Page 42 - DIY Investor Magazine | Issue 34
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• RIT’s NAV has held up fairly well this year although its figures tend to be a little dated so they need to be treated with a little caution.
• The boards of both Henderson Smaller and BlackRock Smaller tend to be rather reluctant to do much in the way of share buybacks so their discounts can widen out more than other small-cap trusts when markets are in risk-off mode.
• Keystone is, understandably, keeping a low profile. It’s made a couple of purchases of questionable quality but the top ten holdings seem a little more robust than some other Baillie Gifford trusts. It’s also only got four unquoted positions so its NAV figure is less open to question than the likes of Scottish Mortgage or Baillie Gifford US Growth.
• HgCapital is the holding I’m watching the closest right now. Its pro-forma NAV for 31 March and adjusted for subsequent disposals is 455p but its share price has dived in recent weeks as investors think the high multiples used in its valuation are likely to be reduced substantially. A recent FT story may have knocked sentiment as well
— it highlighted how Hg and other VCs have sometimes booked higher valuations when selling to other funds that also they run, although other external investors also seem to be involved in these transactions as far as I can tell. HgCapital’s interim result date of 12 September is marked in my diary.
• Timely disclosure is still a concern for me at KR1 although the recent annual report signalled improvements should be made in this area over the coming year. The revised bonus scheme will see a large number of shares being issued in respect of the performance for 2021 (around 23m I reckon) but set a very high watermark before any subsequent payment is made. Past ‘crypto winters’ have seen the KR1 team make astute investments and there’s no gearing and minimal cash burn so it’s better placed than most to take advantage of lower prices. It did make $5m investment several months ago in a fund run by the fated Three Arrows Capital but this has been fully provided for and looks to be a rare mis-step.
One notable feature has been how discounts have widened out across my portfolio this year. That’s not unusual in bear markets of course and something all trust investors should be aware of.
On a rough calculation, I reckon widening discounts have knocked about four to five percentage points off my first-half returns.
I’m hoping that effect will reverse when markets do recover although there’s no guarantee that it will.
Gearing levels are also something to watch out for as they can magnify falls in bear markets. I’ve got five equity trusts with low double-digit gearing at the moment but minimal gearing across the rest and nothing in the two open-ended funds or ETF, so it hasn’t had much impact on my portfolio.
Topping up, mostly in the form of reinvesting cash received from dividends, has been the name of the game for me this year. I’ve added to HgCapital, Bellevue Healthcare, Bluefield Solar Income, Henderson Smaller, Smithson, Worldwide Healthcare, BlackRock Smaller, International Biotechnology, Keystone Positive Change, KR1, and Vanguard All-World ETF.
I sold a little HICL and some JPMorgan Global Growth & Income, the latter as part of an ongoing process to tidy up
and reduce my taxable positions. I haven’t done anything with Fundsmith, Lindsell Train Global, Baronsmead Venture, RIT, or Gresham House Energy Storage. I reckon my portfolio turnover has been 2% this year so that remains very low. It’s been 5%, 9% and 7% for the last three calendar years.
I’m not considering any major portfolio changes right now. I’m watching a few trusts more closely than others of course but I’m not currently planning to get rid of anything in the near future or making any major position size changes.
I’m continuing to write fund profiles over at Money Makers
with recent pieces covering the likes of Herald, Mobius, RIT Capital Partners, Henderson Smaller Companies, Renewables Infrastructure Group, Round Hill Music Royalty, Fidelity Special Values, LXi REIT, Finsbury Growth & Income, and Personal Assets.
Here is the sign-up page that provides full details of what you get as a paying member of Money Makers. Jonathan has set up some more demo portfolios in the last few months and it is very interesting to watch how they have all performed as markets wrestle with current events.
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