Fund Profile

Disclaimer

This is a non-independent marketing communication commissioned by BlackRock. 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.

Overview
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Overview

BlackRock Throgmorton Trust (THRG) invests primarily in UK small and mid caps, with lead manager Dan Whitestone able to allocate to both long and short positions. Typically running gross portfolio exposure of c. 120–130%, with ordinary anticipated net exposure of c. 100–110%, the manager seeks to use the short book as an extra source of active stock differentiation.

As we discuss under Performance, THRG’s returns have been exceptionally strong in both the short term and over the past five years. Indeed, they are currently the strongest in the peer group over five years on a share price basis (and second strongest on an NAV total return basis). Perhaps as a result, THRG trades on a premium (as discussed under Discount). The board has been active in issuing shares to help to manage this whilst also growing the trust.

Presently THRG has net exposure of 119.8% (long positions minus short positions), which is above the typical anticipated operating range. As discussed under Portfolio and Gearing, this in part reflects Dan’s reluctance to short stocks into a generalised market rally such as that seen in the recovery from the sharp market contraction in Q1 2020. However, he believes the COVID-19 crisis has boosted pre-existing trends which will lead to increasing and accelerating divergences in fortunes amongst companies and he anticipates widespread ‘corporate Darwinism’. Accordingly, he expects to increase short exposure in the coming months on the expectation that the market will increasingly recognise the fundamental weaknesses of many companies which are being disrupted or are in financially straitened conditions.

Although the investment strategy is focussed on capital growth, the board has increased or maintained dividends every year for the past 11 financial years.

Kepler View

THRG’s shareholders have enjoyed outstanding returns in recent years, with astute stockpicking (shown by the consistently positive information ratio) and timely adjustments to net exposure seemingly the primary drivers. The decision to run elevated net exposure into a generalised market rally, and to avoid running significant short exposure at a time when many share prices were rallying on sentiment rather than fundamentals, has proven strongly beneficial, as has the pre-existing focus on ‘disruptors’. THRG saw a period of relative consolidation following the announcement around COVID-19 vaccines as value outperformed, a possibility we had warned about in our previous research note. However, absolute returns remained strong and THRG’s relative return profile has started to accelerate ahead of peers and the market once again as constituent companies continue to report. We also note that the manager is extremely bullish on his opportunity set, as shown by his high net exposure. Furthermore, Dan argues that the COVID-19 pandemic and lockdown policy responses are likely to leave many companies in a weakened position operationally. He believes this should offer shorting opportunities in due course, which THRG is notably better able to take advantage of in comparison to the broader peer group.

As government stimulus is withdrawn, we think companies with the balance sheet strength and ability to take the sort of market leadership which Dan insists on seem likely to prosper operationally. Meanwhile, the extensive resources available within the BlackRock team suggest to us that idea generation should remain fertile. The long/short structure and dynamic shifts to net exposure continue to see THRG offering a differentiated product, and it has been reassuring that the trust remained at a premium even as value styles came cyclically into favour over the end of 2020 and start of 2021.

bull bear
Very strong track record of absolute and relative performance Periods of 'value' outperformance and rallies in cyclicals remain likely to prove a stylistic headwind
Highly exposed to long-term industry change and secular trends which are accelerating as a result of COVID-19 Net market exposure tends to be in excess of 100%, exacerbating downside as well as amplifying upside
Focus on balance sheet strength provides exposure to accelerated 'corporate Darwinism'
Currently trading on a premium to NAV
Continue to Portfolio

Fund History

30 Dec 2021 Great expectations
As the last of the mince pies wilts in the fridge, topped with a generous helping of stilton, the Kepler Trust Intelligence team stick a finger in the air and point toward their top picks for the year ahead…
08 Dec 2021 Fund Analysis
A dynamic and growth orientated approach to UK smaller companies…
11 Aug 2021 In at the deep end
Does seeking out wider-than-usual discounts help investors systematically outperform in the UK trust space?
28 Jul 2021 Fund Analysis
THRG’s high net exposure reflects the manager’s bullishness about the opportunity set in UK small caps…
08 Jul 2021 London Calling
UK equities represent a ‘once in a generation’ opportunity according to the managers who joined us at our event last week…
07 Jul 2021 Slides and Audio: BlackRock Throgmorton
Download the presentation and listen to the audio from our 'Cool Britannia' Summer conference on 01 July...
07 Jul 2021 Slides and Audio: Roundtable - Small is beautiful
Download the presentation and listen to the audio from our second roundtable discussion with Dan Whitestone, Georgina Brittain and Judith MacKenzie...
23 Jun 2021 Time to back Britain?
After a challenging period for the United Kingdom, we wonder if it could be the most exciting market on a five-year view…
09 Jun 2021 Cool Britannia?
Join the team at Kepler Trust Intelligence and six leading UK fund managers as we examine the prospects for UK equities with COVID in retreat and Brexit uncertainty finally behind us…
18 Feb 2021 Results analysis: BlackRock Throgmorton
After another set of strong results, we look at why, in our opinion, THRG continues to be one of the standout trusts in the UK…
10 Feb 2021 Eye of the Pfizer
Mining shares have rallied in recent months. With further potential, what impact could this have on the relative returns of active UK Small cap strategies...
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
23 Dec 2020 Fund Analysis
BlackRock Throgmorton (THRG) seeks to use both long and short positions to generate alpha...
10 Dec 2020 Lots of uncertainty, but an abundance of investment opportunities
Dan Whitestone rationalises the financial performance of individual companies during the pandemic and how this has affected BlackRock Throgmorton Trust plc...
25 Nov 2020 Britannia Redux
UK equities have been despised for almost five years and could offer extreme rebound potential…
17 Jun 2020 Fund Analysis
One of the most reliable trusts in the UK smaller-companies sector, THRG uses both a long and a short book to generate alpha, regardless of the wider market conditions…
20 Nov 2019 Fund Analysis
One of the most reliable trusts in the UK, THRG has shown the ability to perform strongly in both rising and falling markets at low levels of volatility…
16 Oct 2019 Thinking big on small companies
10 Apr 2019 Because they're worth it
With the rise of the passives putting more pressure on fees than ever before, we argue that performance fees could be the key to encouraging truly active investment trust managers...
03 Apr 2019 Fund Analysis
Dan Whitestone offers a growth-orientated portfolio of UK small and mid caps, using both long and short positions...
16 Oct 2018 The Investment Trust Advantage
Our recent conference for discretionary fund managers saw some of the UK's leading fund managers discussing the outlook for the world's major regions and asset classes...
06 Dec 2017 Fund Analysis
A top-performing emerging European trust that has delivered significant alpha generation...
29 Nov 2017 Fund Analysis
A portfolio of UK equities with a focus on companies that can generate attractive income and capital growth.
25 Oct 2017 Fund Analysis
A UK small-cap trust that can profit in both rising and falling markets...
25 Oct 2017 Patience is a virtue…
We analyse the outperformance of UK small-caps and why it is so important to take a long-term view...
24 Oct 2017 Fund Analysis
A very high octane but relatively unknown UK small-cap trust that has delivered significant outperformance and undergone a recent make-over...
26 Apr 2017 Size matters
Our analysis proves that investment trusts really are the best way to access smaller companies, and exposes liquidity concerns for their open ended counterparts...
26 Apr 2017 Fund Analysis
26 Apr 2017 Fund Analysis
20 Apr 2017 Fund Analysis
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