Page 11 - DIY Investor Magazine - Issue 25

be long-term value. It is notable that trust-of-investment trusts Miton Global Opportunities (MIGO) retains a reasonable position in HOT.
BEE
Baring Emerging Europe (BEE) is the only AIC fund focused on emerging Europe; this region tends to be cyclical, and it has been a difficult year for the trust, with NAV down c. 17%.
However, the region has fared reasonably well in terms of controlling the medical and economic impact of the virus (see a recent note); BEE has shrunk to £92m in net assets but a modest spread of c. 1.52%, suggests reasonable liquidity.
The trust is focused on a region which trades on extremely
low valuations, and would be highly geared to a recovering global economy;it trades on an 11% discount and offers a 5.3% historic dividend yield. The payout is supported by the ability to distribute up to 1% of NAV each quarter.
£100M-£200M
AJOT
AVI Japan Opportunity Trust (AJOT) has a highly differentiated approach and clearly defined investment strategy; it has traded on a premium for much of the time since launch in 2018.
AJOT has regularly issued shares, and has grown to £117m; despite the pandemic, it is back on a 1.4% premium and issued shares in June.
We believe that the direction of travel is clear, and that AJOT is a good candidate to grow significantly and bring the added benefits of extra liquidity to shareholders as it grows.
At c. 3.9% it’s spread is higher than some of the other trusts here, thinner trading volumes a result of a lack of willing sellers relative to buyers – as indicated by the persistent premium. AJOT focuses on finding cheap Japanese companies, mainly small-caps, with large amounts of cash or securities on the balance sheet, and unlocking this value. We discuss this in full detail in our note on the trust.
CCJI
At £177m CC Japan Income & Growth (CCJI) is close to the £200m threshold which could open up a broader shareholder base; it is the only trust in the AIC Japan sector with an income remit, and trades on a historic dividend yield of 3.8%.
Historically it has traded on a premium, but slipped onto a discount as the coronavirus crisis resulted in a poor period of relative performance – see our recent note.
Structural gearing of 20% in a relatively indiscriminate market sell-off meant that NAV returns suffered on a relative basis
in the aftermath of the pandemic; with high levels of stock correlation mitigating the defensive characteristics the stock picking process usually emphasises.
As with AJOT, the board has been aggressive in looking to grow the trust when it has traded on a premium. Despite the larger size the spread is reasonably wide at c. 4.9%. The shareholder base is reasonably concentrated, with 42% held by shareholders with over 3% of the shares (as of our latest note).
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Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that Independent financial advice should be taken before entering into any financial transaction.
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11 DIY Investor Magazine | Sept 2020