Fund Profile

Momentum Multi-Asset Value Trust 19 January 2022

Disclaimer

This is a non-independent marketing communication commissioned by Momentum Global Investment Management. 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
A ready-made multi-asset portfolio with an attractive yield and a contrarian, value style…
Overview

Momentum Multi-Asset Value Trust (MAVT) is a ready-made portfolio investing in a broad range of assets, including UK and overseas equities, credit, and specialist alternative assets, using a value-based approach across all investments. The trust objectives are to provide a dividend that grows in excess of inflation, to generate a total return greater than UK CPI + 6% per annum over a full market cycle and to exhibit less risk than a full equity portfolio.

As discussed in Portfolio, the four-man management team of MAVT use a hybrid approach, buying direct stocks in the UK portion of the portfolio and using highly active, specialist third party managed open and closed-ended funds elsewhere.

MAVT has performed well against a passive portfolio tracking its strategic asset allocation in recent years, performing in line despite having a strong stylistic headwind for most of the period thanks to its value tilt. Against a value-tilted passive portfolio, MAVT has added significant alpha, as we discuss under Performance. With this in mind, MAVT could be employed as a standalone portfolio for a value and UK-orientated investor or be used to diversify a portfolio with existing growth exposures.

The current yield of c. 3.5% compares favourably with the FTSE UK All-Share Index yield of 3.1%, and the board have indicated a likely increase in the level of Dividends for the financial year ending April 2022, barring unforeseen circumstances.

MAVT employs a discount control mechanism (DCM) which, as discussed in Discount, to date has been successful in ensuring the shares of the trust trade close to NAV.

Kepler View

MAVT provides investors with an off-the-shelf multi-asset portfolio that can be used as a stand-alone holding for a value-orientated investor or to diversify a portfolio with exposures to global growth stocks. Currently, given the valuation spread between highly rated growth stocks and value stocks is at or near all-time highs globally, the diversification aspect is particularly attractive to our minds. Of course, if markets continue to be led by highly rated growth stocks, then MAVT should not be expected to keep up returns-wise with global equity benchmarks.

The exposure to a broad range of assets, especially in alternative spaces such as infrastructure and speciality finance, could be of particular value to investors who would otherwise find it hard to access such strategies due to portfolio size constraints or the capacity to perform the appropriate due diligence. These specialist assets contribute significantly to the dividend yield of c. 3.5%, which may entice income investors, potentially as a substitute for or a complement to more traditional UK equity income strategies. The differentiated sources of income have been of particular benefit to the trust during the pandemic, increasing the resiliency of the portfolio earnings when compared to UK equities. MAVT may appeal to more cautious investors for whom dampened volatility versus a pure equity portfolio would provide comfort, this being reinforced by the discount control mechanism which currently means investors can have confidence they will be able to redeem their shares near NAV.

bull bear
Access to a hybrid portfolio of niche, boutique, highly active funds and direct UK stocks
UK and value focus will likely lead to lagging returns if international and growth assets outperform
Attractive, well-diversified yield, well supported by income and reserves
Gearing can exacerbate downside as well as amplify upside
Value sensitive approach should protect portfolio in the event of a growth bubble
DCM has led to substantial buybacks, and further reduction in share count could raise costs and threaten the viability of the trust
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