Momentum Multi-Asset Value Trust 15 September 2022

Momentum Multi-Asset Value Trust (MAVT) aims to generate a total return greater than UK CPI + 6% per annum over a ‘typical’ market cycle, whilst also providing investors with a dividend that grows in excess of inflation, thereby offering real (i.e. inflation-adjusted) returns. As discussed under Portfolio, MAVT can offer investors an ‘all weather’ solution by investing in a broad range of assets. The investment strategy takes a hybrid approach through allocations to direct UK equities and through specialist third-party solutions to gain an exposure to overseas equities, credit and specialist alternative assets. Currently the greatest allocation within the portfolio is 34.2%.

Lead oversight of the long-standing four-man Management team is provided by Gary Moglione, and the team maintain a strong ‘refined’ value discipline which seeks out opportunities that are currently unloved by the wider market. Central to their investment strategy is their long-term strategic asset allocation, while a shorter-term tactical asset allocation provides the managers with the freedom to benefit from more opportunistic investments if they arise.

As discussed under Performance, MAVT has been able to maintain relatively strong performance characteristics over the long term despite facing value style headwinds for much of the past decade, although its underperformance of the inflation-linked target over the past 12 months is perhaps unsurprising given the current environment.

In addition, the board employs a Discount control mechanism (DCM) that has been successful in minimising share price volatility relative to NAV (albeit while shrinking the market cap of the trust). The emphasis placed on income means MAVT currently has a Dividend yield of 4.4%.

MAVT offers a well-diversified, ready-made investment solution that we think could form a core part of any investor’s portfolio and would be of particular interest to a value-orientated investor. We think MAVT can also be used as a diversifier thanks to its significant allocations to specialist/alternative assets, as we discuss under Portfolio. MAVT’s long-standing management team have extensive fund investment experience, and they have built a broad base of relationships within the industry. This provides them with access to a plethora of favoured third-party boutique fund managers that might otherwise prove difficult for investors to access to be able to perform the required due diligence on.

While MAVT’s focus on value has faced headwinds, over the long term the strategy has generated significant inflation-adjusted returns at significantly lower relative volatility levels than global and UK equities, as we discuss in the Performance section. We note that over the medium term, reaching the inflation-linked target may continue to prove as challenging as it has done over the past 12 months, given current elevated levels of inflation.

We believe the significantly increased allocation to specialist assets – which can offer an element of inflation protection through the greater predictability of cash flows – could prove to be particularly valuable for investors as inflation and forward-looking inflation expectations remain elevated in the medium term and could therefore contribute to an attractive level of income growth in the future.