (3%) - just received UK government funding
IDEX Biometrics (3%) - received more funding post period
AMO Pharma (2%) - no news

We can now add a stake in Revolut to that list. So about 30% of the value is cash or mark to market. ON is between 20% and (say) 30%.

Personally I think the Rutherford Health stake remains quite worrisome - but if a cancer treatment specialist can't make money post-pandemic when the UK government is trying to bring down waiting lists by paying private companies then there's not much hope for them. Atom Bank got a bit unlucky with their timing, that should revalue upwards on the next funding round.

Overall I don't think this looks too risky at the current levels. I'm sure there'll be more writedowns in the long tail of investments, but other than Rutherford the remaining large stakes look pretty good - they're proper companies with multiple backers. Plus it's now debt free and Schroders are starting to make their own investments.

It's a nice diversifier, but I wouldn't want to have a huge amount of money riding on it. I have far more in IPO, for instance.

13th Aug '21

Hi again pka (and others)

In your 11/08/21 you mentioned Revolut and the recent Schroder Uk Public Private Trust (LON:SUPP) investment.

Another long term investor into Revolut is £GROW.

Draper Esprit (LON:GROW) is not an investment trust (the focus of this thread), but a venture capital firm.

As a private investor, I do not personally feel the distinctions between the two are something to be concerned about as both vehicles offer a way for me to access hard to reach early stage companies which I am interested in.

I though you and others might be interested to take a look at Draper Esprit (LON:GROW) if you have not already researched it.

Over 5yrs the share price is up +246% (on a simplistic annualised view this is +49% p.a.).

Over 1yr it's up +88%, YTD its up +57%, over 6mths +30%, 1 month +13%.

What I like about Draper Esprit (LON:GROW) is that they focus on fintech, tech and innovative companies in the UK and across Europe. They have recently moved from AIM and Euronext Growth indices into the main markets (LSE & Euronext).

I feel that they have a well established process and team are attracting inward investment successfully. Their recent funding round (14/06/21) was oversubscribed.

If you/others want to gain a quick insight into them this interview from Edison with the CEO is a useful overview (17 min)

I hold Draper Esprit (LON:GROW) and am quite enthusiastic about its prospects.

I feel, as they do, that the UK and Europe offers some really attractive growth companies but which have historically not attracted the sorts of inward investment their US-based counterparts have achieved.

I think the UK/European investment scene is just getting started in contrast to their US counterparts.

See for example the growth of the Swedish investment company KINV B (I hold), and as I mentioned in a previous post Augmentum Fintech (LON:AUGM) (I hold). Also, the strategy Baillie Gifford has adopted to also invest in private growth companies as well as listed companies.

Hi Howard,

Thanks for mentioning Draper Esprit and the link to the interesting video of the interview with the CEO. It has certainly done well so far.

However, I'm a bit put off in investing in it by its performance fees. According to the AIC website:

"Management fee of 2% of the NAV p.a. Performance fees are payable after a return of 3.5p per Share as a distribution in any one financial year then, as long as the NAV, before the distribution, is higher than 70.6p per Share, the fee is calculated at a rate of 20% of the distribution amount over 3.5p per Share. The performance incentive fee will also have a catch-up should any previous years distribution not be met."

I'm not sure what to make of the fact that the performance fees are only payable if there's a distribution to the shareholders..

14th Aug '21

I had not noted that AIC point, thanks for highlighting it. I'll take a deeper look.

Looking at the AIC posting, the quote you have extracted seems to relate to the 'Draper Esprit VCT' which has a TIDM Draper Esprit Vct (LON:DEVC) .

The equity I posted about was Draper Esprit (LON:GROW) the Plc. The Plc owns the DEVC trust and it also runs EIS funds as well as seed capital funds (some of these also list on the AIC site).

I think the AIC is only listing the investment trust funds that Draper Esprit (LON:GROW) operates, not the details of Draper Esprit (LON:GROW) itself as Draper Esprit (LON:GROW) is a Plc not an investment trust.

Having looked at Draper Esprit (LON:GROW) from this perspective I am not at all sure how management fees within each of the different trusts Draper Esprit (LON:GROW) operates impacts the value of Draper Esprit (LON:GROW) (and thus its share price).

I posit that they are in fact revenue to Draper Esprit (LON:GROW) and thus valuable to a Draper Esprit (LON:GROW) investor. But that said, I am only guessing that is the case. I would be pleased if you or others could offer clarifications to my musing.

Two investment trust that look "cheap" are Hansa Investment (LON:HANA) and Georgia Capital. I assuming they are hugely below book value because of where they are predominantly invested - Brazil in the case of Hansa Investment (LON:HANA) and Georgia in the case of Georgia Capital.

Hi letap73.

I hold Hansa Investment (LON:HANA) . As you say it trades at a significant discount to NAV, not last due to the Brazilian focus. Worth noting that about 24% of the fund is invested in Ocean Wilsons Holdings (LON:OCN) which is a holding company with an operating port and a portfolio of securities which is itself also trading at a significant discount to NAV so there’s a double dip for Hansa Investment (LON:HANA) holders.

6th Sep '21

Good write up on £MNTN. Recent performance and activities.

https://citywire.co.uk/investm...

Brilliant Leader

10th Sep '21

Following a discussion on another thread https://www.stockopedia.com/content/can-i-avoid-roller-coasters-864050/ I posted a summary of my recent research into using investment trusts to diversify income. I have collated a list of 30 investment trusts across asset classes that would generate an income of around 5.5% per annum - I have not focused on growth for this portfolio, although some of my selections have a growth dimension.

I thought others might find it a useful starting point for their own research and as ever, all comments are welcome, especially if there are any health warnings to be shared http://shareknowledge.blog/investment-trust-dividend-ideas/

Cheers
Simon

carmensfella

We have an Investment Trusts and Funds show this coming Tuesday and it is completely free to join us and lots of well known Stockopedia faces and speakers are presenting. It will be a very informative and educational show

Join us at 3pm on Tuesday 14th September for our Trusts and Funds event! The show will be packed with interviews, educational presentations and four company presentations!

The companies presenting are Sanford DeLand Free Spirit Fund, Downing Renewables & Infrastructure Trust plc, India Capital Growth Fund and NextEnergy Solar Fund.

The full programme is as follows:

3.00 pm Mello introduction and welcome
3.05 pm The AIC and the benefits of investing in Investment Trusts & Funds
3.30 pm Company presentation by India Capital Growth Fund
4.00 pm Reg Hoare presents an update on Investment Trusts & Funds
4.15 pm Company presentation by Sanford DeLand Free Spirit Fund
4.45 pm David Stredder interviews Alyx Wood, Fund Manager at Kernow AM
5.05 pm Introducing Edmund Shing, private investor in Investment Trusts & Funds
5.15 pm Company presentation by Next Energy Solar Fund
5.45 pm Company presentation by Downing Renewable & Infrastructure Trust (DORE)
6.15 pm Money Makers – Join Jonathan and Simon for the latest Investment Trust news
6.35 pm Investment Trusts & Funds panel session with Q&A

You can book your place at the show and see recordings of some previous shows here:

https://melloevents.com/trustsandfunds14thsept/ and if you would like a complimentary ticket to the event then please use the code MITF1409.

There are lots of interesting sessions and all annual pass holders and individual ticket holders will get sent the recordings 24 hours later once you have registered.

See you all on the show!

David

Investment Trust thread ......

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Gus 1065

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