Fund Profile

Menhaden Resource Efficiency 03 December 2020

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Menhaden Resource Efficiency. 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
Unique portfolio and good performance means discount looks anomalous...
Overview

On 14/06/2021 An announcement was released by Menhaden plc declaring that the board had resolved to change the registered name of the company to "Menhaden Resource Efficiency plc".

Click here to read the RNS announcement

Menhaden (MHN) is a highly concentrated global equity fund categorised in the AIC’s Environmental sector. The management team took over nearly five years ago (April 2016), first transitioning the portfolio to suit the new investment philosophy, and then refining since – which has shown good results in terms of performance.

Portfolio of investments must fit two criteria, as we discuss in the Portfolio section. Firstly, they must have a dominant position in their market, with a very high competitive moat. The second is that companies need to deliver – or benefit from – the efficient use of energy and resources. As such, it fits a ‘sustainability’ definition in two ways.

With its closed-end structure, MHN can afford to be highly concentrated (only 17 holdings currently), with the top two holdings representing more than 20% of NAV each. With the trust holding both public (c. 80%) and private (c. 20%) investments, the team use the structure to its fullest extent.

Over the last three years, the team’s approach has led to strong performance relative to global equities as well as the Global investment trust peer group as we illustrate in the Performance section. NAV total returns over three years to 30/10/2020 (MHN announces NAVs only monthly) was 32.8%, compared to the MSCI ACWI return of 21.6% and the average global investment trust return of 19.3%.

MHN’s discount has historically been wide but, following the trust’s good performance in 2018 and 2019, it regained ground to trade in the high teens. The discount then widened dramatically during March, to c. 50%, but still remains wide at 27% relative to JPMorgan Cazenove’s estimated NAV.

Analyst's View

MHN is a highly differentiated and actively managed trust which seems to fit the sustainability theme in more ways than one. The portfolio is highly concentrated, which means that at times the NAV can be volatile. However, MHN’s discount is wide when one considers the overall proposition.

The underlying portfolio has evolved rapidly this year, with only c.20% of the portfolio now in unlisted investments compared to around 50% at the beginning of the year. The team’s actions during the Q1 selloff show that they are focusing squarely on fundamentals. Their willingness to take a long-term view, and back their convictions, has meant that MHN is on track to turn in another year of good relative performance, on the back of strong results in 2018 and 2019.

Now that the trust has a tiered management fee, and we have seen organic growth such that it is now paying a lower fee on any future growth, another potential reason for the wide discount (i.e. a high OCF) is eroding. The discount widening dramatically earlier this year serves to highlight the risk of the illiquidity in the shares, but at the same time offers a potential opportunity. Certainly, if the trust continues its current trajectory of improved liquidity, a reducing OCF and strong relative performance, the chances could be rising of the discount narrowing on a sustained basis.

Bull Bear
Wide 27% discount to estimated NAV seems entirely a result of historic factors
Concentrated portfolio means any stock picking mistakes will hurt NAV
Good performance track record continues to develop
Illiquidity and highly concentrated portfolio mean discount volatility likely to persist
Differentiated high conviction portfolio, with clear investment rationale behind it
OCF of 2.0% is relatively high
Continue to Portfolio

Fund History

14 Jul 2021 Grade inflation
We look at how our discounted opportunities portfolio has done in the first half of the year and update on the performance of our long-term rated funds…
14 Apr 2021 Wide Boys
We review our portfolio of chonky discounts as one star performer hits its target…
16 Dec 2020 My haven’t you grown!
How sustainability has gone from zero to hero in 2020…
03 Dec 2020 Fund Analysis
Unique portfolio and good performance means discount looks anomalous...
09 Jul 2020 The next big thing: two mega-trends that everyone should own
Tech seems to beat every other sector hands down – in both up and down markets – but nothing lasts forever. Where else should investors be looking for secular growth themes?
25 Jun 2020 Fund Analysis
MHN’s portfolio has become significantly more liquid and is trading on a sector-wide discount...
01 Apr 2020 Mind the gap
Discounts have yawned across trusts investing in private companies, but appearances can be deceptive and as COVID-19 unfolds it pays to take care…
06 Nov 2019 Fund Analysis
Could strong performance and transformational deals lead to MHN's discount narrowing?
01 May 2019 Sweet or sour?
Three months in, we check up on our list of discount opportunities...
03 Apr 2019 Nice guys finish first
We review the rise of ESG, its impact on investment trusts, and the various ways ESG has evolved in the trust world...
13 Feb 2019 Sweet treats
Eight trusts with the potential for strong returns, currently sitting on unusual discounts...
04 Feb 2019 Fund Analysis
With a refreshed investment philosophy, this out-of-favour trust is starting to deliver good returns...
19 Apr 2018 Fund Analysis
Menhaden Capital is a value-focused investment trust that seeks to generate long-term capital growth and income by investing in businesses that deliver, or are well placed to benefit from, the efficient use of energy and resources...
24 Nov 2017 Fund Analysis
A value focused investment trust, trading on a very wide discount, which seeks to generate long-term capital growth via a multi-asset portfolio...
View all

Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
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.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. 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.