Majedie Investments 06 June 2024

Having been under Marylebone Partners’ management for nearly 16 months, the team have made substantial progress in overhauling the strategy of Majedie Investments (MAJE). There is no directly comparable proposition available to allocators in the listed sector today. Offering investors a liquid endowment-style investment solution, MAJE has the potential to provide exposure to genuinely differentiated sources of returns across their three distinct strategies: specialist external managers, direct equity investments and hard-to-access special investments.

As discussed in Portfolio, the managers have largely completed their planned transition; however, they have continued to make adjustments across each of these strategies over the first half of the financial year with the addition of the CQS Credit MA Fund to the external manager allocation and technology and services provider Computacenter Plc to the direct equity bucket. While there has been some development of their special investment allocation, notably a co-investment in the debt and public equity of Frontier Communications Inc, they are yet to reach their target allocation of 20%, sitting currently at around 13%. A combination of investments returning cash more quickly than expected and higher entry requirements to the portfolio have slowed progress towards this target.

The evolution of the strategy means MAJE now targets annualised total returns of CPI +4% over five-year rolling periods, including an annual Dividend calculated at 3% of NAV. While it may take time to build a track record delivering on these aims, the managers have made a good start. Their focus on investing in a differentiated portfolio of (largely) equities to deliver inflation-beating returns over the long term reflects a commitment to provide strong absolute returns rather than focussing on relative returns against a specific benchmark . Since taking over the strategy in January 2023 MAJE has generated a NAV total return of 9.2% and a share price total return of 31%, as at 31/03/2024. Moreover, their emphasis on high-quality and differentiated investments has boosted performance this year, with contributions coming from a range of lowly correlated underlying holdings (see Performance).

Currently, MAJE trades at a Discount of 11.4%, significantly narrower than its peak of 30.8% prior to the announcement of Marylebone Partners’ appointment.

MAJE’s new managers bring extensive experience in running similar strategies to the table, as well as a vast network of trusted managers they can draw on for differentiated investment opportunities, most of which don’t tend to feature on other investors’ radars. This approach has resulted in a portfolio that stands apart from conventional strategies in the listed market, leading us to think MAJE could be an intriguing proposition for investors seeking a source of differentiated returns or a complementary strategy to a standard equity allocation.

Naturally, a stewardship of 16 months isn’t long, so we think it’s reasonable to expect some investors to gain more confidence in the managers and become more comfortable with the portfolio’s differentiated strategy as a longer track record is established. In our view, the return target of CPI +4% is ambitious, yet, if it can be achieved, seems attractive. While future Dividends will be lower than previously, MAJE now aims to pay 3% of NAV annually on a quarterly basis. Furthermore, it retains substantial revenue reserves and therefore the dividend should provide a dependable income source.

Overall, we think the first year of the managers’ tenure represents a solid foundation for showcasing the potential of a liquid endowment-style model. If the managers deliver in line with their objectives, there’s scope for the current 11.4% Discount to narrow further.