Can our dire Fan­tasy Fund Man­ager per­for­mance be res­cued by this ‘value’ fund?

Aber­forth Split Level In­come has not so far joined in the re­cov­ery of shares gen­er­ally and of its in­vest­ment trust peers

The Daily Telegraph - Business - - Business - RICHARD EVANS Read Questor’s rules of in­vest­ment be­fore you fol­low our tips: tele­ questor­rules; twit­

QUESTOR’S de­ci­sion to pin its hopes of win­ning The Daily Tele­graph’s Fan­tasy Fund Man­ager game on tech­nol­ogy in­vest­ment trusts now looks very poorly timed.

We added Scot­tish Mort­gage, Po­lar Cap­i­tal Tech­nol­ogy and Al­lianz Tech­nol­ogy to this col­umn’s en­try in the con­test last week but early this week in­vestors turned against tech stocks and these trusts’ shares have suf­fered as a re­sult.

Such falls make barely a dent in the port­fo­lios’ stel­lar long-term per­for­mance records but even a brief shun­ning of tech­nol­ogy on the part of the mar­ket could scup­per our chances in the com­pe­ti­tion. Per­haps, then, we should adapt our tac­tics a lit­tle and, if there re­ally is to be a switch from “growth” stocks, epit­o­mised by tech­nol­ogy, to­wards “value”, per­haps we can find a trust nicely poised to soar. In fact, we feel con­fi­dent that we have found one.

On al­most the very day that the in­vest­ment trust sec­tor as a whole re­cov­ered all the losses it had suf­fered so far this year, there is one well-man­aged trust whose shares have barely budged from the lows they fell to in the worst days of the coro­n­avirus panic.

That trust is Aber­forth Split Level In­come – per­haps Bri­tain’s most ex­treme ex­em­plar of the value style of in­vest­ing and a fund that has, more­over, not shied away from adopt­ing the “split-cap­i­tal” struc­ture that still puts some in­vestors off more than a decade af­ter it at­tracted such op­pro­brium.

Shares in Aber­forth Split Level In­come stood at 93.5p at the end of last year but fell to 38.6p – a de­cline of al­most 60pc – on March 18. While stock mar­ket in­dices al­most ev­ery­where on earth, in­clud­ing Lon­don’s FTSE 100, have re­cov­ered strongly from their Covid-19 lows, shares in this trust have not: the price is now 46.75p, ex­actly 50pc be­low what it was at the end of last year.

We have listed the strengths of this fund, and of its sis­ter port­fo­lio,

Aber­forth Smaller Com­pa­nies, which is sim­i­lar but lacks a split-cap­i­tal struc­ture, sev­eral times in the past. They in­clude that un­abashed de­vo­tion to the value style, put into prac­tice by a team of com­mit­ted, ex­pe­ri­enced man­agers who have their own money in­vested along­side that of their clients. If any­one is able to ex­ploit fully any re­turn to fash­ion of value in­vest­ing it is this team, Questor be­lieves.

As is of­ten the case, a share price stuck in the dol­drums goes hand in hand with a high yield, in this case 9.3pc. This at­trac­tive fig­ure does have to come with a pro­viso, how­ever: it is the “his­toric” yield, which, as we ex­plained in yes­ter­day’s col­umn, is based on div­i­dends paid in the past year and is dis­tinct from the “prospec­tive” or fore­cast yield cal­cu­lated on the ba­sis of ex­pected fu­ture di­vis. We will find out what div­i­dend the trust in­tends to pay for the fi­nan­cial year that ended in June when it an­nounces its an­nual re­sults at the end of this month. How­ever, in the cur­rent cli­mate we must be at least pre­pared for a cut.

Yes­ter­day’s dis­count of about 10pc does add to the ap­peal of the trust’s shares but does not strike us as par­tic­u­larly wide in the cir­cum­stances. Per­haps it is more the case that a dis­count is im­plied in the share prices of the trust’s hold­ings in the sense that they have been un­duly pun­ished by the mar­ket’s per­sis­tent aver­sion to any­thing seen as a value stock.

Questor sees the two Aber­forth trusts as sen­si­ble long-term holds for any­one who wants a di­ver­sity of in­vest­ment styles in their port­fo­lio. Read­ers who cur­rently have no hold­ing in the trusts should con­sider buy­ing now while the share prices are so de­pressed.

For the pur­poses of our com­pe­ti­tion, we will add the split-cap­i­tal trust to our en­try in the be­lief that the share price of­fers the scope for rapid re­cov­ery – per­haps even enough to wipe out the dam­age done by our tech­nol­ogy hold­ings.

Questor says: buy

Tick­ers: ASIT (split cap), ASL (small­ers)

Share prices at close: 46.75p

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