MIGO Opportunities 10 July 2024

MIGO Opportunities (MIGO) is designed to exploit the broad range of opportunities in the closed-ended fund universe, which boasts a huge range of specialised strategies with strong NAV stories as well as technical opportunities that often show up via wide discounts.

Managers Nick Greenwood and Charlotte Cuthbertson look predominantly for funds trading on a wide discount to NAV, where they see a clear catalyst to that discount closing. They will at times also buy portfolios trading on narrower discounts if the NAV story is particularly strong and under-appreciated. However, currently, the main theme in the portfolio is deep discounts, with the sector exceptionally cheap versus history—it has only really been cheaper in the immediate aftermath of the 2007/2008 great financial crisis.

The largest ten holdings are trading on an average discount of 32% (see Portfolio section). This would imply a 47% average return should they all return to trading at par, before considering any NAV gains. It is worth stressing real life is likely to be messier than this, and not all positions will be held until the discount closes, so this is no type of return projection, but simply an illustration of the extreme valuation opportunity out there, which Nick and Charlotte tell us makes them feel like “kids in a sweet shop”. They have a small net gearing position for the first time in years as a result of the number of opportunities they are finding.

MIGO’s shares, themselves, trade at a Discount of 2.4% at the time of writing. The board has a vigorous buyback programme which has kept the discount close to NAV in recent years. MIGO is now managed by AVI rather than Premier Miton, although the management team and investment process have remained identical (see Management).

There are two reasons we think this is likely to prove a great long-term entry point into the investment trust sector as a whole. First, the likelihood that interest rates have peaked in the US and UK means that pressure has been relieved on the valuation of equities, listed and unlisted, while investors are likely to be looking to put cash to work rather than building up more. Secondly, wide discounts across the sector and the consensus that rates are not going to be cut fast are leading boards to cut to the chase and use all the levers they have to unlock value. Wind-ups, mergers, and tender offers are a regular occurrence, and the cheapness of the investment trust sector has encouraged value-seekers and activists to get involved, including prominent US hedge fund managers.

All this plays into the hands of Nick and Charlotte, who tell us their main problem at the moment is choosing between the huge number of attractive opportunities. MIGO offers a good way for investors to access a broad range of trusts across the space in sectors it would be hard to research individually for a non-specialist. This is all Nick and Charlotte do, however, and so they have the time and experience to get into the weeds with all the idiosyncratic investment companies on the London market. We think it could easily complement a portfolio with a more conventional asset allocation or serve as a one-stop shop for access to the deep discount stories in the sector for those investors with little investment trust exposure already.