Momentum Multi-Asset Value Trust (MAVT), recently rebranded from Seneca Global Income & Growth Trust (SIGT), aims to achieve total returns of at least CPI + 6% p.a. net of costs over a typical investment cycle through investment across a range of asset classes and geographies. With a team-based approach, the managers of MAVT invest both in direct securities and via third-party fund managers, employing a unique value influenced decision making process across a wide range of assets.
The investment process is avowedly-value based, with the managers seeking out both companies and third-party managers unloved by the wider market. With very strong returns in recent months, the team’s view over 2020 that the market was underestimating the resilience and intrinsic value of significant parts of the market appears vindicated. As we discuss under portfolio and performance, the team had observed that valuation disparities were so significant within markets that even minor adjustments to market level views could have outsized impacts.
As well as noting that MAVT can operate as a standalone portfolio, the managers note that their inherently contrarian stance often sees the trust function as a portfolio diversifier. Presently their tactical outlook sees them leaning positively towards the UK, Japan and Asian markets, whilst noting they continue to find significant diversifying opportunities in specialist/alternative investment vehicles. These alternatives proved a steady source of income over 2020, as discussed under dividend, and MAVT’s board has confirmed it intends to match the previous financial year’s dividend, giving a prospective yield of c. 3.8% (as at 01/04/2021).
MAVT employs a discount control mechanism (DCM) which, as discussed under discount, the board has been highly active in operating. Accordingly, MAVT has consistently traded close to NAV.
MAVT’s managers have consistently delivered ‘real’ returns to shareholders, with dampened volatility when compared to equity markets, through their multi-asset, diversified approach. The past few years have not been kind to value investors, but the team have managed to stay true to their process and philosophy whilst generating income and absolute capital gains. We had previously noted that a rise in inflation expectations and the prospect of economic reopening might prove a catalyst to value realisation in much of the portfolio, and thus it has proven in recent months. Yet, whilst the opportunity may not be as acute as it was towards the end of 2020, there still appears to us an ample hunting ground for MAVT and their preferred third-party managers to identify stock specific opportunities for the longer term.
With an attractive dividend yield of 3.8%, the ongoing commitment of the board to maintain dividends should be reassuring to income investors, backed by very substantial distributable reserves. That said, having highly diversified underlying income streams give us confidence that MAVT’s revenues should remain relatively resilient in any event.
Even if some of the macroeconomic tailwinds currently in place fall or reverse, so crowded does much of the global market remain (exacerbated by the rise of passive investment), that we believe explicitly value-led strategies such as MAVT remain valuable portfolio diversifiers, offering potentially asymmetric relative upside when the stars align. This has, we would contend, been seen in recent months with the significant outperformance of value but, more especially, less liquid value.
|Access to niche, boutique, highly active fund management strategies and a focussed portfolio of UK value stocks
||It remains to be seen whether this proves a ‘false dawn’ for value
|Attractive, well-diversified yield, well supported by income and reserves
||Gearing can exacerbate downside as well as amplify upside
|Should act as a diversifier to mainstream equities with potentially high NAV beta to any macro acceleration
||Scale of buybacks has been very substantial, and reduction in share count could potentially be a concern