MIGO Opportunities (MIGO ) manager Nick Greenwood bought into biotechnology and infrastructure trusts and benefited from a three-way merger in the Japanese sector during his last stint before the trust moved to Asset Value Investors (AVI).

The mandate for the £76m global equity portfolio shifted from Premier Miton to AVI in mid-December along with former Premier Miton manager Greenwood, who has run the trust since launch in 2004, reuniting him with Charlotte Cuthbertson, his former co-manager who joined AVI in July.

In the half-year results for the trust, covering the six months to the end of October, bargain investment trust hunter Greenwood reported a net asset value (NAV) decline of 1.9% compared with an 11.7% decline in the Numis All Share index.

However, the manager is optimistic about future performance as ‘disappointing holding’ Atlantis Japan was removed from the portfolio thanks to its three-way merger with Nippon Active Value Fund (NAVF ) and Abrdn Japan. 

‘We were able to exit from some of our Atlantis shares at a modest discount,’ said Greenwood. ‘This transaction has removed what has proved to be one of our more disappointing holdings and moved the focus towards activist investing in Japan, one of our current themes.’

NAVF, a Japanese smaller companies portfolio that MIGO already owned, had become a top 10 holding, making up 4.3% of the fund.

Greenwood also added to the ‘unloved’ biotech sector by introducing RTW Biotech Opportunities (RTW ) to the fund. The sector had been ‘punished’ by rising interest rates and now trades at a 20-year low, ‘leaving market prices out of sync with fundamentals’.

However, drug innovation has led to a record number of approvals in 2023, and 50% of new products are now developed by smaller companies, while a ‘number of blockbuster drugs are coming off patent so big pharma has an urgent need and the necessary cash to buy biotechs to restock product lines’.

Greenwood also purchased Ecofin US Renewables Infrastructure (RNEW ) after its Texan wind farm was damaged by a tornado, destroying the utility substation that connects the site to the grid. The shares are down 35% this year.

‘A new connection is being made via another substation,’ he said. ‘In the meantime, the trust will pay a reduced dividend. We believe the reaction in the share price was out of proportion to the challenges.’

Perfect storm

Greenwood said the portfolio along with the wider investment trust universe faced a ‘perfect storm’ of rising UK interest rate expectations, ‘kneejerk’ selling as markets fell, the consolidation of the wealth management industry, and ‘most importantly’ the methodology used to disclose costs, which makes closed-end funds appear expensive versus open-ended funds.

He noted the fund ‘held up well’ against the FTSE All Share Closed End index, which ‘slumped 8.47%’, partly due to the cash held in the portfolio.

The biggest contributor to performance over the half year was uranium as ‘the metal’s spot price crept up steadily’. Jersey-listed company Geiger Counter (GCL ), a £73m fund investing in uranium exploration and production stocks, was the third-largest holding at 5.1% at the end of November.

Greenwood said there is a ‘severe shortfall’ of the metal developing, which has been exacerbated by energy security concerns around Russia’s and Kazakhstan’s roles in the supply chain. Problems in Niger have also disrupted supplies to the French power industry.

‘The decision to extend the lives of many power stations to achieve net zero is leading to demand being much greater than expected in the short term,’ he said.

‘Longer term demand will be driven by the build-out of the nuclear industry in the Middle East and Asia. While uranium is not a rare metal, it will be impossible to boost supply meaningfully given the long lead times, often a decade, in turning a promising deposit into a working mine.’

Not all mining was beneficial to the trust as Baker Steel Resources (BSRT ), a £42m portfolio of natural resources stocks, detracted from returns.

Greenwood said there was ‘little interest in lending to develop new mines and many of the trust’s projects have been delayed in the absence of financing’.

‘It is noticeable that the carrying values of these assets are now only a fraction of what they would be worth as an operational mine,’ he said.

The shares currently trade at a discount of 40%, which Greenwood said is a ‘significant discount to the already depressed carrying value’.

‘It would only need a couple of successes to drive the share price significantly higher,’ he said.