JPMorgan China Growth & Income (JCGI)

Performance 

JPMorgan China Growth & Income (JCGI ) managers Rebecca Jiang, Howard Wang and Li Tan acknowledged ‘missteps’ in stock selection caused performance to disappoint over the six months to the end of March.

The £198m trust, which invests in growth stocks in the Greater China region, reported a net asset value (NAV) return of 4.2% compared with a 10.4% rise by the MSCI China index. Its shares rose 9.4% over the same period.

Despite its 10% discount, the board chose not to repurchase any shares over the six-month period. In a similar vein to JPMorgan’s emerging markets trust, which last week proposed an acceleration in buybacks, JCGI has ramped up buybacks since April – buying back close to 100,000 shares at an average discount of 11.3%. 

Stifel analyst Iain Scouller noted that ‘much of the rise of the MSCI China index during the period was driven by value stocks’ which lie outside of the trust’s remit, particularly state-controlled financial companies.

Over the past three years, JCGI’s shares are down 31.5% versus a 5.9% loss by the average trust in the AIC’s China/Greater China sector. 

Portfolio changes 

Unsurprisingly given the buzz around DeepSeek, a handful of technology names were the main contributors to performance over the period. 

These included Kingdee, a software business whose AI-applications the trust believes will be a ‘beneficiary of DeepSeek’s progress in this field’. The team also highlighted tech giant Alibaba as another performance driver.

In the tech space, JCGI also purchased cloud computing and electronic gaming company Kingsoft and online market business Kuaishou Technology. 

Two significant detractors over the period were electric vehicle makers BYD and Xiaomi. A position in China Resources Gas, which connects gas to new residential properties, was also hurt by the ongoing weakness in the Chinese housing market. 

Over the past six months, the managers reduced exposure to Nvidia-related names in a bid to protect the portfolio from tariff-related volatility. For example, their holding in Taiwanese electronics manufacturer Foxconn was reduced, while Zhongji Innolight, which manufactures telecommunication transceiver modules, was sold completely. 

What the managers say 

Jiang, Wang and Tan praised China’s evolving regulatory landscape which ‘now prioritises a pro-entrepreneur and pro-equities stance, following strategic interventions to stabilise markets and restore confidence in the tech sector.’

They added: ‘We are comfortable that our holdings are either concentrated in domestically focused businesses with immunity from tariffs, or in exporters that have strong pricing power and well-diversified supply chains and are thus well-positioned to weather the challenges presented by higher tariffs.’

Barings Emerging EMEA Opportunities (BEMO) 

Performance

Barings Emerging EMEA Opportunities (BEMO ) beat its benchmark index over the six months to the end of March, despite stagnant Russia assets dragging down its portfolio. 

The £77m trust, which invests in emerging and frontier markets, reported an NAV return of 10% and share price return of 20% versus a 7% rise by the MSCI Emerging Markets EMEA index over the period. 

The board pointed out the relative outperformance of BEMO’s NAV over the past two financial years has moved the trust ‘firmly above the benchmark over one, three, five and 10-year periods.’ 

Portfolio changes 

The trust’s holdings in Central and Eastern Europe performed well over the period. BEMO’s chair Frances Daley said this ‘owed much to geopolitics’, as increasing hopes about the prospect of an end to the war in Ukraine provided a boost to valuations. 

‘For all the deep uncertainties about the end of the war, the recent market performance offers insight into the region’s potential to deliver strong returns in the event of a lasting ceasefire,’ Daley added. 

Russian assets in the portfolio continued to be valued at zero while extensive sanctions and restrictions on sales remain in place. However, the board said it ‘remains focused on how shareholder value can best be preserved, created and realised in relation to these holdings.’ 

‘A welcome development this financial year has been the realisation of £1m from the sale of Nebius following three realisations of other Russian holdings during the prior year. Although these are positive developments, the board will continue to value the remaining assets at zero until circumstances permit otherwise,’ Daley explained.

Discount  

BEMO currently trades at a 16% discount. This discount has been persistent since the first quarter of 2022 when its Russian assets were written down. Meanwhile, broader market volatility post the US tariff announcements hasn’t helped matters. 

The trust’s five-year discount and performance targets, set in October 2020, will soon be tested. Daley said the portfolio’s outperformance since 2022 puts the performance target ‘within realistic reach’. However,  the board expects the discount management target to be missed.

If the average discount exceeds 12% over the period, the board will consider a tender offer for up to 25% of the share capital. 

The board said it will consider the case for a tender offer alongside other strategic options, ‘taking account of the company’s remaining Russian assets.’

Abrdn Diversified Income & Growth (ADIG) 

Wind-down update 

Abrdn Diversified Income & Growth (ADIG ) confirmed its managed wind-down will continue with the secondary market sale of its private assets via independent broker Campbell Lutyens. 

Following shareholder approval of the wind-down in February last year, the trust sold the majority of its public market assets and had returned approximately £115m to shareholders by the summer. 

The board of the £136m trust admitted that given the diversified nature of the trust’s remaining portfolio ‘it is unlikely that any one buyer will be found for the entire portfolio and therefore the process is expected to involve sales to multiple interested parties.’

ADIG is currently liaising with the underlying general partners of its investments ‘with a view to commencing the marketing in the coming weeks.’ 

The board also clarified why exclusive discussions with a third party to sell the remainder of the portfolio fell through, explaining the offer was ‘not sufficiently attractive to merit a board recommendation’.

Nevertheless, the trust and its advisers still expect any sale to be ‘at a material discount’ to the underlying NAV.

Performance 

Over the six months to the end of March, the trust’s NAV increased by 4.4% at £206m, comprising the investment portfolio of £171m and net current assets of £34.8m. Unfunded commitments stood at £21.4m. 

ADIG said private equity ‘led the way’ over the six-month period, benefiting from three full redemptions and two partial redemptions. 

Dividend update 

Over the period, shareholders received a dividend of 1.95p per share. 

The board reminded shareholders that the trust’s capacity for revenue generation ‘substantially decreased’ following the sale of its public market assets and ‘will reduce further as the private market assets are realised and capital is returned to shareholders.’

It is expected that, as a minimum, ADIG will declare a dividend each September, normally payable in October, to maintain investment trust status. 

Downing Renewables & Infrastructure (DORE)

Continuation Vote 

Shareholders in Downing Renewables & Infrastructure (DORE ) approved a five-year continuation vote with 88.9% of investors voting in support. 

The £145m trust, managed by Tom Moore and Tom Williams, invests in renewable energy and infrastructure assets in the UK, Ireland and Northern Europe. 

It trades at a discount of 27%, which is in line with peers, according to Deutsche Numis’s data. 

Over the past three years, DORE’s shares are down 9.7%, which compares to a 22.9% loss by the average fund in the AIC’s renewable energy infrastructure sector.