Capital Gearing drops Juniper over discount control blunder

Annual report shows second year of sub-inflation returns from fund run by Peter Spiller, with its performance hampered by the temporary suspension of share buybacks.

Capital Gearing (CGT ) has dismissed company secretary and administrator Juniper Partners over the delays that led to a three-month suspension of its discount control policy and appointed Frostrow Capital and JP Morgan Securities in its place.

Frostrow will supply secretarial and administration to the £1bn defensive multi-asset investment company and JP Morgan will operate the discount control policy under which Capital Gearing seeks to keep its share price close to asset value through regular issuance and buybacks.

In November the company blamed a ‘series of errors and omissions’ for the delay in gaining court approval in Northern Ireland – where CGT is domiciled – for the cancellation of its share premium account. That meant there was insufficient money to continue buybacks from November to January, and the discount widened to over 5% before settling back to the current 2% when share purchases resumed. 

CGT’s fund manager CG Asset Management has also agreed to provide further investor relations and marketing services which will add five basis points, or 0.05%, to the company’s annual costs. Ongoing charges rose to 0.69% from 0.64% of assets last year as a result of the company’s asset base shrinking from the £195m of buybacks that did occur.

Dwindling returns

The temporary suspension in buybacks and widening in the discount meant that shareholders received a total return, including the annual dividend, of just 0.8% in the year to 31 March. That was less than the 1.8% growth in net asset value (NAV) which itself lagged the 3.2% rise in inflation as measured by the consumer price index, a performance that chair Jean Matterson said was ‘far from satisfactory’.

This is a second year of sub-inflation returns. In 2022/23 NAV fell 3.6% while CPI surged 10.1%.

This week brought good news for fund managers Peter Spiller and Alastair Laing, however, when both received AA-ratings in Citywire’s new Investment Trust Fund Manager Ratings for the fund’s superior underlying, risk-adjusted returns. The managers of rivals Personal Assets (PNL ) and Ruffer (RICA ) received AA and A ratings respectively.

A general widening in the discounts of the investment companies in which the trust invests, and a second year of rising interest rates hitting bonds, were the main factors alongside the strength of the dollar for the ‘pedestrian’ performance in the latest financial year, Matterson said. 

However, the chair held out the prospect of better returns, saying, ‘the last two years have been a period of dramatic repricing in the most significant markets in which this company invests, raising the prospect of improved medium-term returns’.

While bond prices had slumped, the amount of income they yielded has again been strong, although earnings slipped 1.3% to 69.74p a share after a 24.4% surge last year.

In future the  company may pay some of its future dividend in interest distributions. For the financial year just gone a 78p per share dividend has been proposed, up from 60p last year, which if approved by shareholders in July, will be paid that month. It follows a special, one-off dividend of 11p in February. 

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