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Trust Watch UK Half-Year Report: Max Ward top again!

10 July 2018

Max Ward, manager of Independent, the best-performing investment trust of last year, beat all UK trusts in the first six months of the year with a total shareholder return of 22.5%. First of two special reports.

Max Ward, manager of Independent (IIT), the best performing investment trust of last year, has delivered another top-notch set of returns, with shareholders enjoying gains of 22.5% in the first half of the year.

Analysis of performance data from Numis Securities, which categorises investment trusts in a slightly different way to the Association of Investment Companies (AIC) sectors used by many investors, shows the veteran stock-picker produced the best result in both the UK All Companies grouping and among all listed closed-end funds investing in the UK (see table below) in the six months to the end of June.

Continued enthusiasm for Ward’s big bets on Fevertree Drinks (FEVR), Blue Prism (PRSM) and Ashtead (AHT), contributed to Independent’s 22.5% total return, including dividends. This beat the 16.3% achieved by second-placed Artemis Alpha (ATS), which after several years of poor performance is enjoying a revival under a refreshed management team ahead of a shareholder continuation vote in September.

It also generated double the return of Schroder UK Growth, another underperformer which pushed into third place as investors excitedly bought its shares ahead of its switch to Baillie Gifford where it this month relaunched as Baillie Gifford UK Growth (BGUK).

While impressive, Independent’s first half performance doesn’t quite match last year’s when it delivered 71.3%, making it the best performing of all investment trusts in 2017 and winning one of Citywire's first investment trust performance awards.

This time the trust has been overtaken by two specialist rivals: Syncona (SYNC), the highly rated life sciences fund with first half gains of 24.8%; and EF Realisation Company (EFR), the rump of what is left of the former Ecofin Water & Power Opportunities, which delivered an astonishing 91% return ahead of its windup in two months’ time.

However, Independent did beat Scottish Mortgage Trust (SMT), the £7.7 billion global giant, which returned 18.4% to make it the best in the Numis Global category, although not in the AIC Global sector, which oddly includes Independent even though it invests overwhelmingly in the UK.

This is a sweet result for Ward, who used to manage Scottish Mortgage at Baillie Gifford in the 1990s before its current co-manager James Anderson started to turn it into the growth juggernaut we know today.

Another impressive – but worrying – feature of Independent’s progress this year is the way investors have defied the sell signals Ward and other of the trust’s directors have sent by repeatedly selling stock to take advantage of the 20% premium to net asset value (NAV) at which the shares traded at the end of June.

The extent of the bubble around the stock – which has consistently traded at a premium for a year – is shown by comparing the 22.5% shareholder return with the much lower but still credible 8.1% growth in its NAV during the first half. A similar disparity exists between the five-year shareholder return of 267% which is much higher than the 169% growth in the underlying portfolio over the same period.

Other highlights

The poor performance of Woodford Patient Capital (WPCT) rightly gets a lot of attention but it wasn't quite the worst UK All Companies trust in the first half. The wooden spoon went to Sanditon (SIT) whose bearish views on markets saw its shares slip 4%, worse than the underlying 1.1% dip in net asset value as the trust sank to a 10% discount to its NAV.

Scrolling down to the UK Equity Income group, the boost Merchants (MRCH) has had from cutting its borrowing costs at the end of last year is evident to see. Shares in the high-yielding trust run by Simon Gergel at Allianz Global Investors generated a 9.1% total return as investors anticipated last week's bigger-than-normal first quarter dividend increase, pushing the shares ahead of the 5.3% growth in NAV. That shrank their discount to just 3%.

As I noted in Trust Watch yesterday, a bigger possible bargain, if you are a contrarian willing to bet on a recovery in fund manager Mark Barnett's performance, is Perpetual Income & Growth (PLI) whose shares' six-month returns were the worst in its sector but offer a wide discount of nearly 12%.

Moving further down to UK Smaller Companies trusts, BlackRock's Mike Prentis and Dan Whitestone gave Ward a run for his money with their Throgmorton (THRG) and Smaller Companies (BRSC) both generating returns of around 19% in the six months to 29 June.

How to read the table

The investment trusts are ranked within their Numis sectors by their share price returns in the first half of the year (second column from left). Alongside this you can see the underlying gains in net asset value (NAV). Because six months is a very short period on which to judge performance we include the five-year share price and NAV returns as well. The last column lists the premium (share price above NAV) or discount (share price below NAV) at which the trusts stood at the end of 29 June. At the bottom of the table we list the comparable returns of all the relevant index benchmarks.

Tomorrow I will follow up with a look at Global investment trust performance in the first half of the year.

  Share price first half % NAV first half % Share price 5Y % NAV 5Y % Share price premium (- discount) to NAV %
UK - All Companies (average) 6.8 2.5 84.9 71.1 -1.9
Independent 22.5 8.1 267.0 169.1 20.4
Artemis Alpha 16.3 11.8 37.5 47.4 -16.9
Baillie Gifford UK Growth** 11.4 2.5 42.8 38.4 -7.2
Fidelity Special Values 7.4 1.2 97.7 81.1 0.8
Jupiter UK Growth 6.9 3.6 47.6 35.6 -1.3
Aurora 6.7 7.2 72.0 50.5 2.0
Henderson Opportunities 4.6 3.3 98.2 93.3 -15.9
F&C UK High Income - B Shares 1.7 -1.7 45.6 46.2 -6.7
Invesco Perpetual Select - UK  1.2 -0.2 69.5 71.4 -1.6
Keystone -0.4 -1.7 33.3 48.1 -11.9
Woodford Patient Capital -1.7 0.2 - - -9.3
Sanditon Investment -4.0 -1.1 - - -10.0
           
UK - Equity Income (average) 2.1 1.6 50.9 58.2 -4.4
Merchants 9.1 5.3 49.7 48.5 -3.4
JPMorgan Claverhouse 6.5 3.2 76.0 67.5 -2.8
Finsbury Growth & Income 5.8 5.4 97.0 99.1 0.8
Standard Life Equity Income 3.3 -2.6 62.6 59.8 -0.6
Temple Bar 2.7 3.0 38.1 48.0 -6.0
Investment Company 2.6 1.8 33.1 39.7 -9.2
BlackRock Income & Growth 1.3 1.9 60.2 65.0 -3.2
JPMorgan Elect - Managed Income 0.8 -1.2 57.0 53.0 -1.2
Dunedin Income Gwth 0.6 0.1 25.2 39.3 -11.0
City of London 0.5 -0.5 53.4 52.4 2.2
Murray Income 0.5 -0.6 31.6 43.3 -8.2
Diverse Income 0.2 2.1 83.4 88.8 -1.6
Lowland 0.1 0.2 49.0 62.7 -7.7
Edinburgh 0.0 0.3 45.1 57.9 -9.0
F&C Capital & Income 0.0 1.9 59.9 65.0 -0.8
Schroder Income Growth -0.3 0.1 50.3 61.0 -9.8
Invesco Income Growth -0.5 0.9 40.9 49.3 -13.4
Troy Income & Growth -1.6 -0.5 52.1 56.8 -1.5
Value and Income -1.7 -0.1 50.1 39.3 -17.1
Perpetual Income & Growth -3.7 -1.6 28.7 46.5 -11.7
           
UK - Equity & Bond Income (average) -0.5 1.7 48.5 55.2 -2.1
British American 7.9 99.8 48.2 66.4 77.2
F&C UK High Income- Units 1.6 -1.7 47.3 46.1 -7.1
Shires Income 1.1 -2.2 64.5 61.9 -0.2
F&C UK High Income - A Shares -0.5 -1.7 43.3 46.8 -8.5
Henderson High Income -2.7 -1.0 45.3 61.7 -3.8
           
UK - High Income (Smaller Cos) (average) 1.5 -0.5 40.3 42.9 -3.7
Aberdeen Smaller Companies Income  4.1 1.1 86.0 105.1 -13.7
Acorn Income  3.9 1.1 92.9 97.4 -1.2
Aberforth Split Level Income  1.2 -0.9 - - -2.2
Chelverton Small Companies Dividend  -4.4 -3.8 129.9 115.9 -0.3
           
UK - Mid Cap (average) 2.3 2.3 101.8 90.6 -9.3
JPMorgan Mid Cap 4.6 0.5 132.1 105.0 -4.9
Schroder UK Mid Cap 2.2 0.5 77.3 74.3 -14.5
Mercantile 1.9 2.8 100.7 90.6 -9.5
           
UK - Smaller Company (average) 8.1 4.8 116.9 104.4 -8.8
BlackRock Throgmorton Trust 19.1 10.0 160.0 137.7 -8.7
BlackRock Smaller Cos 18.9 9.3 162.5 142.2 -6.0
Gresham House Strategic 17.2 -1.3 - - -19.8
Dunedin Smaller Cos 11.5 5.0 83.7 92.9 -9.1
Henderson Smaller Companies 9.3 4.0 153.8 116.6 -7.2
JPMorgan Smaller Companies 8.4 7.7 106.5 92.5 -16.1
Aberforth Smaller Cos 8.3 3.2 97.1 89.5 -9.6
Rights & Issues (Ordinary Share) 6.4 5.8 259.3 171.6 -8.5
Miton UK Microcap 4.5 6.5 - - -4.8
Standard Life UK Smaller 0.9 7.2 93.1 111.7 -9.1
Invesco Perpetual UK SmCos -0.2 1.2 134.5 108.5 -5.7
River & Mercantile UK Micro Cap -1.5 6.8 - - -5.3
Montanaro UK SmCos -3.7 0.9 49.9 56.8 -22.7
Athelney Trust -4.7 0.3 100.4 87.7 -8.0
Downing Strategic Micro-Cap -7.1 -7.0 - - 2.2
Strategic Equity Capital -7.9 -5.1 116.7 112.6 -16.3
CIP Merchant Capital -11.8 -2.6 - - -3.5
Odyssean - - - - 7.0
           
UK - Smaller Cos Specialist (average) -4.2 3.3 17.9 22.8 -5.6
Crystal Amber 15.3 31.6 81.8 107.6 -12.7
Sherborne Investors B 2.4 0.0 - - -5.2
Marwyn Value Investors -6.4 -0.6 8.9 9.1 -29.8
Sherborne Investors C -9.4 -2.8 - - 0.4
           
FTSE All Share 1.7 1.7 52.8 52.8  
FTSE 350 High Yield 1.2 1.2 44.8 44.8  
FTSE Mid Cap ex ICs 1.9 1.9 72.6 72.6  
FTSE Small Cap ex ICs 0.1 0.1 78.7 78.7  
Numis Smaller Cos ex ICs -1.1 -1.1 72.4 72.4  
FTSE Fledgling ex ICs 9.0 9.0 214.2 214.2  
FTSE AIM 3.8 3.8 67.0 67.0  

Source: Numis Securities: 29/6/18
** Baillie Gifford UK Growth was previously Schroder UK Growth

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