incomeA dynamic and growth orientated approach to UK smaller companies…

 

growthThis trust has been awarded a rating by Kepler for growth…Find out more

 

 

 

BlackRock Throgmorton Trust (THRG) invests in small and mid-sized UK companies that are either driving innovation or benefitting from structural change, with the primary aim of achieving capital growth. The portfolio manager, Dan Whitestone, firmly believes financially sound, well-managed companies with differentiated products that have a tailwind of secular trends are most likely to undergo exponential growth, and as discussed in Performance to date, this has translated into exceptionally strong and consistent returns for shareholders, both over the long and short term.

Uniquely in the AIC UK Smaller Companies peer group, THRG takes both long and short positions in stocks, betting against firms Dan believes are in a weak position. The short book provides a separate avenue for the manager to add value through stock selection skills. Additionally, the short book allows net exposure to the market to be reduced to smooth volatility in stressed market conditions. As discussed in Gearing, THRG can have a net exposure between 70% and 130% of NAV but typically operates in a range between 100 and 115% of NAV. The current gearing of 120.9% (as at 30/09/2021) indicates the bullish outlook Dan has for his Portfolio, believing the pandemic has accelerated the pre-existing trends his companies were benefitting from.

THRG’s exceptional performance has created strong investor demand such that the trust has been trading at a premium for a large part of 2020 and 2021, and as discussed in Discount the board has been active in issuing shares to address this issue. This has contributed to the growth in assets leading THRG to join the FTSE 250 Index in September 2021.

 

 

Analyst’s View

 

As discussed in Performance, THRG’s track record is outstanding. It is the best performing trust in the AIC UK Smaller Companies sector over five and ten years and second-best over three years on a NAV basis. The ability to go both long and short and gain effective leverage via CFDs has provided Dan and his team additional flexibility to add value via both stock picking and managing overall net exposure to the market. This has resulted in THRG’s excess returns not being overly driven by stylistic factors, despite high conviction in the quality-growth approach and the eschewal of highly cyclical sectors such as energy and mining. If an investor believes that trends in disruption, innovation and digitalisation will continue to drive stock performance and wants a focussed, undiluted Portfolio reflecting this view, then THRG may appeal.

We would note that the trust fee structure is heavily skewed towards performance fees rather than the fixed management fee. As discussed in Charges, although this remuneration structure has fallen out of favour with some boards, we believe it aligns the interests of shareholders and the manager and incentivises Dan and the team to continue to push to outperform. This means we expect Dan to continue to use high levels of gross market exposure, shorting and to maintain conviction in his particular approach, and this will mean THRG will not suit investors uncomfortable with any of these features.

 

BULL BEAR
Very strong and consistent track record of relative and absolute performance Trading at a premium
Focus on structural growth and industry change provides high return opportunities High effective gearing can amplify losses as well as gains
Ability to short companies provides additional opportunities for manager to add value Avoidance of cyclical sectors could cause future underperformance if they rally

 

See the full research paper on Blackrock Throgmorton here >

 

investment trusts income

 

investment trusts

 

This is a non-independent marketing communication commissioned by BlackRock. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

 

 

Download the presentation >

 

Important information

The opinions and views expressed in this webinar are as of 01 July 2021 and are subject to change. They are for information purposes only and should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation to buy, sell or hold any security, investment strategy or market sector. No forecasts can be guaranteed. Opinions and examples are meant as an illustration of broader themes, are not an indication of trading intent and may not reflect the views of others in the organisation. It is not intended to indicate or imply that any illustration/example mentioned is now or was ever held in any portfolio. Kepler Partners LLP may manage investment products with a financial interest in securities mentioned herein and any comments should not be construed as a reflection on the past or future profitability. There is no guarantee that the information supplied is accurate, complete or timely, nor are there any warranties with regards to the results obtained from its use. Past performance is no guarantee of future resultsInvesting involves risk, including the possible loss of principal and fluctuation of value.

The information contained herein is for educational purposes only and should not be construed as financial, legal or tax adviceCircumstances may change over time so it may be appropriate to evaluate strategy with the assistance of a financial professional. Federal and state laws and regulations are complex and subject to change. Laws of a particular state or laws that may be applicable to a situation may have an impact on the applicability, accuracy or completeness of the information provided. Kepler Partners LLP does not have information related to and does not review or verify particular financial or tax situations and is not liable for use of, or any position taken on, such information.

Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590) registered in England and Wales at 9/10 Savile Row, London W1S 3PF with registered No. OC334771.

 





Leave a Reply