Exposure to differentiated sources of returns: Majedie Investments

MAJE offers exposure to differentiated sources of returns…by Jean Baptiste-Andrieux

Overview

Majedie Investments (MAJE), managed by Marylebone Partners, employs a liquid endowment-style investment approach aimed at delivering an annualised return of at least 4% above the UK Consumer Price Index (CPI) over five-year rolling periods. This long-term, fundamentally driven strategy mirrors the approach of elite US university endowments in that the team take a long-term view on investing (avoiding market timing). This approach harnesses idiosyncratic performance from an actively managed equities strategy, held alongside high-conviction investments in other asset classes. However, the team, led by CIO and founding partner Dan Higgins and deputy CIO Olivia Macdonald, steers clear of illiquid assets like private equity, venture capital, and real estate, and all investments are frequently marked to market.

The Portfolio can be divided into three segments: specialist External Managers (equity and absolute-return specialists), Direct Investments, and Special Investments, the latter offering exposure to differentiated opportunities not likely to be held by investors in their portfolios. Over time, the allocation to External Managers is expected to decrease to make room for Special Investments – —with the team having a 20% target allocation—which may help reduce costs.

Although Marylebone Partners has managed MAJE since the end of January 2023, the trust has outperformed the UK CPI + 4% benchmark in the last two calendar years, generating returns of 9.8 and 7.2 percentage points above inflation in 2023 and 2024, respectively. Since Marylebone Partners took over management responsibilities, MAJE has delivered a NAV total return of 20.4% and share price total return of 49.8% (to 25/02/2025) according to Morningstar, leading the Discount to narrow to 5%. The trust currently holds a high level of cash as it prepares to repay its debenture in March, aiming to replace it with a smaller revolving credit facility. As of 31/01/2025, net Gearing stood at 3.3%. Dividends are seen as an important component of shareholders’ total return, and the trust aims to pay quarterly distributions of 0.75% of the relevant quarter-end NAV, annualising at 3% over the financial year.

Analyst’s View

 
In our view, one of the main attractions of MAJE is that it provides access to a strategy typically reserved for institutional investors. To our knowledge, this is a relatively unique approach in the investment trust or open-ended space. Whilst more complex than a simple direct equity strategy, MAJE is managed by a team with extensive experience, resources, and an established industry network—an intangible asset that’s difficult to replicate.

Building on these strengths, Marylebone has designed a portfolio that offers exposure to sources of return that investors are unlikely to capture through more ‘conventional’ strategies. With equities arguably expensive at the index level due to the high concentration of Magnificent Seven in global indices and credit spreads tight, less-well-identified and more attractively priced opportunities should provide better risk/reward returns and enhance portfolio diversification. Furthermore, as many of these sources are idiosyncratic in nature, their success should be less dependent on broader macroeconomic trends.

Finally, prioritising returns above inflation, rather than relative to a market index, further differentiates MAJE from the crowd. One could argue that the primary goal of investing is to grow wealth in real terms over time—not merely outperform an index. After all, beating an index doesn’t necessarily mean beating inflation. As such, we believe MAJE could be an attractive vehicle for long-term investors focussed on protecting their capital from the erosive effects of inflation—an increasingly relevant factor as the era of low inflation that followed the global financial crisis of 2008 is likely behind us.

Bull

• A rare opportunity to access a strategy typically reserved for institutional investors, managed by a highly experienced and well-resourced team
• Offers differentiated sources of return through liquid assets that should not heavily rely on macroeconomic factors for success
• The aim of beating inflation could be attractive to investors looking to grow their money in real terms, rather than trying to beat a market index

Bear

• May not suit investors focussed on relative returns
• Allocation to Special Investments depends on opportunities offered by industry contacts
• High OCF (as with most investment trusts in the AIC Flexible Investment sector)

 
Read the full research on MAJE here >

 
_{Disclosure – Non-Independent Marketing Communication. This is a non-independent marketing communication commissioned by Majedie Investments. 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.}