The discount was as wide as 30 per cent in the middle of last year after a period of dull performance, but is now at 18.7 per cent.The trust has made 55.35 per cent over the last 12 months, thanks to NAV gains of 27.21 per cent and a narrowing discount. The FTSE All Share has made 32.06 per cent over this time.
"We continue to believe that the discount of 18 per cent is excessive and feel that Will Wyatt’s efforts to refine the investment process and strengthen the management team should be positive for long-term performance," Cade said.
Caledonia IT’s discount is wider than all but two other global growth trusts, and Cade says it is mispriced.
The average fund in the IT Global Growth sector made just 29.99 per cent over the last year.
Performance of trust vs sector and index over 1yr
Source: FE Analytics
Cade says the restructuring of the portfolio has borne fruit.
After Wyatt was appointed as chief executive in mid-2010, he reorganised the portfolio into six separate pools of capital.
However, two of these pools (Asia and Property) have now been dissolved, with the assets moved into other pools, as appropriate.
"We believe it makes sense to run a more focused portfolio, and the strategy is far clearer now that there are four, rather than six, separate pools of capital," Cade said.
The pools consist of: 20 quoted companies managed by Matthew Masters, which makes up 40 per cent of Caledonia IT; eight to 10 unquoted companies, headed up by Duncan Johnson at 27 per cent of the portfolio; a selection of funds chosen by Jamie Cayzer-Colvin, at 13 per cent of the trust; and an income and growth tranche, made up of a maximum of 45 mega cap global stocks.
Stephen Mitchell manages the fourth pool at 12 per cent of the trust. It also has 8 per cent in cash.
In spite of the refocus, Cade says the portfolio has become less concentrated, having backed down from massive holdings in financial services firm Close Brothers and British Empire Securities.
"Two years ago, Close Brothers and British Empire Securities together represented over 21 per cent of the portfolio," Cade said.
"However, Caledonia has reduced the weighting in Close Brothers to 6.3 per cent by selling into strength, while it has fully exited its position in British Empire."
"At the same time, the tail of small investments has been reduced, with the aim of focusing the group’s resources on a smaller, more manageable list of investments that have the potential to make a meaningful difference to Caledonia’s overall performance."
The trust’s largest holdings are now offshore helicopter transport services company Bristow Group and Belgian firm Cobehold, though Close Brothers is still the number-three holding in the trust.
The trust has decided to scrap the FTSE All Share as a short-term benchmark, which Cade says is a positive.
"The board has decided to cease using a one-year benchmark to measure progress as ‘except by coincidence, Caledonia’s portfolio will not perform in the short-term close to or in line with the FTSE All Share index'," Cade said.
According to Cade, Wyatt is taking the trust in a more long-term direction, with a 10-year investment horizon over which the trust will be measured against the FTSE All Share.
The management team has also redirected the trust’s geographical exposure towards the US and Asia, ramping up exposure to the world’s largest economy to 16 per cent from 7 per cent three years ago. This is a figure Cade expects to rise further.
A total of 10 per cent of the portfolio is invested in Asia, although UK companies still make up the bulk of the portfolio.
The trust has a dividend yield of 2.5 per cent and is not geared.
On the income front, Cade says the dividend is up 10 per cent from the previous year, to 47.2p, which he says is the 46th consecutive year of increases in the annual dividend.
It has ongoing charges of 1.01 per cent, according to the AIC.
