£100m oddball delivers 50% return in year
STOCK market-listed Miton Global Opportunities is an unusual investment fund on so many levels. Its portfolio comprises an eclectic mix of investments with exposure to everything from German residential property through to forestry and shipping – while its holdings are primarily in quoted investment trusts.
Although it is an investment oddball, the formula seems to work based on the latest performance figures. Over the past year, the £100million trust, whose shares can be traded on the London Stock Exchange, has delivered investors a return of 50 per cent – 84 per cent over five years.
‘The trust has changed over the past two to three years,’ says Charlotte Cuthbertson, the fund’s assistant manager. ‘It’s no longer a fund that invests primarily in investment trusts with exposure to equities. It’s now about providing shareholders with a portfolio made up of a richly diversified mix of assets. We’re trying to find returns in different areas of the investment universe.’
The selection of investment trusts is undertaken by Cuthbertson, in association with lead manager Nick Greenwood. Their prime focus is on investment trusts that have assets of less than £500 million. This, Cuthbertson says, is because there is more value to be found in these smaller funds that tend to be overlooked by big wealth managers such as Hargreaves Lansdown. ‘There are plenty of opportunities in this space,’ she adds. ‘We’re talking about a choice from more than 270 trusts.’ The end result is a portfolio built around 45 holdings.
There are key points the managers look for in an investment trust before they will buy it. They have to like the asset class that the fund is invested in and the shares have to represent a bargain. In other words, they must sit at a big – double digit – discount to the value of the underlying assets. Then, they sit down and assess the chances of a ‘catalyst’ bringing about a reduction in this discount. If a trust ticks all of these boxes, it is bought. Some holdings come good quite quickly. For example, the trust bought into Biotech Growth Trust towards the end of 2018 when stock markets corrected worldwide. ‘Biotech as an investment theme was unloved,’ says Greenwood. ‘But of course, the pandemic came along in early 2020 and suddenly biotech stocks came back into favour.’ The trust disposed of its holding in July last year, generating a profit of nearly 80 per cent in the process.
Other stakes take longer to come good. For example, a holding was made in Vinacapital Vietnam Opportunity five years ago. ‘Vietnam, like India, is a stock market we like,’ says Cuthbertson. ‘The underlying economy is benefiting from a growing middle class and greater urbanisation. It’s also the beneficiary of inward investment as large multinational businesses look to reduce their dependency on China.’
Although the Vinacapital fund has performed strongly – its share price is up nearly 40 per cent over the past year – Cuthbertson and Greenwood won’t crystallise their gains until the fund’s discount narrows (it currently stands at a whopping 23 per cent).
‘If the discount halved from here on,’ says Cuthbertson, ‘we’d look to reduce our stake. Our mission would be done.’
Its key holding in the booming Indian stock market is via India Capital Growth, a trust that has generated a one-year return of 76 per cent. A narrowing discount – down from 14 per cent to 8 per cent – suggests it might not be long before Miton realises its gains. The trust’s stock market identification number is 3436594 and its market ticker is MIGO. The total annual charges are on the high side at 1.3 per cent.