Star specialist managers on a discount
Both Evy Hambro and Anthony Bolton run trusts that are currently trading below their net asset value, but this may not be the case for long if the economy begins to pick up.
By Joshua Ausden, News Editor, FE Trustnet
Thursday August 23, 2012
Few areas of investment have managed to avoid the recent turbulence in markets, but specialist managers have had a particularly tough time of late.
Many investment trusts focused on the commodities sector or specific emerging market countries have seen their discount widen quite considerably, which presents an opportunity for investors who think the tide may be about to turn in their favour.
Here are two portfolios on significant discounts and run by top-rated managers:
Evy Hambro – discount of 13.9 per cent
The FE Alpha Manager’s £1.26bn BlackRock World Mining IT
is one of the best-performing closed-ended funds of the last decade, returning 496.19 per cent. By contrast, its HSBC Global Mining index benchmark has delivered 370.76 per cent, albeit with less volatility.
Performance of trust vs index over 10-yrs
Source: FE Analytics
These stellar returns come in spite of the 2008 crash and the more recent market sell-off, which has seen the trust lose more than 20 per cent in the last six months.
Weaker growth and demand from China in particular has prompted a significant slump for commodities stocks and, while there are many who think the market could still fall further, it is worth at least keeping an eye on this trust, which is currently on a discount of 13.9 per cent.
Hambro, who also heads up BlackRock’s flagship Gold & General
fund, predominately invests in large cap stocks associated with mining.
Larger commodity companies tend to be less volatile than those that are smaller, since they are more diversified and less dependent on individual contracts. Rio Tinto, BHP Billiton and Vale are the trust’s top-three holdings.
The portfolio can also have up to 10 per cent invested in physical metals. Gold currently has a 9.4 per cent weighting, though this is split between bullion and gold stocks.
Hambro has headed up the trust since 2009, but was an understudy to Graham Birch during the early and mid-2000s. Since he was named lead manager, BlackRock World Mining has returned 55.52 per cent, compared with 40.74 per cent from its benchmark.
The trust has a total expense ratio (TER) of 1.31 per cent.
Anthony Bolton – 3.2%
The underperformance of star manager Anthony Bolton's Fidelity China Special Situations
investment trust is well documented, but many experts agree that he needs to be given more time before he can be properly judged.
Bolton’s trust was only launched in April 2010, at a time when the post-Lehman rally was close to its highest point. Since then, rising inflation, rumours of a property bubble, a slowdown in economic growth and the knock-on effects of the eurozone crisis have plagued the portfolio, which is now down 26.59 per cent since launch.
Performance of trust since launch vs index
Source: FE Analytics
If the markets were to turn, Bolton’s focus on unloved companies that rely on the Chinese domestic consumption story could bode very well for his portfolio, which is currently underperforming.
Throughout his industrious career, Bolton has been much stronger in up markets than down, which makes the trust’s discount of 3.2 per cent even more attractive for those who are optimistic about the fate of China.
The trust has a TER of 1.7 per cent.