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Volatility Bites: the week’s biggest trust fallers and risers

Volatility Bites: the week’s biggest trust fallers and risers

Volatility returned with a vengeance this week with global markets attempting and failing to sustain a rebound after tumbling on Tuesday in belated recognition that the era of easy money is over.

Given that, the striking thing about our list of big investment trust fallers (see first table) is that it is not completely dominated by funds under the cosh of macro-economic factors.

Other things happened! The sacking of star smaller company fund manager Philip Rodrigs for an undisclosed breach of compliance rules in December was the most shocking event. His departure caused shares in River & Mercantile UK Micro Cap, an investment trust he was hired from Investec to launch three years ago, to crash nearly 24%.

Skipping over Ratos and Investor AB, two Swedish investment companies, and Tiso BlackStar, a Luxembourg-based South African publisher, the next significant faller for UK investors is CATCo Reinsurance Opportunities. Its shares fell nearly 10% after updating investors last Friday on the impact of last year’s hurricanes and wildfires on shareholder returns.

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Fifteen biggest fallers

  Price 8/2/18 Price 1/2/18 Change
River & Mercantile UK Micro Cap (RMMC)  178.50 234.00 -23.7%
Ratos AB B (RATOB)  29.90 37.50 -20.3%
Tiso BlackStar Group (TBGR)  37.00 43.00 -14.0%
EF Realisation Company (EFR)  33.50 38.00 -11.8%
CATCo Reinsurance Opportunities Fund (CAT)  0.73 0.80 -9.7%
Fidelity China Special Situations (FCSS)  228.50 252.00 -9.3%
Edinburgh Worldwide (EWI)  708.00 778.00 -9.0%
JPMorgan Chinese (JMC)  303.50 332.50 -8.7%
Alternative Liquidity (ALF) 0.22 0.25 -8.6%
Investor AB (INVEB) 358.00 388.80 -7.9%
Premier Global Infrastructure (PGIT)  136.00 147.50 -7.8%
Ecofin Global Utilities & Infrastructure (EGL)  114.00 123.50 -7.7%
Herald (HRI)  1100.00 1190.00 -7.6%
Aberforth Split Level Income (ASIT)  92.00 99.50 -7.5%
Phoenix Spree Deutschland (PSDL)  348.00 376.00 -7.4%

Source: Numis Securities. Share price gains in week to 8/2/18

This week’s almighty sell-off does explain most of the other sliders in the above table, however. For example, it’s not a surprise to see two highly geared China specialists – Fidelity China Special Situations and JPMorgan Chinese – fall around 9% as risk aversion gripped investors.

Nor is the presence of Edinburgh Worldwide a shock. Shares in the adventurous and top-performing smaller companies trust over three years are at the more volatile end of the global sector. It also amplified equity market declines with a fall of 9%.

The three funds from Premier, Ecofin and EF Realisation invest in utilities and infrastructure shares. Their falls of between 7-12% show they are once again perceived as ‘bond proxies’ that will be hurt by a move to higher interest rates.

Herald has a great long-term record investing in UK technology shares under manager Katie Potts, but, even after removing gearing recently, is also probably viewed as being too edgy in these cautious times and its shares fell nearly 8%.

The inherent leverage in the structure of Aberforth Split Level Income, a smaller company income fund rolled out of the windup of its successful forerunner last summer, saw it fall a similar amount.

The surprise on the list of fallers is Phoenix Spree Deutschland, a Berlin residential property investment company, which last week indicated its net asset value jumped 16% in the second half of the year.

Private equity performs well

Turning to the list of risers (see second table below) – and there were a few notching up modest gains – one notable thing is the prominence of private equity funds.

There are five – ranging from the respected and active HgCapital Trust, up 3%, to Candover, LMS Capital, Mithas and Symphony International which are all in various stages of winding up and returning cash to shareholders and which edged between 0.6% and 2.1% higher.

Boost for Brevan

Is there a sign of a recovery in BH Macro and BH Global? Gains of 2% and 1.3% are not much to write about and one week is obviously far too short to draw conclusions.

However, the abnormally calm nature of the bull market in recent years is one factor in the underperformance of these investment companies linked to the Brevan Howard hedge funds. It could be that a resurgence in volatility is just what its bond and currency traders need to do better. At the very least it looks to have generated some interest in their shares which both trade on improved discounts of 6% to net asset value.

Fifteen biggest risers

  Price 8/2/18 Price 1/2/18 Change
Ashmore Global Opportunities - US$ (AGOU)  3.96 3.83 3.4%
Dolphin Capital Investors (DCI)  6.80 6.60 3.0%
Yatra Capital (YATRA)  5.20 5.05 3.0%
HgCapital Trust (HGT)  1795.00 1747.50 2.7%
Pacific Alliance China Land (PACL)  2.53 2.46 2.6%
LMS Capital (LMS)  49.00 48.00 2.1%
BH Macro - £ (BHMG)  2070.00 2030.00 2.0%
Candover Investments (CDI)  117.00 115.00 1.7%
Macau Property Opportunities (MPO)  189.50 187.00 1.3%
BH Global - £ (BHGG)  1415.00 1397.50 1.3%
City Merchants High Yield (CMHY)  188.25 186.00 1.2%
SQN Asset Finance Income C (SQNX)  91.60 90.60 1.1%
DP Aircraft (DPA)  1.07 1.06 0.9%
Mithras IT (MTH)  226.00 224.00 0.9%
Symphony International Holding (SIHL)  0.87 0.86 0.6%

Source: Numis Securities. Share price gains in week to 8/2/18.


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