 Switch EditionUK?Opinion09 Sep, 2024James Carthew: AVI Global can extend its excellent track recordDiscounts across global markets present opportunities for the UK-based bargain hunter, which recently cashed in on Starwood's Balanced Commercial Property bid.ByJames CarthewThe investment companies sector continues to shrink. So far in September, we have seen bids for Tritax EuroBox (EBOX) and Balanced Commercial Property Trust (BCPT), JPMorgan Global Core Real Assets failing its continuation vote, and Aurora (ARR) absorbing Artemis Alpha (ATS). All of this is in reaction to the persistent discounts across the sector.Yet, despite the attractive uplifts investors can achieve when these exit opportunities materialise (21% for BCPT and 27% for EBOX), very few UK-based investors seem to be hunting for these potential bargains. Instead, most discount-driven investors in the sector seem to be American.One UK-based investor that has been profiting from these value opportunities is AVI Global Trust (AGT). It cashed in more than 15 million shares in BCPT following the announcement of that bid, crystallising a decent profit on its position.The trust invests in assets its manager Asset Value Investors (AVI) believes are valued at a discount to their intrinsic value; it invests in a mix of holding companies, closed-end funds, and asset-backed special situations (AVI Global's Japanese investments fall into this category). Where it can, it will work often behind the scenes, but sometimes quite publicly to unlock that value for the benefit of all shareholders.Over the past few years, AVI Global has found no shortage of potential investment opportunities. Macroeconomics (rising interest rates, China's slump, inflation and the like) caused discounts to widen, not just in the investment companies' sector.That could have been problematic for the trust, as widening discounts on its portfolio could have driven down its net asset value (NAV). However, fund manager Joe Bauernfreund has done a great job unlocking value and recycling capital to new positions. Over five years, the portfolio's underlying returns of 64% are ahead of the MSCI All Countries World index's 57%, according to Deutsche Numis data, and commendably it has achieved this without any exposure to the Magnificent Seven US technology stocks.Recent successesThe manager has sought to position the portfolio to benefit from individual discount-narrowing events but without too much generic market risk, so it should not be too much affected by gyrations in the price of Nvidia, for example. It also managed to get out of Pershing Square Holdings before the Universal Music profit warning crashed its share price in July.AVI's name has been cropping up a fair bit recently. It was heavily involved in blocking the sale of some of Hipgnosis Songs' (SONG) catalogues at a knockdown price and profited from the subsequent takeover of the company (at the time it was the largest position in AGT's portfolio). AGT was also a substantial shareholder in Pantheon International (PIN) when it adopted its new capital allocation policy.BCPT was one of several positions AVI Global built up in cheap property stocks. Another is PRS Reit (PRSR). AVI is not one of the requisitionists looking to make changes to the PRS board but has given an irrevocable undertaking to support their proposals. AVI is unhappy with the board's proposed extension of the management contract to 2029, which effectively creates a poison pill. It is also concerned about the board's spending on external advisers.I am a bystander but support the requisitionists' stance. You only want to fire a manager when you are unhappy with their service, or a windup/takeover means their services are no longer required. Outside the initial period after the initial public offering, and in most cases, not even then, there is no reason why a manager needs to have more than 12 months' notice in their contract, and six months is now more normal.The largest position in AVI Global's portfolio is News Corp. AVI believes the sum of the parts including online real estate portal REA Group, HarperCollins and Dow Jones is a lot more than the current share price suggests. Crucially, it also thinks the latent value can be unlocked. There are plenty of other similarly interesting situations in the portfolio.Ongoing campaignsElsewhere, back in our sector, AVI Global has big positions in four investment companies in its top 10. It holds Oakley Capital Investments, reasoning, as I do, that its performance track record merits a discount closer to HgCapital Trust's (HGT) sub-3% level than Oakley's current level of 27%. Oakley just freed up £50m from its portfolio as its stake in Ocean Technologies Group was sold for 2.7 times what it paid for it in 2019. Oakley appears to have no shortage of new investments with similar potential to reinvest the proceeds into.Partners Group Private Equity, formerly Princess Private Equity, has been much less successful than Oakley, but AVI Global would also like to see its 23% discount narrow from here.Chrysalis (CHRY) has seen some modest narrowing of its discount (now about 45%), but its fortunes could be transformed if it sold one of its more mature investments Klarna is the one that seems to be in the frame.Cordiant Digital Infrastructure (CORD) suffered by being bracketed with the abysmal Digital 9 Infrastructure (DGI9). Cordiant is trading on a 35% discount. Its latest quarterly trading update was quite encouraging, recording improving underlying revenue and profits to support its well-covered dividend. Cordiant is buying back stock but needs to do more to win back support.It is also worth mentioning AVI Global's Japanese exposure about 23% of the trust at the end of August. The market volatility that accompanied the Bank of Japan's rate increase and subsequent yen rally at the end of July, which I wrote about, took just over 1% off the trust's NAV. However, true to form, the manager took advantage of the selloff to add to positions at attractive prices, laying the ground for further NAV appreciation in time.James Carthew is head of research at QuotedData.?Any opinions expressed by Citywire, its staff orRelated Portfolio ManagersJoe Bauernfreund?? |
This manager, JB, is a very safe pair of hands imho, may he carry on like this into the future. A very happy holder... |
This should be a net contributor on the next factsheet. |
 InvestecAVI Global Trust (AGT): AGT published its Newsletter for August last week. AVI take a value orientated approach (in place since 1985) and given the portfolio is fairly concentrated (top 10 accounts for 55%) you will be unsurprised to hear the DD process is incredibly thorough. AGT currently has 30% invested in closed-end funds. We think there continues to be an interesting backdrop for AGT to take advantage of the significant discounts on offer and the pickup we are seeing in corporate activity/activism. There have been a number of recent corporate actions for the underlying AGT portfolio companies which have had a positive impact. Some of which AVI will have been more involved in than others, these include:Hipgnosis Songs (SONG) Acquired by Blackstone.PRS REIT (PRSR) Shareholders requisitioning an EGM to seek removal of the Chairman and a strategic review.Balanced Commercial Property Trust (BCPT) Starwood cash offer for the company last week. BCPT's shares rallied more than 10.3% last Wednesday and AVI confirmed it had sold its 16,165,250 shares.Aberdeen European Logistics Income (ASLI) In Wind-Down.NT Lease Office Property (NLOP) In Wind-Down.Chrysalis (CHRY) We note AGT recently announced a holding >10% in CHRY. The second part of CHRY's Capital Allocation Policy, which is dependent on further portfolio realisations is to return £100m to shareholders via share buybacks. Klarna is expected to IPO in Q1-25 and Visa is reportedly in negotiations to acquire Featurespace. |
@davebowler @Steve3 Gents I couldn't agree more, JB really is a class act in his management of this fund, why it should be on virtually a double digit discount with his track record amazes me. He picks his stocks and then is not afraid to take profits as they reach his "fair value" estimate. Another thing I respect him for is his honesty in the monthly reports where he always spends as much time on explaining why those stocks which underperformed did so, as he does on pointing to those which outperformed. As a holder of various trusts I find his straightforward approach refreshing. |
hTTps://citywire.com/investment-trust-insider/news/avi-global-looks-for-bargains-to-buy-after-japan-panic-selling/a2447750 |
5 Aug Net Asset Value ‑ Debt at fair value: 236.46 pence |
Joe just sold 25,000 shares. I bought 2500 more. I'm wondering if he knows more than me? Only joking though the last thing I'd sell in my portfolio is AGT. Discount still around 10% and from what I can see most major positions are doing OK. |
Mention here - |
They've just bought 10% of CHRY, no doubt for it's Starling holding. |
They've opened a position in Reckitt Benckiser - they seem to be investing increasingly in traditional single name equities. This is a bit different to their usual focus - discounted investment companies and special situations. Have mixed feelings about this. Entain was another recent example - can't say I'm a fan of that one and looks like it hasn't performed well so far. |
June report - |
An old favourite of Bauernfreund. |
20/6 /24 Net Asset Value ‑ Debt at fair value: 257.79 pence |
All time high for OCI, one of our largest holding? |
 Half Year report- 4 June
Your Company’s NAV is some +23% higher than when we wrote to you this time last year. At the time sentiment was dour; investors were fretting as to the potential fallout from the collapse of Silicon Valley Bank; inflation remained stubbornly high; and the deeply inverted yield curve was flashing red that the most anticipated recession in recent history was about to bite. A year on and there has been no real contagion from the regional banking crisis, with the actions of the United States Federal Reserve having ensured financial stability. The picture on inflation has certainly improved, but we are not off the mountain just yet. And a recession remains the watched pot that hasn’t boiled, with the economy proving much stronger than many had anticipated. These better-than-expected developments, combined with strong share price performance of a narrow-band of US technology companies, that are thought to be beneficiaries of AI, has propelled markets to new all-time highs. For the interim period since September, AGT has produced a NAV total return of +13.9%. This was slightly behind the performance of our comparator benchmark, the MSCI AC World Index (£), which returned +16.1%. From the very wide levels observed in October 2023 – when the portfolio weighted average discount hit 37.0% – discounts have started to narrow, such that the weighted average discount at period end stands at 31.5%. We have taken advantage of this, fully exiting positions in Pershing Square Holdings and Godrej Industries, and reducing positions in strong performers, Schibsted, FEMSA, KKR and Apollo. KKR was the standout performer adding +253bps to returns. Having initiated a position in the company in 2020, we have held a decidedly different view to the market on the durability of the company’s earnings power and growth prospects. The market has been coming round to our way of thinking, with the shares up by +319% over that time, and we have been reducing the position. We continue to believe this is a stock picker’s market, and a market where a focus on events, catalysts, and activism to crystallise value is important. Illustrative of this is Schibsted, which has undergone significant structural simplification (detail below) and was one of the strongest performers over the period. Over the six-month period we have been adding to News Corp, D’Ieteren, Bollore and Entain, all of which have attractive underlying fundamentals and NAV growth prospects combined with potential catalysts. Despite Hipgnosis Songs Fund being a detractor over the interim period and requiring a lot of work and intensive engagement from our investment team, a takeover battle subsequent to the period end has resulted in an excellent outcome for shareholders.
More generally, over the last 18 months our exposure to closed-end funds has increased. There is a structural lack of interest in such companies, almost entirely for non-fundamental reasons, and we believe this to be an attractive opportunity set with discounts at wide levels where we can add value through activism. The opportunity for engagement in Japan also remains compelling. Longterm readers of our reports will know that we have spent a significant amount of focus on Japanese small-cap equities since 2016/17, when it became clear to us that the winds of change had begun to blow, and that the corporate governance reform agenda had gained critical momentum. 2023 was something of a (re) coming out party for Japanese equities – which are becoming increasingly relevant again to international equity investors, who have grown to appreciate the very clear agenda of the Tokyo Stock Exchange (‘TSE’) and other authorities in unlocking corporate value. As is to be expected, flows have concentrated on larger cap companies, which have outperformed smaller caps. For unhedged international investors (such as ourselves) the continued depreciation of the Yen has proved a headwind. We do not expect this to persist indefinitely. Far from the madding crowd of increasingly concentrated equity markets, it remains an exciting and fruitful time for our approach to investing. Discounts have started to narrow but remain relatively wide by historical standards and we are finding a high number of attractive opportunities from all parts of our universe. Reflective of this, net gearing (debt at fair value) has continued to increase and stands at 9.6% as of the period end. As we look ahead, we remain humble in the unpredictability of financial markets and macro events. Our conviction, however, is built from the bottom up. We have assembled a concentrated-yet-diverse collection of companies that should compound NAV at attractive rates; discounts are generally wide and across the portfolio there are numerous potential corporate catalysts to unlock value. We believe this to be an attractive medley. |
 Citywire- Investment company bargain hunter Joe Bauernfreund says the 39% return the trust made in eight months on SONG demonstrates value of shareholder activism and importance of having the right board. Jamie Colvin BY JAMIE COLVIN
comments Activist investor AVI Global (AGT) has sold out of Hipgnosis Songs (SONG) after a ‘highly successful’ holding that saw the rejigged board engineer a takeover bid above the shares’ 2018 listing price.
Writing in the £1.2bn trust’s half-year report, fund manager Joe Bauernfreund highlighted his role in fighting off the proposed sale of a portion of SONG’s catalogues and urging fellow shareholders to vote against the company’s continuation last October.
The activist then pushed successfully for the appointment to the board of Robert Naylor and Francis Keeling, who had just stepped down from rival Round Hill Music Royalty (RHM) following its acquisition by Concord.
In April, a bidding war commenced in which Blackstone, the majority owner of Hipgnosis Songs Management, saw off another bid from Concord with a recommended offer at a 47% premium to the share price.
‘We are delighted with an outcome that has not only generated a very strong return for AGT’s shareholders but has demonstrated again both the value of shareholder activism and the critical importance of having the right people on boards,’ Bauernfreund first invested the trust in SONG in late 2020; he sold more than half its stake 12 months later. He then rebuilt the position back up to 6% ahead of the continuation vote.
While the stake detracted from returns in the six months to 31 March, over the whole period of its last phase of ownershp up to May 2024, AVI Global received a 39% total return. The trust has returned 24.6% in one year.
Bauernfreund hasn’t been the only seller. Most long-term holders sold out after Blackstone won the day, with hedge funds flooding in to take the 131-cents-per-share (102.7p) offer when the deal completes in the third quarter. The shares trade at just over 101p. Trust bargains Over the half-year, AVI Global delivered total returns of 14%, including the 1.2p dividend, while the shares jumped 16%, falling just short of the MSCI All-Country World index’s 16.1% gain, largely driven by US mega-cap stocks.
Bauernfreund has taken advantage of the wide discounts across the investment company sector, which are ‘almost entirely for non-fundamental reasons’, where the trust can add value through activism. As a result, gearing, or borrowing, has increased to 9.6% of assets.
Closed-end funds made up 31% of the trust at the end of May, with the larger positions including private equity funds Oakley Capital Investments (OCI) and Princess (PEY), and Cordiant Digital Infrastructure (CORD), which have respective weightings of 6.7%, 5.6% and 3.6%.
Over the period, US private equity company KKR was the top performer, adding 2.5% to net asset value (NAV) as its share price soared 64%. AGT’s investment thesis remains that alternative asset managers remain undervalued.
Asia-focused private equity firm Symphony International Holdings was the worst performer, knocking 0.8% off performance; its dollar shares fell as the discount widened from 36% to 50%, exacerbated by a rally in the pound.
Rupert Murdoch’s News Corp is now the largest asset in the portfolio, with an 8.8% weighting, after Bauernfreund added to the position. Oakley and Princess are the second-largest holdings.
Over the past five years, the trust’s shares have soared 74%, ranking it third in the AIC Global sector, where the average return has been 57.7%.
AGT’s shares closed at 239.5p on Wednesday, 8% below NAV. The board spent £24m on buybacks to narrow the discount over the half-year |
Major holding tipped....https://www.dailymail.co.uk/money/mailplus/article-13508623/MIDAS-SHARE-TIPS-UPDATE-private-equity-stock-tip-18-bargain-buy-investors.html?ns_mchannel=rss&ns_campaign=1490&ito=1490 |
I agree re. Entain. |
May factsheet out. Looks like a new 4% position in Reckitt Benckiser - they seem to be doing more single stocks rather than more traditional holding companies/investment funds. Interesting that CORD is now also a top 10 holding. Still not sure about Entain - personally wouldn't touch that with a bargepole. |
 quoted-data-Listed Fund ResearchAVI Global TrustThriving under pressureThe AVI Global Trust (AGT) has gone from strength to strength as its managers identify a wealth of opportunities. A share price total return of over 30% in the past year highlights the value of the company's strategy of targeting high-quality companies whose shares are trading at a discount to their intrinsic value.Against a backdrop of markets adjusting to structurally higher interest rates, especially in the US, we expect this momentum to continue, and the value of less correlated market returns (in other words returns not tied to the performance of broader market indices), such as those provided by AGT, to increase.Despite its strong performance, the company continues to trade on a share price discount to net asset value (NAV) of 7.4%. Given AGT's performance track record and increasingly optimistic outlook, we believe this is an attractive entry point for investors, particularly for those looking to manage exposure to increasingly concentrated and expensive market indexes.Extracting value from discounted opportunitiesAGT aims to achieve capital growth through a focused portfolio of investments, particularly in companies whose shares stand at a discount to estimated underlying net asset value. It invests in quality assets held through unconventional structures that tend to attract discounts; these types of companies include holding companies, closed-end funds, and asset-backed special situations.NB: Marten & Co was paid to produce this note on AVI Global Trust Plc and it is for information purposes only. |
April Factsheet makes very good reading. |