Manchester & London ditches ‘bully’ benchmark provider to go it alone

Manchester & London (MNL ) has ditched its performance benchmark after growing tired of being ‘scalped and bullied’ by index providers.

M&L Capital Management’s Mark Sheppard, the manager of the £396m technology-focused trust, has declared an end to performance marking against a benchmark in the latest factsheet, a year after dropping its benchmark-related performance fee in favour of a tiered pricing structure.

He stated that under close-end investment fund rules, there was ‘no requirement’ to adopt a performance benchmark, although most funds typically do to help investors track and contextualise progress and returns.

Sheppard argued that the portfolio is ‘not selected from constituents of any single index’ and he does not use any individual benchmark to plot returns against. He also took aim at the benchmark providers.

‘We are tired of being scalped and bullied by benchmark providers,’ Shepherd said, referring to ‘attempted negotiations with a new benchmark provider who will remain un-named’.

‘We have cancelled all services we received from our previous benchmark provider, who has stated that we are no longer even allowed to mention their name,’ he said.

While the most recent factsheet does not include a benchmark, previous ones have outlined the returns of the MSCI UK IMI index, which measures the performance of the large, mid- and small-cap segments of the UK market.

However, 99.9% of the portfolio is invested in North America, meaning the benchmark is of little use to investors.

Sheppard said a ‘huge number of digital financial data providers’ supply details of the net asset value (NAV) and share price performance of MNL, and investors can compare those details against whichever benchmark they think is the best.

‘Providing charts and data against benchmarks heralds back to the digital dark ages when such information was not ubiquitously free,’ he said.

Investors charting MNL’s performance closely will be unfazed by its lack of adherence to a benchmark as it has done little to stop MNL’s stellar run over the past year. It is the best performer in its Global Equity peer group over one and three years, returning 32.3% and 140.8%, respectively, in NAV terms.

While five-year performance sees it drop down a place, it has more than made up for it over 10 years, with the fund returning 400.9%.

MNL has benefited from its extraordinarily high weighting to Nvidia, which makes up 41% of the portfolio. Shares in the microchip giant have soared 1,343% in the past five years, taking the trust along for the ride.

Microsoft also makes up a significant chunk of the trust, at 24.8%. Although the tech stalwart delivered disappointing quarterly results earlier this year, Sheppard pointed to an 18% increase in revenues in its fiscal fourth quarter, led by growth at its Azure cloud computing platform.

Sheppard said technology has had a ‘great year’ but technology investment companies are finding there are still ‘more shares than there is demand for, especially from a volatility-averse UK investment community’.

This led MNL to buy back 4.6% of its shares in the year to the end of July, in line with its peers: Herald (HRI) repurchased 7.5%, Scottish Mortgage (SMT ) bought back 11.4%, and Polar Capital Technology (PCT ) – which Sheppard holds in MNL – was ‘forced to buy back 3.1%’ despite its 674% return over 10 years.

Sheppard said it begged the question: ‘Are we sure it’s not the London market that is broken?’

He added that he hoped for ‘lower discount rates in the US and projection of further [interest rate] cuts to come’ as rates are ‘critical to equity market investing’.