New boss takes the helm – and sticks with core values of British Empire
A NEW manager, Joe Bauernfreund, has stepped in at the helm of investment trust British Empire Securities and General. His mission is simple – to improve the fund’s rather mediocre performance.
In recent years, the trust has struggled against its globally invested peers. A return of 9 per cent over five years compares with 48 per cent for the average global investment trust. Indeed, only four trusts in the 35-strong sector have worse records.
Even Alliance, which has come under attack from investors for offering poor value, has outperformed it sixfold.
‘The performance of the trust has lagged its peers,’ admits Bauernfreund, though he says he has no intention of overhauling the portfolio, put together by his predecessor, John Pennink.
Its poor record, he says, is more a reflection of its ‘value investing’ bent – an investment style that has lost out in recent years to the more fashionable ‘growth’ investing.
Value investing is based on identifying companies where underlying assets are not reflected in the share price, in the hope that the mismatch will be corrected at some stage. In contrast, growth investors concentrate on firms where sustained earnings growth is expected, even if the share price looks expensive.
Bauernfreund insists that value investing will come good again, so he is content to run with Pennink’s 42-company portfolio, built around a mix of family controlled holding firms and investment funds where the shares trade at a discount to their underlying assets.
Ironically, for a trust looking for value from investment funds trading at a discount, British Empire’s own shares are selling at a 13 per cent discount.
‘I am not happy with that,’ says Bauernfreund. He hopes that through a combination of ‘plugging away’ at improving the trust’s performance and marketing it to potential investors, the gap between the trust’s share price and asset value will narrow.
Bauernfreund works for Asset Value Investors, a London-based asset manager set up 30 years ago to manage the £738million trust. AVI has since branched out and launched a number of other funds and now manages more than £1billion of assets.
Last month, rival Goodhart Partners bought a stake in AVI. The move should give AVI greater scope to grow its business.