REG - AVI Global Trust PLC - Monthly Update

AVI Global TrustAnnouncement

11/03/2022 14:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220311:nRSK5442Ea&default-theme=true

RNS Number : 5442E  AVI Global Trust PLC  11 March 2022

 

AVI GLOBAL TRUST PLC

 

Monthly Update

 

AVI Global Trust plc (the "Company") presents its Update, reporting
performance figures for the month ended 28 February 2022.

 

This Monthly Newsletter is available on the Company's website at:

https://www.assetvalueinvestors.com/agt/content/uploads/2022/03/AGT-FEB-2022.pdf
(https://www.assetvalueinvestors.com/agt/content/uploads/2022/03/AGT-FEB-2022.pdf)

 

Performance Total Return

 

This investment management report relates to performance figures to 28
February 2022.

 

                     Month  Fiscal Yr(*)  Calendar Yr

                            to date       to date
 AGT NAV(1)          -4.0%  -3.0%         -9.0%
 MSCI ACWI Ex US(2)  -2.0%  -3.4%         -4.7%
 MSCI ACWI(1)        -2.6%  -0.7%         -6.5%

( )

1 Source: Morningstar. All NAV figures are cum-fair values.

2 From 1st October 2013 the lead benchmark was changed to the MSCI ACWI ex US
(£) Index. The investment management fee was changed to 0.7% of net assets
and the performance related fee eliminated.

* AVI Global Trust financial year commences on the 1stOctober.  All figures
published before the fiscal results announcement are AVI estimates and subject
to change.

 

Manager's Comment

 

AGT's NAV declined -4.0% in February. The greatest contributors were Third
Point Investors, DTS and FEMSA, whilst KKR, IAC and Godrej Industries were the
most significant detractors.

 

Russia's invasion of Ukraine is first and foremost a humanitarian tragedy, and
we hope for a safe and peaceful resolution - albeit recognising that seems
increasingly unlikely.

 

AGT's focus on strong corporate governance has led us to steer clear of
Russia, with no direct exposure to Russian listed assets. Our underlying
companies however operate in an inter-linked global economy, and there may be
spill over effects from the abrupt de-linking that we are witnessing.

 

From a market perspective the current situation is challenging. Markets were
already grappling with higher inflation and monetary tightening, and now the
unfolding geo-political situation has spiked commodity prices, dampened the
outlook for global growth, and elevated tail risks.

 

The portfolio has behaved in line with how we would expect during times of
market stress. Discounts have widened - at the end of February the portfolio
weighted average discount stood at 29.3% compared to 25.6% at the start of the
year. This double whammy of NAV declines and discount widening is a headwind
to performance.

 

Having effectively eliminated our gearing late last year we have capital to
deploy and are free to take advantage of mispriced opportunities - both in new
and existing names. We are approaching this cautiously and waiting for the fat
pitch. In the meantime, we sit close to 100% invested being "actively
inactive".

 

Aker:

 

The recent rally in oil prices has been a positive for Aker, the Norwegian
holding company. At the time of writing the share price and NAV are up +13%
and +16% in a little more than two weeks, led by Aker BP, the Norwegian
E&P company which accounts for 63% of NAV, which has returned +25%.

 

We added to the position last Autumn with a view that a pure play, low-cost
low-emission producer, controlled by a thoughtful long-term orientated
shareholder, would prosper in a world starved of oil capex and production
growth. Clearly, this latest leg up in the oil price was not something we
could have (or would want to have) predicted, but it does serve to highlight
how dependent the world still is on fossil fuels. Whilst we believe the energy
transition is a one-way street over the coming decades, it seems clear that
oil will play an important and elongated role in this. Aker BP appear likely
to benefit from this given their long-dated production growth schedule.

 

The current crisis has also exposed the importance of energy sovereignty and
flaws in Europe's energy policies. In turn this will likely lead to
significant increased investment in renewables. Aker are well placed to
benefit here too, having established Aker Horizons, a renewable
energy-focussed holding company in 2020. By creating a separate holding
company - as opposed to conducting such activities via Aker BP which remains
pure play - Aker were able to take advantage of investor enthusiasm and build
Aker Horizon's foundations with a very low cost of capital.

 

That said, investor sentiment toward the sector has swung from euphoria to
pessimism in recent months, and Aker Horizons share price now sits some -53%
below its 52-week high (at the time of writing). Such booms and busts are
painful, but they are not uncommon in new and emerging technologies where
investors become overly optimistic, only to have their dreams crushed.

 

Aker have a history of going against the grain and investing through the
down-cycle to create value in the longrun. We believe they will adopt a
similar strategy, and that their industrial know-how and partnership model
stands them in good stead to create value in the years ahead.

 

Japan:

 

In a risk-off environment nothing is entirely insulated in the short-term,
but, as an asset class, cash-laden Japanese small caps are relatively
unaffected by events in Eastern Europe.

 

In this vein it is worth noting that a number of the strongest performers in
February came from our small cap Japanese holdings. Most notably shares in DTS
Corp, Wacom and NS Solutions rose +13%, +5% and +12% respectively, adding
+27bps, +16bps and +15bps to returns.

 

The possible returns from successful engagement and change in corporate
control events are largely idiosyncratic, and we expect will continue to drive
outperformance. Valuations remain compelling, and with COVID in the rear-view
mirror and Japanese companies laden with more cash, the backdrop for our
shareholder activism looks as promising as ever. As such we expect to continue
allocating a significant portion of our capital to such ideas.

 

 

Associated British Foods:

 

During the period we exited our holding in Associated British Foods ("ABF").

 

We started to build the position in the Autumn of 2020, at a time when we
increased our exposure to economically sensitive assets likely to benefit from
a re-opening of the UK economy. Whilst our other UK reopening plays performed
well, ABF was an unsuccessful investment. Social restrictions continued to
disrupt trading, and not unfounded worries about the deterioration of
Primark's competitive positioning stopped the company from re-rating.
Cognisant of thesis creep, and with Primark's thin margins likely to be tested
by higher rates of inflation, we took the decision to exit the position. Over
the life of the investment ABF generated an IRR of -11% vs. +6% for the MSCI
ACWI ex-US (£).

 

Third Point Investors:

 

Our position in Third Point Investors Limited (TPIL) was the largest
contributor to performance as our public activist campaign came to an end with
the appointment of an independent director we had proposed to the Board:
https://www.investegate.co.uk/third-point-investors-ltd--tpou-/prn/board-and-shareholder-update/20220218123552PDE52/
Despite a decline in TPIL's NAV over February, its discount narrowed
materially with a move in to 11% from the 18% at which it began the month.

 

Contributors / Detractors (in GBP)

 

 Largest Contributors   1- month contribution  % of NAV

                        bps
 Third Point Investors  32                     6.0
 DTS Corp               27                     2.5
 FEMSA                  20                     3.2
 Wacom                  16                     3.5
 NS Solutions           15                     1.5

 

 Largest Detractors          1- month contribution  % of NAV

                             bps
 KKR                         -93                    5.5
 IAC/InterActiveCorp         -78                    4.3
 Godrej Industries           -59                    3.2
 EXOR                        -55                    6.6
 Oakley Capital Investments  -48                    5.9

 

 

Link Company Matters Limited

Corporate Secretary

 

11 March 2022

 

LEI: 213800QUODCLWWRVI968

 

The content of the Company's web-pages and the content of any website or pages
which may be accessed through hyperlinks on the Company's web-pages, other
than the content of the Newsletter referred to above, is neither incorporated
into nor forms part of the above announcement.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  DOCFLFEVVAILLIF