AVI Global Trust PLC Monthly Update (5228Y)

TIDMAGT

RNS Number : 5228Y

AVI Global Trust PLC

14 January 2022

AVI GLOBAL TRUST PLC

Monthly Update

AVI Global Trust plc (the "Company") presents its Update, reporting performance figures for the month ended 31 December 2021.

This Monthly Newsletter is available on the Company's website at:

https://www.aviglobal.co.uk/content/uploads/2022/01/AGT-DEC-2021.pdf

Performance Total Return

This investment management report relates to performance figures to 31 December 2021.

 
                       Month   Fiscal Yr   Calendar 
                                to date       Yr 
                                            to date 
 AGT NAV(1)            1.9%      6.5%       23.6% 
 MSCI ACWI Ex US(2)    1.7%      1.4%        8.8% 
 MSCI ACWI(1)          1.6%      6.2%       19.6% 
 

1 Source: Morningstar. All NAV figures are cum-fair values.

2 From 1st October 2013 the lead benchmark was changed to the MSCI ACWI ex US (GBP) Index. The investment management fee was changed to 0.7% of net assets and the performance related fee eliminated.

Manager's Comment

AVI Global Trust (AGT)'s NAV returned +1.9% in December. The key contributors were Oakley Capital Investments, Fondul Proprietatea and Christian Dior. Third Point Investors and Pasona were the most significant detractors.

For the full calendar year AGT achieved a NAV total return of +23.6%, which compares to +8.8% for our comparator benchmark, the MSCI ACWI ex-US, and +19.6% for the broader MSCI AC World. This was predominantly driven by underlying NAV growth, but also aided by discount narrowing, with the portfolio weighted average discount currently standing at 25.7% versus 30.1% a year ago.

Oakley Capital Investments:

Oakley Capital Investments returned +11% during a month in which they announced the sale of TechInsights at a 134% premium to carrying valuing, adding +4.2% to NAV. TechInsights focusses on analysing IP across the semiconductors industry with its services used by corporate clients to support patent claims, and is very much a classic Oakley investment having been acquired as a carve-out from a large conglomerate with zero competition from other buyers back in 2017. Under Oakley's ownership, TechInsights shifted to a subscription-based revenue model, having previously earned revenues solely from one-off projects, and completed a number of bolt-on acquisitions. The combination of a non-competitive acquisition process coupled with material improvements in business quality are fine ingredients for investment returns, with TechInsights generating an 18.8x MoC and 82% IRR. We believe this speaks to the attractiveness of Oakley's model and remain excited at the prospect of aligning capital with such shrewd operators.

Godrej Industries:

Shares in Godrej Industries were up +10% in December, as the discount narrowed from 62% to 57% on a flat NAV. Since initiating a position in Feb-19 the discount has widened materially (from 45% to as wide as 67%), acting as a headwind to returns, and partially diluting the strong NAV growth (+20% CAGR) we have experienced. Of late there have been reports that the Godrej family are looking to separate and divide their assets as part of a generational transition. It is unclear what form this might take, or whether this will impact Godrej Industries, but the family have a history of creating value for all shareholders.

During the month Godrej Consumer Products ("GCPL") - which accounts for 47% of Godrej Industries' NAV - held a capital markets day. This was the first proper opportunity for Sudhir Sitapati - who started as CEO in October following a 22 year career at Hindustan Unilever - to lay out his vision for the business. The investor day involved a candid outsider's assessment of GCPL's performance, strengths and weaknesses. As well as this GCPL set out their mid-term targets and strategy, aiming for double-digit volume growth led by increased penetration and higher media investment, whilst targeting 150-200bps of margin expansion. With the new CEO and (relatively) new head of the Africa business, GCPL appears well positioned to drive growth in value for Godrej Industries in the years ahead.

Eurazeo:

During the period we (re) built a position in Eurazeo.

Eurazeo is a French-listed holding company controlled by the Decaux family. AVI have invested in Eurazeo at various points over the last 20 years and in recent years have studied from afar Eurazeo's evolution from traditional holding company to alternative asset manager. As we wrote about in the October newsletter in reference to our investments in KKR and Apollo, the market has started to recognise the high-quality characteristics of companies operating within the alternative asset management industry, their secular growth tailwinds and attractive economics. We believe Eurazeo shares these characteristics, but is overlooked due to the relative infancy of its third party capital strategy, its heavy balance sheet weighting, historic Eurocentricity, and financial reporting.

We believe Eurazeo is at an inflection point in this transition, with the prospect of strong growth in third party AUM (management are well on the way to hitting their target of doubling AUM) and even faster growth in earnings as margins expand due to the inherent operating leverage in such businesses. We acquired our shares at a wider than average c.25% discount to reported NAV. In turn we believe this NAV to be conservative, most notably with regard to Eurazeo's asset management activities (20% of NAV) which are valued at a steep discount to peers who command high near-term multiples reflecting the long growth runway for alternatives assets, and the high quality nature of fee income.

We believe the prospects for NAV growth and discount narrowing - as over time the market starts to value Eurazeo more like the alternative asset manager it is becoming - will drive attractive long-term returns.

Contributors / Detractors (in GBP)

 
 Largest Contributors        1 month contribution   Percent of 
                                      bps               NAV 
 Oakley Capital                       58               5.7 
 Fondul Proprietatea                  36               4.6 
 Christian Dior                       35               4.6 
 Pershing Square Holdings             31               8.6 
 Godrej Industries                    29               3.5 
 
 
 Largest Detractors        1 month contribution   Percent of 
                                    bps               NAV 
 Third Point Investors             -47               5.9 
 Pasona Group                      -19               1.6 
 IAC/InterActiveCorp               -17               3.5 
 KKR                               -14               5.9 
 Symphony International 
  Holdings                          -7               2.1 
 

Link Company Matters Limited

Corporate Secretary

14 January 2022

LEI: 213800QUODCLWWRVI968

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