Fund Profile

Menhaden Resource Efficiency 04 February 2019

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Menhaden Resource Efficiency. 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.

Overview
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Overview

Menhaden has evolved over its relatively short life. It is possible that many investors are under the misconception that it is a “green” fund, aiming to save the world rather than deliver good investment returns. Having met with the management team, we believe the philosophy can be better described as using a “value” focus to identify durable companies, with strong pricing power and very high barriers to entry, aiming to remain invested for the very long term.

In taking a long-term view, the managers feel they need to consider a wide range of long-term factors and make various macro assumptions about the future. One of these assumptions is that environmental considerations - and more specifically resource efficiency - will become increasingly relevant for businesses of all types. Those that provide their products or services in the most resource efficient way will be more successful - both in terms of having lower costs / taxes, and their products will appeal more to an increasingly aware consumer.

Using this philosophy, Menhaden has a resulting portfolio which is highly concentrated, currently with only 19 positions. From a top down perspective, the team try to balance the portfolio across three “buckets” (public equities, private investments and “yield”), each expected to be around 30% of the portfolio over the medium to long term depending on the opportunities the team find. Otherwise, there are no restrictions to the shape of the portfolio; the team tend to look for opportunities within four broad sectors- being renewable energy, sustainable transportation, resource & energy efficiency and water & waste.

We discuss the rationale for various holdings in the portfolio section. However, the current largest holding (representing c 21% of NAV) is X-Elio, a private investment in a Spanish solar PV developer. It is currently held at a valuation 50% above the price that Menhaden bought the stake. The team at Menhaden were tight lipped on the potential for this investment, but we note that there has been some press coverage in Spain (link) on what El Pais speculates might be one of the (Spanish) deals of the year. According to the newspaper, KKR put its 75% stake up for sale in October 2018.

The trust, launched in 2015, had a difficult start in life which explains the current very wide discount. However, since the portfolio was repositioned (Q1 2017), performance has started to improve. Over the past year, Menhaden has outperformed the average of the global investment trust and open-ended peers, as well as the MSCI ACWI index.

Continue to Portfolio

Fund History

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06 Nov 2019 Fund Analysis
Could strong performance and transformational deals lead to MHN's discount narrowing?
01 May 2019 Sweet or sour?
Three months in, we check up on our list of discount opportunities...
03 Apr 2019 Nice guys finish first
We review the rise of ESG, its impact on investment trusts, and the various ways ESG has evolved in the trust world...
13 Feb 2019 Sweet treats
Eight trusts with the potential for strong returns, currently sitting on unusual discounts...
04 Feb 2019 Fund Analysis
With a refreshed investment philosophy, this out-of-favour trust is starting to deliver good returns...
19 Apr 2018 Fund Analysis
Menhaden Capital is a value-focused investment trust that seeks to generate long-term capital growth and income by investing in businesses that deliver, or are well placed to benefit from, the efficient use of energy and resources...
24 Nov 2017 Fund Analysis
A value focused investment trust, trading on a very wide discount, which seeks to generate long-term capital growth via a multi-asset portfolio...
View all

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