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The up and coming investment trust managers to watch: Part 2

20 July 2017

FE Trustnet explores the fund managers tipped by analysts as the ‘rising stars’ of the investment company space.

By Jonathan Jones,

Reporter, FE Trustnet

The Mercantile Investment Trust, BlackRock World Mining Trust and Seneca Global Income & Growth are all run by up and coming managers that investors might want to keep an eye on, according to a group of analysts. 

The investment company sector has a number of well-respected, long-tenured managers for investors to analyse, including the likes of Nick Train and Neil Woodford, but identifying the next rising stars can be more difficult without a long-term track record.

Investment company analysts were asked by the Association of Investment Companies (AIC) which new managers they believe could carve out successful careers in their respective funds.

Having looked at the prospective ‘rising star’ managers highlighted by Numis Securities and Peel Hunt’s, below FE Trustnet looks at the selections of Winterflood Investment Trusts and Cantor Fitzgerald.

 

Guy Anderson – The Mercantile Investment Trust

Winterflood research analyst Emma Bird highlighted Guy Anderson as the first manager for investors to watch going forward.

He co-manages the £1.6bn The Mercantile Trust, a UK mid- and small-cap focused fund which aims to grow its dividends at least in line with inflation, alongside Martin Hudson and Anthony Lynch.

Bird said: “He was appointed as lead manager in April last year, having been involved with the management of the fund since August 2012 and has been responsible for 50 per cent of the portfolio since March 2015.”

Since he joined the fund, it has returned 125.29 per cent, 40.6 percentage points above the IT UK All Companies sector average, as the below shows.

Performance of fund vs sector since manager start

 

Source: FE Analytics

“Guy Anderson is a highly-regarded manager and we believe that his promotion to lead manager of the largest investment trust investing in UK equities demonstrates JPMorgan’s confidence in his ability.

“Mercantile is Guy’s sole focus and he is supported by a well-resourced team. The manager’s passion about the individual stocks in which he invests is evident and the fund has started to show signs of a turnaround in performance since his role was expanded just over two years ago.”

The fund is 29 per cent weighted to industrials with Spirax Sarco Engineering and DS Smith its top two holdings, with G4S and Halma also among its top 10 positions.

The trust is on a price discount to net asset value (NAV) of 10.3 per cent, is 4 per cent geared, offers a 2.4 per cent yield and has clean ongoing charges (OCF) of 0.5 per cent, according to the latest figures from the AIC.


Olivia Markham - BlackRock Commodities Income Investment Trust and BlackRock World Mining Trust

Bird’s second selection is Olivia Markham, a member of BlackRock’s Natural Resources team and manager of both the BlackRock Commodities Income Investment Trust and BlackRock World Mining Trust.

She joined BlackRock in 2011 from her role as a sell-side mining analyst which the analyst said “providing her with in-depth knowledge of the sector”.

She became co-manager of BlackRock Commodities Income Investment Trust in January 2014 and of BlackRock World Mining Trust in April 2015, replacing the highly-regarded Catherine Raw, who left to join Barrick Gold as chief financial officer.

“Olivia is considered to be a rising star at BlackRock and we rate the company's natural resources team highly,” Bird noted.

Merkham and FE Alpha Manager Tom Holl took over the £84m BlackRock Commodities Income trust in January 2014, during which time the fund has lost 17.39 per cent as commodity prices dived on fears of a slowdown in China and a large oversupply in numerous sectors.

Performance of fund vs sector since managers start date

 

Source: FE Analytics

However, this is 2.05 percentage points better than the IT Commodities & Natural Resources sector, as the above shows.

The fund has a 19.9 per cent weighting to oil stocks, which particularly have struggled in recent years with the oil price plummeting from highs of more than $100 per barrel to lows of around $20 per barrel.

The trust is on a price discount to NAV of 4 per cent, is 9 per cent geared, offers a 5.6 per cent yield and has an OCF of 1.39 per cent, according to the latest figures from the AIC.

Merkham joined the £631m BlackRock World Mining Trust in May 2015 alongside Evy Hambro, during which time the four crown-rated fund has returned 28.64 per cent, beating the sector by 14.7 per cent.

The four crown-rated fund solely invests in mining stocks with Rio Tinto (11 per cent), First Quantum Minerals (8.9 per cent) and Glencore (7.6 per cent) its top three holdings.

The trust is on a price discount to NAV of 10.5 per cent, is 14 per cent geared, offers a 3.4 per cent yield and has an OCF of 1.1 per cent, according to the latest figures from the AIC.


Peter Elston - Seneca Global Income & Growth

Monica Tepes, head of investment companies research at Cantor Fitzgerald Europe, chose Peter Elston as her manager to watch.

He is only about one year into his joint lead manager position of the Seneca Global Income & Growth fund, having joined Alan Borrows on the fund in February 2016.

“This is a small multi-asset fund, (£70m market cap) but has big ambitions to grow and has already made good progress in this direction with strong performance, an attractive yield, a successful zero-discount policy in place and already some share issuance,” Tepes said.

The fund has an overweight position to UK (33.2 per cent) and overseas equities (28.2 per cent) while underweight specialist assets and fixed income.

Performance of fund vs sector since manager start

 

Source: FE Analytics

Since Seneca chief investment officer Elston joined the fund as co-manager, it has returned 29.35 per cent – 1.37 percentage points ahead of the IT Flexible Investment sector.

The trust is on a price premium to NAV of 0.1 per cent, is 7 per cent geared, offers a 3.7 per cent yield and has an OCF of 1.59 per cent, according to the latest figures from the AIC.


Keith Watson and Robert Crayfourd - City Natural Resources High Yield, Golden Prospect Precious Metal and Geiger Counter

Tepes’ other managers to watch are CQS’s Keith Watson and Robert Crayfourd, who are co-managers on three funds - City Natural Resources High Yield, Golden Prospect Precious Metals and Geiger Counter.

“While they have been with CQS since 2013 and 2011 respectively, this has coincided for the most part with a very tough time for their sector,” the analyst said.

“The first five of the last six years saw natural resource equities recording declines in every year,” she added.

“2016 however saw a sharp reversal of this trend and all three funds were amongst the top 15 best performing trusts with price total returns of 57 per cent to 95 per cent.”

Performance of funds in 2016

 

Source: FE Analytics

However, while 2017 started well for the sector it should be noted that those gains have since been given back.

“I do think however that should the recovery trend get back on track and continue over the coming years, the managers will get more media and investor attention,” Tepes said.

Crayfourd's£75m, four crown-rated City Natural Resources High Yield is on a price discount to NAV of 18.9 per cent, is 20 per cent geared, offers a 4.9 per cent yield and has an OCF of 1.86 per cent, according to the latest figures from the AIC.

The Golden Prospect Precious Metal trust, run by both Watson and Crayfourd is on a price discount to NAV of 20.4 per cent, is 1 per cent geared and has an annual management fee of 1.25 per cent, according to the latest figures from the AIC.

The pair also run the £16m Geiger Counter trust, which is on a price discount to NAV of 1.7 per cent, is 26 per cent geared and has an OCF of 3.34 per cent, according to the latest figures from the AIC.

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