Caledonia Investments 07 November 2018
Disclaimer
Disclosure – Independent Investment Research
This is independent research issued by Kepler Partners LLP. The analyst who has prepared this research is not aware of Kepler Partners LLP having a relationship with the company covered in this research report and/or a conflict of interest which is likely to impair the objectivity of the research and this report should accordingly be viewed as independent.
The principal aim of Caledonia is to grow capital and income over the long term, while managing the risk and volatility of the returns. Consistent, dependable dividend growth has been a stand out characteristic for the trust and has led to its inclusion in the AIC dividend heroes after 50 consecutive years dividend growth.
A key characteristic of the trust is the vast business network that the internal team at Caledonia has established. They see these contacts as a vital part of identifying opportunities, particularly in the unquoted markets. Additionally, their long-term reputation as a supportive and constructive long-term investor enables the team to further develop this network.
The portfolio is comprised of four segregated pools, each with different managers and mandates. The Unquoted and Fund pools are where the majority of the returns are expected to come from, both with forecasted returns ranging between 12-15% per annum. The Income pool and the Quoted pool help grow the dividend and feature listed companies, which offer added liquidity to compensate for the unquoted companies.
The trust's largest geographical weighting is towards the UK, which made up 33% of the portfolio as of the most recent factsheet (September 2018). North America (27%) and Europe (20%), also play important roles in the make-up of the portfolio. The trust offers lesser levels of exposure to Asia (14%) and holds 6% cash.
Caledonia uses the FTSE All Share as its performance benchmark, and over the past five years has outperformed delivering NAV returns of 55.7%. However, in comparison to the MSCI ACWI and the AIC Global peer group, the trust has struggled to keep up. This pattern is also seen over more recent times, when the trust has outperformed the benchmark but again underperformed the MSCI ACWI and the AIC Global peer group.
Currently the trust is on a significant discount to NAV of around 25%. This is the widest discount in the AIC Global peer group.
Fund History
