A recent pick-up in performance combined with a change in investment strategy and a notably wide discount could make Hansa Trust a significant value opportunity, according to Winterflood Securities.
Hansa, a family investment trust overseen by William Salomon and managed by John Alexander, has fallen out of favour in recent years as its performance has lagged; over three years the fund has returned just 2.6 per cent compared to 39 per cent from its sector, IT UK all companies. This poor performance is reflected in Hansa's current share price discount to net asset value (NAV), which is by far the widest in the sector at nearly 23 per cent.
The trust's ownership structure, which sees it split into two share classes, has also weighed against it. Over half of the £8 million of ordinary voting shares are owned by the family of William Salomon, while the remaining £16 million of 'A' shares do not have voting rights.
This led to a de-rating of the trust by a number of brokers in 2012, when its 'A' shares were excluded from the FTSE All Share index as non-voting shares became ineligible, leading to widespread selling by tracker funds.
However, Hansa has turned its performance around of late and is now the best-performing trust in the UK IT all companies sector over six months, with a return of 17.9 per cent compared to a sector average of 4.1 per cent.
The trust has also announced a change to its investment strategy, which, combined with its recent outperformance, has attracted the attention of Winterflood Securities.
Historically, Hansa has held a third of the portfolio in Brazilian shipping company Ocean Wilsons, with the remaining portfolio, overseen by John Alexander, invested in quoted and unquoted UK equities.
Going forward, Hansa has said that it will retain its stake in Ocean Wilsons as a 'long-term strategic asset', but will view this separately from the remainder of the portfolio, which will be invested both in UK equities and in 'best-of-breed' funds from other asset classes.
So far, Hansa has already bought into Findlay Park American, JO Hambro Japan, Adelphi European Select and Odey Absolute Return, with Findlay Park taking the largest share at 3.8 per cent of the trust.
Commenting on the change, Simon Elliott, research analyst at Winterflood, says: 'We believe that the changes to Hansa Trust's investment strategy make sense. By broadening out the portfolio's exposure, it brings the fund more in line with other family office investment trusts such as RIT Capital Partners and Caledonia Investments.
'This should result in a more balanced performance, with an emphasis on achieving attractive absolute returns over the long term. We believe that the fund offers value at its current discount and could be rerated further if its recent strong performance can be sustained.'
Speaking to Money Observer, Alexander explains that the trust's decision to change its strategy was geared towards making it a more attractive option for private investors.
'What we're trying to do is come up with a portfolio that has the shipping interest at 25 per cent, 25 per cent in really top-quality international funds that retail investors often can't get into, and then the UK bit, which will probably be more focused on small and mid-cap companies.
'It's to try and make it a more rounded, one-stop shop for the private investor. We are very aware of our discount and as we don't try to overtly manage it through share-buybacks, we wanted to come up with something that would make more sense and be more attractive to outsiders,' he says.
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