Complete your registration today for a chance to win £50 John Lewis vouchers in our weekly draw Enter now
Fund Profile

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.

Overview
ARR’s highly concentrated portfolio sets it apart, but the wider discount merits attention…
Overview

Aurora Investment Trust (ARR) owns a highly concentrated portfolio of predominantly UK-based equities. The trust is managed by the team at Phoenix Asset Management Partners, headed up by company founder and CIO Gary Channon. The team take a value-oriented approach and claim to analyse stocks in extreme detail. They have the freedom to invest across the market cap spectrum, and often buy companies that don’t feature in the trust’s formal benchmark, the FTSE All Share Index. Once a potential investment is identified, it is backed with conviction and allowed to run. This means stocks can become very large weights in the Portfolio and that stock-specific risk is a key driver of performance.

ARR has performed particularly well over the past year (see Performance). Its highly active approach means its returns tend to diverge from the benchmark, and it can be quite volatile.

Despite the stronger near-term returns, ARR trades at a wide Discount to NAV. In the past five years, the trust has traded close to NAV and even at a premium on numerous occasions, but the shares have moved to a discount that is over one standard deviation wider than the five-year average and wider than the peer group as at time of writing.

ARR also has a unique charging structure (see Charges). There is no management fee, with the managers compensated by a performance fee which is capped, awarded in shares of the company, and subject to a three-year lock period. Should the managers underperform, earned fees are subject to a claw-back which is designed to align interest between the managers and shareholders.

Analyst's View

We believe the managers have maximised the use of the trust’s closed-ended structure to offer a truly unique vehicle. With some position sizes in excess of 20% and a double-digit holding in Castlenau Group, a specialist vehicle created by Phoenix, the Portfolio is, in our view, highly differentiated from its peer group. For this reason, we believe the trust could offer a complementary holding to core UK equity strategies for those looking to add diversification to a large portfolio.

Performance will likely be driven by these stock picks and therefore we believe returns are very reliant on the manager’s skill. The approach of allowing holdings to run to very large positions means that even a modest move in one stock can have a material impact on performance. This unique approach to portfolio management further distinguishes the trust from more traditional peers. Whilst this approach offers both risk and reward, the level of manager ownership and charging structure means there is a very strong alignment of interests with shareholders.

The view of the managers at present is that the market, and by extension their portfolio, is extremely cheap. Their valuation focus looks to identify those companies at a discount to their intrinsic value, which they believe can only go so far and may well bounce back. If valuations do begin to normalise, we believe there is a lot of potential on offer for investors as not only does ARR typically perform best in rising markets, but the shares are also available on an historically wide Discount which could prove a compelling entry point.

Bull

  • Unique approach offers highly differentiated portfolio
  • Trust is trading at a wide discount relative to its history
  • High level of manager and shareholder alignment

Bear

  • Concentrated portfolio brings risks
  • Trust has typically underperformed in down markets
  • Performance fee could be high if targets are achieved and sustained
Continue to Portfolio

Fund History

08 Nov 2023 Fund Analysis
ARR’s highly concentrated portfolio sets it apart, but the wider discount merits attention…
03 Sep 2020 Fund Analysis
ARR offers a highly concentrated portfolio of long-term value investments…
07 May 2019 Fund Analysis
Three years on from the appointment of Phoenix as manager, Aurora Investment Trust has truly emerged from the ashes...
20 Mar 2018 Star struck
Star culture presents siginficant problems for asset management companies when top managers jump ship. We examine the steps some groups take to avoid them...
13 Sep 2017 Big Issue(rs)
We highlight the UK equity trusts that have issued and bought back the most shares over the course of 2017 so far and how these actions have affected shareholders...
02 Aug 2017 Carpe Discount…
We analyse just how much discount movements have on shareholder returns in the AIC UK All Companies sector...
02 Aug 2017 Fund Analysis
A UK trust that has undergone significant change that is now run using a highly-concentrated, value-based stockpicking approach...
12 Jun 2017 MAYDAY!
As the Conservative party founders, we examine the impact of last week’s disastrous election on trusts...
07 Jun 2017 Omnishambles...
Given the huge levels of political-induced uncertainty, we analyse recent drivers and themes within the UK equity market ahead of the upcoming election
22 Mar 2017 The new kids on the block…
We highlight the three newest managers to grace the UK equity sectors and how they have put their own individual stamps on the portfolios they've inherited...
View all

Welcome to Kepler Trust Intelligence

Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.