And the winner is...
Winner: BlackRock Throgmorton
Only six UK growth trusts achieved above-average net asset value total returns compared with their sector in each of the past three years, and all were mid- and smaller company specialists. Black Rock Throgmorton Trust (THRG) achieved much the highest returns of these qualifiers, outperforming its benchmark in all three years, so it claims the award.
The trust is managed by Dan Whitestone, who also manages the private BlackRock UK Emerging Companies Hedge fund. He says: “Throgmorton aims to identify and own, for the long term, the exciting, fast-growing companies that we believe are truly differentiated and disruptive and taking full advantage of the structural changes reshaping industries.” He hopes they will do well regardless of the economic environment.
THRG is differentiated by its ability to invest up to 30% of assets in long and short contracts for difference (CFD). The long CFDs are used to increase exposure to companies the manager particularly likes. The shorts are typically used to target areas under structural or cyclical pressures. They have recently been focused on companies in the consumer services sector that are facing headwinds such as digital disruption or cyclical pressures such as rising costs. Short CFDs added 1% to returns last year and it is disappointing they do not appear to have been more rewarding during the market sell-off.
Whitestone has managed the CFD portfolio from 2015, but since taking sole charge of THRG in February 2018 he has concentrated it down to 99 holdings, none of which exceed 3.3% of the portfolio. At end-January industrials and consumer services both accounted for 27% and it had limited exposure to basic materials and oil & gas.
Exposure to disruptive software companies was increased during 2019, as were holdings in UK domestics, but the latter were trimmed in the run-up to the election. Last year’s biggest winner was JD Sports Fashion, which Whitestone bought into at a bargain price in December 2018; he then took some profits as it was promoted to the FTSE 100.
THRG targets long-term capital growth and an attractive total return. Last year’s total dividend was up 2% at 10.2p, covered by earnings per share of 11.02p.
Managed by: Dan Whitestone since February 2018
Sector: UK smaller companies
3-year NAV total return: 62.1%
3-year share price total return: 104.2%
Average sector discount: -5%
Ongoing charges: 1.8%
30% of assets in long and short CFDS
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JPMorgan Smaller Companies Trust (JMI) made dramatic gains in late 2019, when the general election result galvanised the lower end of the UK stock market. As a result, it achieved the best three-year NAV total return in the sector, but it missed out on winning the award because of below-average returns in 2018.
Manager Georgina Brittain has enjoyed a wider choice of companies since JMI’s benchmark was changed from the FTSE SmallCap index to the Numis Smaller Companies plus AIM index in January 2019. However, around a third of the portfolio is still invested in companies capitalised at less than £1 billion.
As recent events have shown, smaller companies can be hard hit when investors run scared, but they can also be exceptionally rewarding for patient investors prepared to swing with the punches, and Brittain is a talented manager.
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