Disclosure – Non-Independent Marketing Communication. This is a non-independent marketing communication commissioned by Momentum Multi-Asset Value Trust. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.
If one marker of quality is longevity, then investment trusts can definitely make the case for their own excellence. A large number of trusts can point to quarter, half or even full century-long track records. One trust marking such a milestone in 2021 is Momentum Multi-Asset Value Trust (MAVT), which is celebrating its 25th anniversary this month.
While the trust has periodically changed over this time, its core proposition has not changed: consistently achieving above-average returns from a unique blend of assets.
When the company was first founded in 1996 as the Taverners Trust, it invested primarily in breweries, pubs and restaurants – including large-cap and small-cap listed equities, and unquoted companies. Indeed, in its first ever annual report the board cited the trust’s 25% allocation to AIM-listed and unquoted stocks as central to its outperformance in that year.
Since then, the company has rotated its objective to include an income mandate and has adopted its characteristic “refined value” approach applying valuation and quality considerations across a wide range of assets. However, the trust continues to deliver this objective by investing in a highly distinctive and broad range of assets, many of which investors would find hard to access in other funds.
The times are a changin’
Crucially, the trust has adapted to changing market conditions and investor preferences, seeking out the most compelling investment opportunities throughout its 25-year history. For example, MAVT was one of the early adopters of multi-asset portfolio construction and over the years the scope of assets considered for the portfolio has evolved considerably.
The benefits of MAVT’s long legacy of adaptability have been demonstrated by its long-term results. Over the five years to 31 August 2021, the trust significantly outperformed its benchmark in both share price and NAV terms, achieving returns of 50.1% and 53.0% in these terms respectively, against a benchmark return of 35.6%. At the same time, it has maintained its dividend, yielding 3.53% (as at 24/09/2021).
In the last few years, alternative investments have become key to meeting the MAVT’s income generation mandate: the likes of Hipgnosis Songs Fund and Greencoat UK Wind simply didn’t exist a decade ago, and yet have become important components in the portfolio mix as the trust’s managers continue to look for innovative sources of income.
Central to the current manager’s approach is a clear willingness to go against the crowd, taking contrarian positions on markets, sectors, asset classes and stocks that it views as underappreciated by the wider market. While this doesn’t necessarily mean these assets fit a classic ‘value’ definition, many do, and this approach means that the manager only invests if a security is trading at an especially attractive valuation. The trust’s investments in Hipgnosis and Greencoat demonstrated this. The manager identified these opportunities as underappreciated, due to their perceived complexity, but both quickly reached premiums.
Sourcing income from alternatives has also freed up the manager to take distinctive views on equity markets in the course of meeting their objective of achieving an inflation-beating total return. Over ten years, MAVT’s annualised returns have met its target of beating CPI by 6%+, meaning that long-term investors have achieved the ‘real’ returns they seek when investing in the trust. It has also achieved this feat with lower volatility in NAV terms than broader stock markets.
In recent years, the manager has particularly identified the UK market as significantly undervalued, with multiple specific stock stories meeting the bill.
Widespread UK dividend cuts in 2020 could have thrown a spanner in the works when it came to investing in the UK market for a trust with a clear commitment to maintaining its dividend. However, the resiliency of the income from alternative and specialist investments enabled the managers to hold fast in their view that a recovery was coming for UK companies, especially those with the financial resilience and flexibility to adapt to successive lockdowns.
This view has been vindicated in 2021, when the UK market not only recovered, but saw previously unloved names, including domestically-focused companies, achieve significant valuation uplifts in the first half of the year.
That MAVT’s manager was able to maintain exposure to this theme due to income levels being supported by other asset classes further showed the benefits of such a distinctive and flexible approach to investing for income and growth.
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