The £1.01bn trust is trading at a discount of 19 per cent, compared with 8.25 per cent from the average vehicle in the IT Global Growth sector, according to FE Analytics data.
Performance of trust vs sector over 3-yrs
Source: FE Analytics
Caledonia has had its ups and downs over the medium-term; it has managed a paltry 1.89 per cent in the last three years, having lost as much as 37 per cent in the downturn. But Numis’ Ewan Lovett-Turner says the trust has potential.
"The net asset value (NAV) has lagged in the recovery since early 2009, due to a defensive bias and exposure to unquoted companies," he explained.
"Will Wyatt completed a strategic review after being appointed chief executive in July last year, and although the changes are subtle, we believe they have the potential to reinvigorate performance."
Caledonia takes significant minority stakes in companies and acts as a long-term supportive investor.
Following Wyatt’s strategic review, the vehicle plans to up its Asian exposure, but slash the number of large caps in its holdings.
Caledonia already has a concentrated portfolio, with the top-10 investments representing more than 50 per cent of its assets, but Wyatt wants to cut the number of core holdings from 68 down to 40 or 50.
He also thinks the West is facing sluggish growth for the foreseeable future, so wants to increase the trust’s Asian exposure up from 14 per cent.
Wyatt also announced plans to up the dividend of Caledonia from its yield of 2.1 per cent, and has introduced a new income and growth equity portfolio with a target allocation of 15 to 20 per cent of net assets over the next few years.