Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by AVI Global. 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

AVI Global Trust (AGT) – previously named British Empire Trust (BTEM) – seeks to generate capital growth for investors through investment in a concentrated portfolio of companies trading at a wide discount to NAV.

AGT currently trades on a share price discount of c. 7.9% (as at 26/03/2021). However, when the discount to fair-value of the underlying holdings is accounted for, AVI estimates that the trust trades on a ‘double-discount’ of c. 39% (as at 28/02/2021), as discussed under discount. Historically such levels have proven attractive entry points, which we discuss under performance. Performance in recent months has indeed been very strong, boosted by astute tactical adjustments to positioning. Despite the relatively low allocations made to the US market for a global strategy and the outperformance of US equities compared to global peers, AGT has outperformed global equities over the past five years.

Since taking over as sole lead manager in 2015, Joe Bauernfreund has transformed the AGT process and portfolio. Joe and the team look to identify high-quality assets which are trading at a significant discount to their intrinsic value, often as a result of the holding’s structure.

Since the second half of 2020, the team has been tilting the portfolio to increase exposure to ‘recovery beneficiaries’, anticipating economic acceleration as lockdown ends and pent-up demand is released back into the economy. They have been able to build positions which they note give them exposure to high-quality assets at substantial discounts to market-level fair value.

Gearing has been tactically utilised in recent months, and the team tell us the recent market volatility has continued to create new opportunities in high-quality assets.

Analyst's View

Returns have been strong coming out of the crisis, and boosted by tactical decisions by the team. We note that the ‘double-discount’ on AGT’s portfolio at its present substantial level has historically represented an attractive entry point, and thus we do not particularly fear any short-term mean reversion in relative returns after substantial outperformance in the market recovery. With COVID-19 cases seeing a resurgence in parts of the world and many parts of the global economy lagging in their vaccination programmes, having exposure to high-quality assets with strong pipelines of NAV growth at significantly discounted valuations seems attractive to us given the inherent uncertainty of the future. Markets remain volatile and, as we have seen in recent weeks and months, rotations in style outperformance can be sharp, reflecting the greater than usual uncertainties about the near-term future the world continues to face. In these circumstances in particular, we think there are clearly benefits to having a foot in each camp, as AGT’s portfolio would appear to.

The themes driving much of the portfolio construction remain compelling to us over the long-term, in particular the Japanese allocation, where underperformance at the share price level does not reflect strong operational performance. Yet we note that, historically, periods of sharp market drawdown tend to see discounts widening within AGT too, and investors should be prepared that this could again prove a short-term headwind in a generalised sell-off (whilst likely creating more buying opportunities).

bull bear
Double-discount remains wide by historic standards
Underlying discounts have often been vulnerable to market reversals
Discounted access to high-growth and high-quality opportunities
Gearing can exacerbate downside (as well as amplify upside)
Exposure to an array of otherwise hard-to-access, high-quality opportunities
High level of KID RIY
Continue to Portfolio

Fund History

07 Apr 2022 Fund Analysis
AGT trades on an attractively wide discount, despite its long-term outperformance and potential capacity to rebound...
26 Jan 2022 Fight or flight...
Two of our analysts debate the impact that war in Ukraine could have on investors' portfolios...
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…
14 Oct 2021 Fund Analysis
AGT has generated some of the best YTD returns in its sector, but its portfolio still trades on a 36% double discount…
19 Aug 2021 Pandemic immunity
We ask which global equity trusts have outperformed through the different stages of the pandemic…
02 Jun 2021 Fortune favours the brave (sometimes)
Our research suggests wide discounts often herald high NAV returns too…
19 May 2021 The complexity premium
We examine the idea that extra returns can be obtained from buying investments which are perceived to be more complex by most investors...
09 Apr 2021 Fund Analysis
AGT’s shares trade on a wide double discount to the portfolio’s underlying NAV…
20 Nov 2020 Fund Analysis
AVI Global has held up strongly throughout the uncertainty of 2020, outperforming the benchmark and taking advantage of depressed valuations…
18 Nov 2020 Results analysis: AVI Global
AVI Global has held up strongly throughout the uncertainty of 2020, outperforming the benchmark and taking advantage of depressed valuations…
03 Jun 2020 Price is what you pay, value is what you get
The listed private equity sector has seen discounts widen markedly, but does this present an opportunity?
20 May 2020 Fund Analysis
AGT seeks companies with high-quality growth assets trading at a discount to fair value…
20 Feb 2020 The return of the activist... but not as we know it.
Why the ‘20s will go down as the decade of the corporate activist...
12 Dec 2019 Fund Analysis
AGT seeks companies with high-quality assets exhibiting growth and trading at a discount to fair value...
17 Jul 2019 Ready for action
In the second part of our active management series, we assess the most active managers across the major closed-ended equity sectors…
07 May 2019 Fund Analysis
While British Empire Trust is sitting on a wide discount, the recent sell-off has turned up a wave of new opportunities...
24 Dec 2018 Why did the chicken cross the road?
Because he was so bored of reading newspapers devoted entirely to Brexit he was hoping he’d be hit by a truck.
19 Sep 2018 Artificial Alpha
While there are some signs that we may be finally seeing the froth come off the growth-led market, we think investors need to be highly selective in choosing value strategies...
05 Sep 2018 Bullseye
The third arrow of Shinzo Abe's grand plan, corporate reform, could have significant implications for undervalued Japanese equities...
08 Aug 2018 Fund Analysis
British Empire Trust has top quartile NAV returns in the global sector over three years...
08 Aug 2018 Feeling giddy?
As markets look toppy, we consider a few equity trusts with different approaches to diversification and risk management...
27 Jun 2018 A winning combination
New research from Cass Business school helps explain why closed-ended funds have outperformed their open-ended peers in the major equity sectors since 2000...
29 Jan 2018 Fund Analysis
A highly-active, benchmark agnostic portfolio of global equities that follows a value-orientated investment approach...
29 Jan 2018 What lies beneath
Following our research last year, we analyse the correlation between the performance of value stocks and bond yields and how many investors are unprepared for a change to the status quo...
28 Jun 2017 Fund Analysis
As its name suggests, British Empire Trust has a long and impressive history. For the past 25 years it has employed a “deep value” approach, with the managers aiming to buy quoted investments at a significant discount to NAV.
View all

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