MIGO Opportunities 20 April 2022
Disclosure – Non-Independent Marketing Communication
This is a non-independent marketing communication commissioned by MIGO Opportunities. 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.
MIGO Opportunities Trust (previously named Miton Global Opportunities Trust) is a specialist trust that aims to benefit from special situations and inefficiencies that can exist in the UK listed funds market. The managers actively seek diversification within the portfolio, and invest in trusts they think have strong NAV prospects. However, they also look to invest at an attractive discount to NAV with a medium-term catalyst (18 months or longer) identified for the discount to narrow.
They aim to take a contrarian view in finding ideas and take a longer-term view than the market. This means that they typically own trusts within a number of themes. The portfolio currently constitutes around 40 holdings, of which the top ten represents around half of the assets (47.3% as at 31/03/2022). The current notable themes within the portfolio include uranium, which has been a strong contributor to performance lately. Other themes are UK micro caps, high OCFs (listed private equity) and biotechnology.
Gearing has been selectively deployed over past years, reflecting the number of opportunities that Nick and Charlotte find at any point in time. Cash levels have been increasing until very recently, indicative of the lack of interesting opportunities the team are finding. At the current level of 11.6% (as at 14/04/2022), this still represents a significantly higher level than has historically been the case.
2021 delivered very strong Performance, driven by diverse exposures such as private equity, mining, Vietnam and UK Microcap investment trusts. NAV returns were well in excess of world markets, but particularly strong relative to the Flexible Investment trust sector.
Nick and Charlotte look to use their time to monitor and analyse trusts and use publicly available information to gain an edge over the market. In their view, many investors routinely overlook important and relevant information. They also aim to benefit from a good understanding of specific shares’ supply and demand dynamics, looking to benefit from clumsily executed buy and sell orders in what can sometimes be a relatively illiquid market. In this regard, MIGO’s size (net assets of c. £97m) can be seen as an advantage, giving Nick and Charlotte the ability to be nimble.
MIGO’s share price has relatively closely tracked the NAV. Indeed, it is the board’s policy to be “proactive in managing” the share price premium or discount. MIGO presently trades on a discount of c. 3% (as at 09/04/2022), which compares with the average discount of c. 1.2% over the last five years. Whilst the headline discount is relatively narrow, the underlying holdings in the portfolio trade at a significant discount. When we met up with Nick recently, he commented that with the average discount of the top 12 holdings approaching c. 25%, discounts have rarely been wider (see Discount section).
In our view, MIGO will appeal to trust investors who recognise the value the structure offers to specialist managers, but who also want the potential to benefit from the accelerant to share price returns from the discount narrowing. MIGO offers an elegant one-stop-shop, offering a highly distinct exposure to special situations in the UK listed funds market, backed by an investment process which has periodically outperformed wider equity markets.
- Diverse exposure to an array of otherwise hard-to-access, relatively illiquid opportunities
- Expert management in a specialist field
- Look through discount of portfolio at lower of the historic range
- Illiquid nature of many closed-ended holdings makes discounts vulnerable to market reversals
- Trust-of-trusts structure does involve a double layer of fees
- Opaque nature of some alternative asset trusts may mean that discounts persist