Momentum Multi-Asset Value Trust 20 April 2023
Disclaimer
This is a non-independent marketing communication commissioned by Momentum Global Investment Management. 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.
Momentum Multi-Asset Value Trust (LON:MAVT) offers shareholders a differentiated investment strategy with a benchmark agnostic, total return-focused multi-asset approach. Gary Moglione is responsible for overseeing the portfolio management, however, the nature of the strategy means responsibilities are split across a team of seven depending on their expertise in UK equities, investment companies, specialist overseas equity and credit funds, or specialist assets.
As discussed in Portfolio, the team have a long-term strategic asset allocation which is adjusted tactically based on bottom-up analysis and valuations. The team’s focus on valuations has resulted in a long-term underweight allocation to the US and significant overweight to UK mid-cap equities. Since the start of the second half of 2022, the latter has gradually increased to 38%. This reflects the managers’ contrarian style that seeks to exploit mispriced, but fundamentally strong companies that have been disproportionately impacted by prolonged negative sentiment towards the country.
Long-term Performance has held up, but the focus on UK mid-caps has negatively impacted short-term performance. However, this has presented valuation opportunities to add to existing holdings, particularly through specialist assets that offer an element of inflation-linked cashflow, particularly with respect to specialist infrastructure and sustainable assets exposed to the energy transition.
MAVT offers an inflation-linked Dividend as a core investment objective, which during periods of sluggish earnings can be maintained by the trust’s revenue, realised capital, and special reserves. MAVT’s board operates a strict discount control mechanism, which keeps the shares trading close to NAV.
In our view, MAVT’s strategy may offer investors a valuable source of diversification to more common equity strategies. The managers estimate 18% of the portfolio is directly or indirectly linked to inflation, mainly in the significant allocation to specialist and long-duration infrastructure assets. We think this is likely to be an attractive feature given persistently high inflation. Additionally, we note that many of these cashflows will likely benefit from the energy transition. MAVT’s inflation-linked dividend is a key attraction, in our view.
The managers’ valuation sensitive, and contrarian approach has seen them increase their weighting to UK mid-cap equities. We think this growth market looks cheap and could offer significant returns should economic and political conditions ease. The managers’ aggressive stance on Gearing also adds to the return potential, although it brings risks.
Bull
- Inflation-linked dividend, leading to continued dividend growth
- Contrarian investment approach may provide a good source of diversification and returns should market sentiment shift
- Discount control mechanism ensures shareholder value is maintained
Bear
- Value focus may lead to performance lag in growth-driven markets
- High level of recent buybacks and the reduction in share count could increase costs
- Gearing can magnify losses on the downside, but also gains on the upside
Fund History
