BH Macro’s (BHMG) NAV returns have been in line with the expected range, but remain relatively muted, especially in the context of a surging equity market. This does nothing to alter the fact that BHMG may potentially act as a low-volatility compounder to form the core of a long-term investment portfolio. However, perhaps of increasing relevance to today’s investors, it may also act as a diversifier within equity and bond portfolios, given that the returns of Brevan Howard Master Fund Limited can potentially be very different, and hopefully complementary, to equity and bond returns.
Every cycle, one is told that ‘this time it’s different’. Brevan Howard’s commentary (which we summarise above, but is well worth reading in full in the interim statement – see link below), is rather disquieting in this context. Yet, aside from 2022, total returns from equity markets in all of the calendar years since COVID have been well ahead of historical long-run equity returns. Certainly, AI brings opportunities, but the macroeconomic threats seem rarely to have been higher, whilst at the same time, stock market valuations remain elevated. There is clearly plenty of potential for an upset. BHMG has historically provided significant diversification from, and lack of correlation to, bond and equity markets, and as such offers the potential of being one of the truly rare places that offers investors a port in a storm.
The BH Macro Board and manager have made strong progress in addressing the discount, set against a background of moderate NAV performance. With a significantly larger buyback facility this year, and the manager’s new private fund that has the ability to invest in BH Macro shares when they stand at a discount, investors can be reasonably optimistic that the share price will more closely follow that of the NAV. As a result, shares in BH Macro offer a compelling way for ordinary investors to access the flagship strategy of one of the world’s best macro hedge funds. If markets become more volatile, and complacency is replaced by fear, there is clear potential for BHMG to perform strongly in NAV terms. Additionally, if history is anything to go by, there is clear potential for the discount to narrow from the current level of c.6% if NAV performance picks up. As such, the current discount may represent an attractive entry point both from a total return perspective, but also to add diversification to equity and bond portfolios.
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]]>Possibly the most famous example is the Three Sisters method, comprising beans, sweetcorn and squash. The sweetcorn plants provide shade and act as a vertical pole up which the beans can climb, while the squash can be used as ground cover to ensure space is used efficiently.
The managers of JPMorgan UK Small Cap Growth & Income (JUGI) take a similar trifecta-like approach to portfolio construction. Rather than constructing a portfolio that outperforms when only one singular investment style is in favour, Georgina Brittain and Katen Patel aim to build a portfolio capable of generating repeatable alpha across a variety of market conditions.
To do this, they consider three factors – quality, value and momentum – using a process that has been refined over three decades. This helps them to create a portfolio of companies that are financially strong, growing, resilient, and attractively valued.
As one can see below, using return on invested capital (ROIC) as a proxy for quality, free cash flow yield as a proxy for value and earnings revisions as a proxy for momentum, the average company within JUGI’s portfolio has higher returns and better capital discipline and is generating more cash than the average company in the trust’s benchmark, the Deutsche Numis Smaller Companies plus AIM ex Investment Companies Index, and is seeing positive earnings upgrades compared to the market, which is seeing downgrades.
Not only do they consider these three factors when making investments, they regularly review their existing holdings to make sure they still meet these three characteristics, given share prices have been particularly reactive to new information in the past couple of years.
Crucially, management’s unashamedly bottom-up, long-term approach has paid off over longer-term timeframes. JUGI has the third-best annualised 10-year net asset value total return, at c. 10.3%, and the second-best annualised 10-year share price total return at c. 11.5%.
Of course, just as the Three Sisters planting method can be blown off course if the weather is inclement, past performance doesn’t guarantee future success and there are bound to be times when even JUGI’s portfolio will underperform. Indeed, the five-year numbers are currently below the benchmark. Still, we think the depth and experience of the management team provides reassurance that the strategy can continue to deliver for shareholders.
Its portfolio is anchored in domestically oriented growth companies aligned with long-term trends and policy priorities like self-sufficiency—companies likely to benefit from ongoing stimulus, even as global uncertainty lingers.
JUGI’s board recently joined forces with that of Aberdeen UK Smaller Companies Growth (AUSC) to propose a combination that would create the second-largest UK smaller companies trust, providing much-needed scale and improved liquidity and a continuation of what we see as welcome consolidation within the sector. If approved, it would be JUGI’s second major deal, following on from its 2024 merger with former stablemate JPMorgan UK Mid Cap.
We think the deal makes complete sense for both sets of shareholders, as well as for the UK mid- and small-cap space as a whole. The new, enlarged entity could be c. £645m in market capitalisation and would come with a reduction in the ongoing charges ratio.
The new management fee structure would be 0.6% chargeable on assets up to £200m, and 0.55% chargeable on assets in excess of £200m. Following completion of the proposal, the estimated OCR would be 0.7%, representing a reduction of 11 basis points (bps) and three bps compared with AUSC’s and JUGI’s current OCRs respectively.
Meanwhile, the UK SMID segment would have another vehicle of sufficient scale, good performance and reach, giving it the potential to attract greater attention from wealth managers and stronger appeal to retail investors, perhaps helping to revive interest in what has been a shrinking part of the domestic market.
JUGI is one of the oldest trusts in the smaller companies sector and Georgina and Katen are highly experienced, having worked at JPMAM for 31 and 13 years respectively. Georgina was appointed as manager of JUGI in 1998 – the second-longest tenure in the sector. Katen joined her in July 2013.
The portfolio managers are members of a dedicated UK mid- and small-cap specialist investment team that benefits from the broader resources of JPMAM’s 90-strong international equity group of investment professionals with expertise in both quantitative and qualitative analysis. As mentioned previously, this has translated into impressive total returns through the cycle versus its benchmark.
We remain of the view that there remains latent value throughout the small-cap part of the UK market, for reasons we’ve outlined consistently. In short, UK economic data is nowhere near as apocalyptic as some would let us believe. In fact, both the UK economy and its headline stock market index, the FTSE 100, are currently outperforming developed market peers.
The key, to us, however, is the sheer scale of M&A activity we’re seeing in the small-cap market: clearly overseas and trade buyers are seeing value at a time where public market investors seem to be willingly ignoring it.
JUGI has seen several holdings taken over, suggesting Georgina and Katen’s strategy is identifying the right opportunities. These takeovers have not only supported returns due to the high premia of the bids, but have also provided liquidity for the managers to rotate into the plethora of opportunities they’ve identified elsewhere.
In another interesting development, the yield on the small-cap asset class as a whole has now crept above 3% - an historically high level.
Over and above all this, JUGI uses the bells and whistles of the investment trust vehicle to full effect in an attempt to capitalise on the valuation opportunity within the small-cap space. This includes running gearing at around the 10% level, making JUGI one of the most-geared trusts in the AIC UK Smaller Companies peer group and adding to the trust’s upside potential.
JUGI’s enhanced dividend policy is also a key selling point, in our view. It is designed to pay a relatively high income while still offering exposure to the growth potential of the UK smaller companies asset class, ensuring the trust appeals to the broadest possible set of investors.
The rate paid is equal to 4% of the year-end NAV figure and is paid in four equal amounts on a quarterly basis. The announced dividends for the first quarter of the upcoming year will be c. 3.73p per share, equating to c. 14.92p per share for the full year, representing a potential forward yield of 4.3% at the share price as of 24/09/2026. That’s a meaningful premium over the small-cap index and a c. 75% premium to AUSC’s yield.
As this writer hopes his new garden will benefit from companion planting such as the Three Sisters method, so do we believe that shareholders would benefit from and should look favourably upon the combination of JUGI and AUSC.
The depth and quality of the management team and its impressive performance sets JUGI apart, while its improved size and liquidity as well as its enhanced dividend policy ensure it will be on the radar of a much wider pool of investors.
Added to everything we’ve discussed above, there’s also the benefit of a double-discount: not only is the c. 15.5x price-to-earnings (PE) ratio on the MSCI UK Small Cap Index a c. 40% discount to the c. 25x PE on the MSCI World Small Cap Index, as of 31/08/2026, so too is JUGI trading on a discount of c. 7.6%, offering the scope for a real re-rating.
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]]>One could argue that over the past decade or more, the UK stock market has been akin to the Rebel Alliance: forgotten about and trading on depressed valuations amid political uncertainty, a lack of technological innovation and unprecedented levels of selling by domestic investors.
The ensuing structural undervaluation of British companies has led to an almost inevitable wave of inward M&A as overseas buyers have been snapping up UK plc. To try and combat this, UK firms responded by ramping up share buybacks, with London becoming the share buyback capital of the world.
However, we see two key trends taking place within UK markets that point to a more conducive backdrop: the return of outward M&A and the strength Britain brings as a diversifier to US-heavy portfolios – even more so when you consider the fact that the UK’s FTSE 100 and the US’s S&P 500 have been closely matched in terms of returns over the past five years, in pound sterling terms.
The first thing we’ll highlight here is the new narrative emerging of UK firms striking back. It looks to us as though the pace of share buybacks may have reached a peak, as companies start to look to the future.
Organic growth is often seen as a panacea, but, done well, inorganic growth (acquisitions and the like) can help, too. Certainly, when we’re seeing doom-and-gloom headlines about inward M&A, there’s a seemingly untold and unappreciated story of UK firms turning the tables and looking to do deals themselves.
Pharmaceuticals giant GSK completed its share buyback programme in June and shortly after announced that it would be buying Nuvalent, a Boston-based creator of oncology therapies, for c. $10.6bn (£8bn). This was the largest transaction undertaken by the firm in over a decade.
Elsewhere, HSBC completed its $13.6bn buyout of Hang Seng Bank in January, Shell splashed out $16.4bn on Canadian natural gas producer ARC Resources in July, while also this year student housing specialist Unite bought Empiric, Standard Life agreed to buy the UK arm of pensions and life insurer Aegon, and Santander completed the purchase of TSB Bank from Sabadell.
Others are focusing on increasing their global growth opportunities. Hollywood Bowl has been expanding into Canada since 2022, when it bought Teaquinn Holdings, which owned five bowling centres in the country. It now runs 16 centres in the country under the Splitsville brand and plans to get to 35 by 2032.
American brewer Molson Coors took a c. 8.5% equity stake in Fever-Tree at the start of 2025, a partnership that has benefitted the tonic water maker by giving it a vastly improved distribution network from which to expand into the US. With UK sales starting to plateau, the US market remains vast and using a similar playbook to how it cracked the UK seems prudent.
So, while some commentators are raising concerns over the health and future of the UK market amid continued inward M&A, a steady drip of companies crossing the Atlantic and low IPO activity, we’d beg to differ. It could be that as a result of this outward M&A that UK plc becomes much stronger and increases its global competitiveness, potentially supporting a further re-rating in many of these companies.
Of course, the UK has plenty of attractions to recommend it in and of itself. The defensive sectoral make-up of FTSE 100, thanks to its overweight to more traditional industries, means it can bring diversification benefits to an overall portfolio alongside more tech-heavy indices.
We saw an example of this when the VanEck Semiconductor UCITS ETF, a good proxy for the chipmakers that are powering the AI revolution, crashed into bear market territory in the space of 37 days through June and July. During that time, the Vanguard FTSE 100 UCITS ETF rose c. 5%.
As we’ve mentioned previously, pound sterling total returns from UK and US large caps aren’t as far apart as one might expect. In fact, the MSCI United Kingdom Index, which differs slightly from the FTSE 100, has returned 86.4% in pound sterling terms, higher than the 84.8% return of the MSCI USA Index, which, again, slightly differs from the S&P 500. Despite that, UK blue-chips trade at a c. 40% discount on both a trailing and forward price-to-earnings (PE) basis.
This is evidence of what we’ve long been arguing: that the UK has the potential to play the role of a safe harbour in the eye of any AI storm that comes our way, while retaining a good slug of companies able to benefit from AI as and when the turbulence calms.
We think that Schroder Income Growth (SCF) stands out as a good way to get exposure to these trends described above.
GSK, Shell and HSBC all feature in SCF’s top 10 holdings, showing the benefits of manager Sue Noffke’s investment process. Sue looks for companies with strong balance sheets – a prerequisite for doing M&A – sustainable profitability and consistent cash generation, targeting mispriced opportunities across the whole of the UK market.
In addition, Sue benefits from the huge size and scale of Schroders’ UK equities team, enabling them to have ongoing dialogue with some of the largest listed companies in the UK. This ensures that Sue has all the information needed to assess all potential acquisitions to ensure they are value-accretive and done at the right price.
Given the international outlook the majority of FTSE 100 firms have, SCF’s portfolio is well diversified globally, from a revenue perspective. Overweights to financials and healthcare ought to provide diversifying exposure for shareholders away from the market’s current myopic focus on AI. As an aside, plenty of sectors in the UK, while not direct AI plays, will be beneficiaries of the technology, through productivity and efficiency gains.
The trust has already earned its stripes having benefitted from the ramp up in share buyback activity, while it was also able to secure its 31st consecutive dividend increase, giving it one of the longest track records in the investment trust universe.
This dividend hero status is, to us, the trust’s most compelling characteristic and given the board takes into account all distributable returns (both revenue and capital) when deciding on the dividend, we have confidence its income profile remains on solid footing.
At the end of The Empire Strikes Back, Luke Skywalker returns to finish off his training with Jedi master Yoda in anticipation of what will be a climactic battle in the final film of the original trilogy, Return of the Jedi.
One could argue that the UK stock market is undergoing a similar journey. It may be down in terms of perception and weightings in both global and domestic investors’ portfolios, but it’s by no means out when it comes to returns. The unloved UK market looks to us ready to emerge from the shadows if the AI and tech narrative falters and disappoints those investors that have retreated from our domestic shores.
We think SCF is well placed to take advantage of these factors and provide a compelling re-entry point to returning investors, given its long track record of both outperformance and dividend growth and the attractive c. 8% discount and 4% yield on which the trust trades.
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]]>While Vietnam Enterprise Investments' (VEIL) results for 2026 so far have been disappointing, they follow a very strong 2025 in which the trust was by a long way the best-performing Vietnam specialist trust and the only one to post positive returns. This has been a difficult period for the Vietnamese market, with few stocks outperforming and the market being overwhelmingly driven by Vingroup. In both the rising market of 2025 and in 2026 so far, the key factor behind VEIL underperforming the local index was the significant underweight to this company and its subsidiary Vinhomes. Few active managers would be willing to let one stock rise to 19% of their portfolio, or 26% including Vinhomes, even before considering the low free float and the high valuation – the managers assess it trades at a premium to their reappraised asset value. Vingroup is a major beneficiary of the government’s investment plans, but it has risen more than 3.5x in 12 months and more than 13x since the start of 2025. Additionally, retail investors have used large amounts of leverage to take positions. As such, there are clearly downside risks and investors may not be happy to have so much of their Vietnam exposure in one stock, especially considering the potential in the rest of the market.
That potential is based in a truly exciting fundamental backdrop. Vietnam delivered its highest GDP growth for years in H1, with investment, consumption and industrial output all strong. Retail and service sectors performed well, and inflation remained below the 4.5%-5% target ceiling, and peaked in May. The success is rooted in domestic factors, most importantly a massive public investment programme and ambitious series of reforms all aimed at boosting the private sector as the engine of Vietnam’s economic growth. VEIL’s portfolio is 80% invested in domestic credit and consumption and the domestic investment cycle, with the positioning having become more bullish towards the end of the reporting period. VEIL’s managers expect Vietnam’s top 100 listed companies to deliver outstanding EPS growth of 20.9% in 2026. Yet the market is trading at trough multiples excluding Vingroup. The manager’s forward P/E for their portfolio is just 10.2x, while excluding Vingroup it falls to 9.2x, on even higher EPS growth of 28%.
Vietnam was upgraded by FTSE Russell from Frontier Market to Secondary Emerging Market status on 21/09/2026, and this is expected to bring passive inflows of $1.5–2.0bn from index-tracking mandates, and FTSE Russell estimates a further $5-6bn of potential investment from actively managed funds. This suggests liquidity could improve over the coming months. Foreign outflows have been substantial in recent years, with the market rising despite a net $11.8bn withdrawal since the start of 2024. As such, we think any resumption of foreign inflows could be the catalyst needed to correct the market and portfolio’s low valuations. In our view, the value at the portfolio level and in the discount make VEIL a particularly attractive way to get broad exposure to a market with an exceptional growth outlook.
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]]>Here in the UK, that’s certainly true. Indeed, the FTSE All-Share is less than 2% lower than the all-time high it hit in July, spurred on by impressive recent gains for the large-cap FTSE 100 index.
Despite this, consumer confidence remains sluggish. Indeed, sentiment towards the labour market is at its lowest level in three and a half years, while credit accessibility is more difficult than at any time since December 2023, according to S&P Global.
The answer, of course, is that artificial intelligence advances continue to push share price valuations higher around the world (and don’t forget that c. 70% of FTSE 100 revenues comes from overseas), while high gas and oil prices, tax rises and government debt levels are making life trickier for households.
It’s no surprise, then, that hedge funds are increasingly putting their chips on falling share prices for companies that are linked in any way, shape or form to the UK economy. As we round up below, the housing and construction market looks particularly ripe for the picking.
Before we dig into the data, a quick reminder that shorting a stock is, essentially, the act of betting that an individual company’s share price will fall, rather than rise (the opposite of what most investors will do).
As we commented last time, we absolutely do not think that ordinary investors can successfully run a book of short positions – and that’s especially true in choppy waters such as now.
However, we do think that it’s a good idea for investors to know which of the stocks in which they invest are being bet against. Exploring the bear case for all of one’s individual long positions can be a good way to play devil’s advocate and ensure you’re happy with your position, or if you think your initial investment thesis has run its course.
There’s been a change in the disclosure regulations around short-selling since the last time we reported the numbers. The Financial Conduct Authority (FCA) no longer provides individual details of which hedge fund is shorting which company, instead publishing only the aggregated short position for each company. It has also lowered the threshold for reporting short positions from 0.5% to 0.2%.
Housing pains
There’s one key theme that runs through the data and that is a loss of confidence in the UK housing and property market. Indeed, almost half (seven out of 15) of the companies on our list were in some way related to the housing or construction industry.
Building costs have been rising pretty much ever since the coronavirus pandemic and have surged further since the onset of the Iran war. In addition, rising long-term bond yields have translated into higher mortgage costs, leading to a slowdown in the housing market.
Margins within the housebuilding and construction sectors are under pressure, with eight profit warnings from such companies being posted in the first half of 2026, according to EY.
Two of those companies were Vistry (VTY) and Crest Nicholson (CRST), both of which are in the top 10 most-shorted UK stocks. For Vistry, its most recent profit warning was one in a string going back several years. The share price has fallen by more than 80% since mid-2024 and short interest in the company has exploded in recent months.
Vistry’s change in business model from building homes to sell on the open market to building affordable houses in partnership with housing associations and local authorities doesn’t seem to have worked. The firm has been flogging discounted houses to shift inventory and is struggling under c. £144m of debt.
It’s not only the housebuilders themselves that are struggling, though; many of the firms further down the supply chain are also being shorted.
Both Ibstock (IBST) and Breedon (BREE) are in a similar area. Ibstock is the world’s biggest maker of clay bricks. Breedon also makes clay bricks and both firms make concrete building products, too. Breedon also makes roof tiles as well as paving materials used for roads and pavements. Both firms have been hit by demand for their products in the UK being in long-term decline. In fact, Breedon said ready-mixed concrete volumes last year fell to their lowest level since 1963.
Ibstock warned on profits twice in 2025. It said in August that it had swung to a loss of £27m in the six months to the end of June 2026, versus a profit of £8m in the same period in 2025, as revenue fell 15%. Shares are down almost 50% so far in 2026 and 65% over the past five years.
Breedon’s shares have held up better, though the share price chart still looks rather ugly, down c. 6.4% over five years and 3% in the year to date. The firm remains profitable and revenue is growing, albeit slowly and margins remain soft. It has also been hit by an unscheduled cement mill shutdown in Ireland.
While building-related firms dominated the list, they aren’t the only companies being bet against. A trio of retailers – Kingfisher (KGF), WH Smith (SMWH) and Greggs (GRG) – were hanging around, albeit improvements at Greggs has seen it fall from second most-shorted to 15th.
An interesting new entrant was Yellow Cake (YCA), which buys and stores large quantities of physical uranium oxide concentrate, making it akin to a uranium exchange-traded fund. Shares have been volatile, as has the uranium price, suggesting the shorting could be somewhat tactical. The spot price of uranium has fallen c. 36% since its January 2024 peak, according to the miner Cameco.
YCA shares are up c. 68% over the past five years, with uranium in demand thanks to the proliferation of AI data centres, which will need all the power they can find to fulfil lofty promises.
In a world where defence spending is on the rise and companies with the potential to tap into this are seen as huge beneficiaries, it might be surprising to see a company with exposure to the defence and aerospace supply chain in this list.
Chemring (CHG) sells products and services like military explosives, cyber defence systems and biological warfare agent detection systems to both governments as well as blue-chip companies – an area that should be thriving.
However, while its half-year results struck an upbeat tone, profits were hit by an impairment charge for the retirement of its countermeasure operations in the US state of Tennessee as well as weakness in its sensors & information division.
Net debt also rose by c. 50% to £144.5m as it continues to invest in expanding its energetics production capacity, while the delayed publication of the UK’s Defence Investment Plan didn’t help, either.
Shorting is typically the domain of hedge funds. The process is that the shorter will borrow shares of a particular company from a stockbroker or an investment bank, then sell those shares at the current share price. If the share price falls as they expect, they can then buy the shares back at a lower price, return the shares they borrowed back to their original owner and pocket the difference.
As a worked example, let’s say you borrow 10,000 shares in a company whose share price is £1. You sell those for £10,000 and the share price then falls to 50p. You can buy shares in the open market for £5,000 and return them to whomever you borrowed them for and you have a £5,000 profit, minus the fee you paid to loan the shares and other trading costs.
The risk, of course, is that the share price actually rises. If the share price goes to £2, you’ll spend £20,000 buying them back, giving you a loss of £10,000.
Indeed, the biggest risk involved in short-selling is that your losses can be potentially unlimited: when going long, the most you can lose is 100% of your capital, but share prices can theoretically rise to infinity. Say the share price in our example went to £10, you’d then be facing a loss of £90,000. In percentage terms, that’s a 900% loss.
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]]>From an Octopus Renewables Infrastructure (ORIT) specific perspective, this was a difficult first half, with a technical reassessment of the onshore wind portfolio leading to a significant reduction in NAV. However, what we can now say is that the valuation is rooted in actual technical data from the specific assets in question, with ORIT’s more mature solar assets and offshore wind assets already valued this way, and with just some of its more recently commissioned solar assets, which are performing in line with expectations, relying on pre-construction forecasts for their valuation. While no disposals were made in H1, the team reports that, while the listed renewables infrastructure trusts remain at wide discounts, in the wider world of renewables it sees an improvement in sentiment and there is demand for good-quality assets, albeit transactions are taking longer and are subject to rigorous scrutiny. The team has various sales processes underway and expects the next asset sales to complete in late 2026 or early 2027.
From a big-picture perspective, 2026 is unfolding as an important year for renewables. Whereas electricity demand in the UK and elsewhere has remained relatively constant for some time, all of the signs are that the electrification of the global economy is picking up pace, and there can be few investors who aren’t aware of the enormous challenge that the growth in datacentres will place on electricity grids. Yes, it’s true that investment is going into other forms of power generation, such as nuclear and even fusion, and these tend to attract headlines. But these remain enormously expensive, time-consuming to build or technically unproven, or combine all three characteristics. Renewables, combined with battery storage, by contrast, are proven technologies with large installed bases across many grids that are, even without subsidy, relatively cost-effective and quick to build. Yes, there are challenges, such as the need to upgrade power grids, the global demand for various common and uncommon metals and materials, and risks to supply chains, but those still need to be seen in the context of proven technology, where the engineering challenges are all well understood.
An understandable investor frustration with the listed sector is that 2026 also saw power price spikes caused by the unstable, difficult-to-predict crisis in the Persian Gulf, which continues to haunt energy markets. ORIT’s strategy of fixing the majority of its revenues (86% are fixed over the next two years to 30 June 2028) means it has limited exposure to short-term power-price spikes, but this is a function of one of its core propositions: a stable, growing dividend. It’s notable that although overall power generation was broadly on budget, revenue and EBITDA were slightly ahead as a result of incremental management actions. As a result, dividend cover has increased, and thus ORIT has delivered on one of its central objectives.
So, without downplaying that this has been a tough first half, ORIT now has a portfolio diversified across multiple European jurisdictions and operates a range of technologies that are all well understood from an operational and construction point of view, with relatively predictable economics. This is against a backdrop where electricity demand is starting to ramp up as the AI-datacentre build-out continues at pace. If that demand scenario plays out, then ORIT’s discount of 30% and yield of 10% could prove to be a very attractive entry point.
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]]>This was a positive set of interims from Neuberger Private Equity Partners (NBPE), which in our view provides several points of evidence that the green shoots of a recovery are appearing. NBPE is unique when compared to listed peers, in that it invests 100% of its portfolio in co-investments. This means it has a direct view into companies’ operating performance, and allows the managers can both curate the portfolio as well as have a high degree of control over the pace of investments. The board and manager have been using the flexibility conferred by this approach to balance investment with capital returns. The current strategy is to refresh the portfolio with newer deals, which will be the main driver of returns in years to come. In this, as the interims highlight, the team has been active on this front and we understand that nearly one-third of the portfolio is now represented by investments made in 2024 or later.
At the same time, NBPE’s strategy sees the board continue to return capital to shareholders. NBPE’s discount remains wide at c. 30% to the 31/08/26 NAV, and so returning capital via buybacks is accretive. NBPE also pays a dividend from capital, which represents a yield at the current price of c. 4.8%. Taken together, according to our calculations NBPE has returned the largest amount of capital as a % of NAV in the listed private equity peer group over the last five years. As a result of buybacks and new investments, gearing has ticked up to 115% as at 30/08/26, in the middle of the board’s expected range of 110%-120%.
Encouraging signs of a recovery from previous years of below-average activity levels in the private equity industry can be seen in NBPE’s interims. These include not only the strong performance of the top ten holdings and the 2024/25 vintages (both of which have reported stronger-than-average revenue and earnings growth), but also a broader increase in valuations of more mature vintage investments, reflecting continued strong earnings growth. Against this, performance of the quoted holdings and negative foreign exchange adjustments detracted from returns marginally in the six months. As we report above, realisation levels also continue to recover, and whilst the average uplifts on exits remain below average, the ability of the manager to recycle proceeds into new deals is key to long-term NAV growth.
The shares continue to trade at a significant discount to NAV, which the Board believes is unjustified. Discounts across the sector have remained wide. NBPE has not been immune to this, and the Board recognises that the Company’s overall NAV and share price performance remain below long-term averages and investor expectations. They are focussed on delivering stronger NAV growth as the way to sustainably improving NBPE's rating and narrowing the discount.
With the managers reporting good visibility on further realisations, they are optimistic about the portfolio’s prospects for the second half of the year. Given NBPE’s differentiated proposition, should NAV returns continue to improve, it is possible that shareholder returns will be boosted by the discount narrowing yet further.
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]]>The setup for the near future looks really exciting too. In the last financial year the managers invested in Anthropic, the global leader in enterprise AI, which is expected to IPO in October and made up 6.4% of the portfolio as of the end of May. Anthropic has already made a meaningful contribution to returns for 2026, having been written up prior to the listing process. They also added a position in OpenAI, most famous for ChatGPT but breaking new ground with coding models and competitive across multiple vectors. USA also owns the unlisted fintech company Stripe which makes up 7.3% of the portfolio and has been revalued upwards over 2026, within the 28.9% of the portfolio in unlisted investments (after accounting for the listing of SpaceX).
USA offers exposure to many of the key themes that investors are focused on right now. AI is firmly established and proliferating in the real economy. The fallow years for the unlisted equity space seem to be over, with the IPO market coming back for the right sorts and secondary market activity picking up. Meanwhile, global markets are increasingly concentrated, meaning that differentiation and highly active approaches are arguably more necessary than ever for those seeking to avoid a quasi-tracker that costs more. Having been patient when the environment served the trust ill, shareholders should be able to hope for their reward in the coming years.
Saba’s latest approach to the company therefore seems spectacularly ill-timed. The activist investor has proposed three directors for the board. Saba will of course claim they are independent. Saba also claims to want to offer shareholders a 100% cash exit, but the board points out they have offered this to the activist before and been rejected. If this is so, it can’t simply be that Saba wants its money back at NAV, which means we have to wonder what else they might want. The board suggests that Saba wants to get control of the company for its own interests, and this is likely to lead to the end of the current strategy.
That strategy is something that investors will struggle to find elsewhere. Baillie Gifford have used the flexibility of the investment trust structure to the full in taking meaningful positions in private companies, something which typical (open-ended UCITS) funds owned by many ordinary British investors are not allowed to do. They have built up punchy, high conviction single stock positions, taking holdings well over the 10% limit which usually applies for open-ended funds. Shareholders have been rewarded with the spectacular returns of SpaceX pre-IPO. It’s worth noting that not all investors are offered access to companies like SpaceX or Anthropic, as the investee companies have a long line of suitors. The current managers’ access relies on their contacts and experience built up over years, and the trust placed in them by company management. For that reason amongst others, it’s hard to see the current strategy continuing if the board wants a new manager. But, of course, we don’t know what they want.
We think shareholders should vote against the nomination of Saba’s three directors to the board. All the details of when and how to do this are at USA’s website. Voting should be available through your platform, and should be done in good time before the AGM on 23/10/2026. The deadline for proxy voting is 1 p.m. on 21/10/2026. Deadlines for voting through platforms will be earlier and may be as early as 14/10/2026, so shareholders must act within the month. Saba cannot win the vote on its own, but if retail shareholders don’t vote, it may do.
If Saba wins, there can be no guarantee that USA will continue to offer its current, distinctive growth strategy, and that means one less way to access the world’s most exciting and exclusive private companies via an experienced and, increasingly, results-proven team. Those thinking they can sit it out and take a cash exit need to consider Saba’s rejection of an exit themselves and that the terms offered by a new board might end up being deeply unattractive, if an exit is offered at all. A vote for Saba is a vote for uncertainty and a vote to one way or another close the book on a highly distinctive strategy investors will struggle to replicate, just as it seems to be coming into form.
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]]>One could reasonably argue that stock markets have, for a long time now, aligned with the story: most travellers (investors) have been blinded by the new, shiny narratives emanating from the busy marketplaces (the US’s S&P 500 and Nasdaq Composite indices) and have shunned the potential riches hidden in the unloved fields (pretty much everywhere else in the world).
I’m certainly not suggesting one sells all their US holdings, as the traveller sold all his belongings. Perhaps, though, if you are of the view that there’s a shakedown in the offing, it’s worth taking profits and redistributing them elsewhere.
The US market undoubtedly seems the most attractive to many investors right now, given it is leading the way in the development of artificial intelligence. Sellside analysts seem particularly bullish, with earnings estimates for US Companies in both 2026 and 2027 having been revised upwards through this year by c. 10%. In an average year, earnings estimates are revised down by around 8%.
To me, this rings alarm bells, especially with relative valuations so skewed towards the US. Sure, it’s possible the country might continue to power ahead, but the MSCI USA Index’s price-to-earnings (PE) ratio, at 25.8x, is a c. 43% premium to the MSCI World ex USA Index’s PE of 18.4x, as at 31/08/2026. On a forward PE basis, the US trades at a 29% premium and on a price-to-book (PB) basis, the premium is a whopping 136%.
The PE ratio is a valuation measure that tells you how much investors are willing to pay for every pound or dollar of earnings a company, or index, makes. So, on a PE ratio of 25.8x, it would take you around 25 years and nine months to earn your money back if earnings remain the exactly same during that time.
The PB ratio is similar, but tells you how much investors are willing to pay for every pound or dollar a company, or index, is worth. The book value of a company is essentially its total net worth.
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]]>Whilst the performance of ATR in this period will deservedly capture the headlines, arguably the most interesting story from the six months under review is the proposed combination with PAC. Whilst we have covered the changes in detail in a previous article, the highlights include a larger asset base, shareholder-friendly changes to the fee structure and a conditional tender offer in December 2030. We believe the key takeaway from this corporate activity is that it is a strong vote of confidence for the ATR strategy, with the board of an industry peer deciding the risk-conscious, benchmark-agnostic approach is the best alternative for their own shareholders.
This approach has again delivered exceptional returns in the period covered by these results. In absolute terms, an over 30% return in six months is very impressive, particularly so when considering the volatility of the market in that period, typified by the war in Iran which has had a negative impact on several countries in the region. The managers’ technology stock picks have been particularly advantageous, demonstrating the success of the stock selection, whilst lower allocations to the likes of China and India have contributed to relative performance against the reference index. The ability of the managers to navigate challenging markets is very encouraging in our view, and cements the company’s place as a highly compelling, all-encompassing strategy that can provide long-term, actively managed exposure to the exciting potential of Asia.
The investment case at this juncture is also greatly enhanced by the discount in our view. The board has been active in using buybacks to mitigate this, aiming to keep the level within 5% of NAV. With the shares trading close to this level as at publication of the results, we believe it represents a rare opportunity to add to the long-term potential of the company at an attractive level.
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]]>Now, July’s revision of Japan’s Corporate Governance Code is raising the bar even higher for companies.
The update to the Code doesn’t necessarily mark a change in direction. But it does push the same agenda deeper into the boardroom by putting greater scrutiny on how companies allocate capital, invest for growth, and explain their path to long-term value creation.
Since it was first introduced in 2015, Japan’s Corporate Governance Code has become one of the central forces behind the changing face of corporate Japan.
Its impact is already visible to investors. Companies are paying more attention to return on equity. Dividends and buybacks are repeatedly hitting record highs. Low price-to-book stocks have faced more pressure to improve capital efficiency and shareholders are also becoming more active, forcing boards to respond.
Together, this has helped change how investors view Japan.
For many years, the market was associated with low returns, excess cash and limited focus on shareholders. That perception has steadily improved, with governance reform playing a major role.
But the latest revision to the code, overseen by the Financial Services Agency (FSA) and the Tokyo Stock Exchange (TSE), suggests the agenda is becoming more demanding. It’s no longer enough for companies to comply in form. Boards need to illustrate that they’re making decisions that support sustainable growth and medium- to long-term corporate value creation.
The clearest example is the revised Code’s emphasis on growth investment and resource allocation.
Boards are now expected to explain clearly and explicitly how companies allocate resources towards growth, including capital expenditure, research and development, human capital, intellectual property, portfolio reshaping, and shareholder returns.
That matters in a market with a long history of corporate conservatism whose companies are still estimated to hoard some $1.8 trillion on their balance sheets (Source: Reuters).
The revised Code doesn’t simply tell them to stop holding cash. Nor does it say every company should spend more or return more capital immediately.
The message is more useful than that.
Companies are expected to explain the logic of their capital allocation. They should show how retained earnings, investment plans and shareholder returns fit together. And they should demonstrate how those decisions support their path to growth.
Good governance isn’t just about returning excess capital. It’s about using capital well.
For some companies, that may mean higher dividend payouts or buybacks. For others, it may mean investing more confidently in areas where they can earn attractive long-term returns.
The revised Code also reinforces several wider governance themes.
Cross-shareholdings remain under pressure. Companies are expected to engage more constructively with shareholders as board effectiveness is receiving greater attention. Outside directors may also play a larger role in investor dialogue, depending on the issue being addressed.
While none of these ideas are entirely new, what’s changing is the breadth and depth of expectation with the governance agenda being pushed further into how companies are actually run.
That’s encouraging because we believe the next leg of Japan’s market improvement shouldn’t come only from balance sheet repair or restructuring. It should also come from companies able to grow consistently, allocate capital intelligently and deliver attractive total returns over time.
Earlier governance reforms were most visible among companies with clear shortcomings: inefficient balance sheets, poor capital discipline or limited shareholder focus.
For quality growth companies with strong long-term prospects, disciplined management teams, and the ability to reinvest at attractive rates of return, we believe the revised Code should be supportive.
If boards are encouraged to think more carefully about growth investment, capital discipline and long-term value creation, strong businesses have a chance to differentiate themselves more clearly.
That should matter to domestic and foreign investors alike.
International interest in Japan has already been rising, helped by governance reform, improving shareholder returns and stronger market performance. This next stage could encourage stronger growth alongside better capital discipline, potentially enhancing the long-term appeal of Japan’s equity market to global investors.
Indeed, it’s not just the AI boom that has helped push the Topix towards all-time highs this year. Foreign capital has also been flowing into the nation’s stocks throughout the year as strengthening governance standards filter through.
The revised Code is delivering one clear message. Japan’s governance story is no longer just about fixing what was broken. It’s increasingly about building a market where better-run companies can be recognised, rewarded and supported as they grow.
For Japanese equities, it could help turn a decade of governance progress into a stronger foundation for long-term returns.
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]]>Then there’s the yellow sticker frenzy, capable of turning even the red trouser brigade into sharp-elbowed predators. Since moving back to London, I’ve rediscovered the joys of the 6pm Waitrose raid, though my children remain less enthused about suppers assembled entirely from discounted picky bits.
But shoppers aren’t the only bargain-hunters in town: UK plc has become the world’s favourite discount aisle, and overseas buyers have piled in with gusto. More than £70 billion of deals have been announced so far in 2026 - over twice the total for 2025. And the headline numbers look enticing: AJ Bell puts the average premium at 43%, with easyJet commanding an eye catching 81% after its recent private equity tussle.
On the surface, this may look like easy pickings for UK investors but, as is so often the case, the devil is in the detail.
On the face of it, acquirers are paying some hefty premiums to take out UK-listed companies this year, with many of the largest bids offering a 40%-plus premium to the ‘undisturbed’ share price. But such premiums are frequently flattered by well timed swoops, with a few looking distinctly less impressive against 12 month averages.
Take Intertek, whose shares had fallen by a quarter after missing growth expectations when private equity firm EQT swooped in with a bid in April. The board squeezed out another 16%, but even the final offer was only 30% above the 12 month average.
And easyJet saw similar opportunism: the Iran conflict triggered a slide in its shares, prompting Castlelake to make multiple approaches before Apollo gatecrashed the party. The recommended bid was at an 81% premium but nearer to 50% against the 12 month average.
Private equity has driven much of the activity, keen to put dry powder to work to justify their management fees, but trade buyers have also re emerged. The potential synergies on offer have pushed up premiums, with Swiss engineering group ABB paying a 70% plus premium to leverage Rotork’s product catalogue.
For UK investors, the M&A boom has offered a welcome route to crystallise returns after years of depressed valuations but if sentiment improves, the bigger prize may come from backing companies to stay independent and deliver their own rerating.
The more pressing challenge, however, is the steady shrinking of the listed market, with takeovers removing companies faster than a moribund IPO market can replace them. Deliveroo was the biggest ticket London IPO of the past five years, but lasted just four years before being acquired by US rival DoorDash. ARM chose the US for its relisting, while Flutter, Wise and Indivior have shifted their primary listings across the Atlantic.
With NVIDIA alone worth the same as the entire UK Main Market, calls for more radical action are growing. Listing rule reforms should help, but ultimately performance is the best advertisement, and there are at least some green shoots on that front.
Owning a takeover target is the obvious win, though notoriously difficult to predict. And once a bid lands, investors have to choose between profit-taking on the bounce or holding out for completion, which isn’t guaranteed if regulators decide to intervene.
A portfolio approach tends to offer significantly better odds. While managers rarely hunt explicitly for M&A targets, the same traits that attract buyers - cash generative, quality businesses trading at undemanding valuations - often feature heavily in active portfolios, so which trusts have been best placed to benefit?
Law Debenture (LWDB) offers a differentiated equity income proposition, pairing a UK equity portfolio with a professional services arm that underpins its dividend. The trust has returned 28% over the past year, with a near 3% yield. Bid activity has been a material contributor, with eight approaches in its interim results - including easyJet, Schroders and Tate & Lyle - while M&A also benefits its services division.
One area less exposed to the UK’s de equitisation is the FTSE 250, which Schroder UK Mid Cap (SCP) manager Jean Roche dubs the “Heineken index” thanks to its constant refreshing via promotions and demotions. Mid-caps were hit by the Iran conflict but have since rebounded, returning 11% over six months. Depressed valuations have created a fertile hunting ground for takeovers, with SCP benefiting from premia of 75% and 100% on the acquisitions of Just Group and Spectris.
Looking ahead, UK plc may still resemble the nation’s favourite yellow sticker aisle, but the M&A wave is at least shining a light on the valuation opportunity on offer in the UK. If sentiment and performance improve, investors may yet find the real upside in the companies remaining independent and proving themselves too good to go after all.
All data as at 07/09/2026 unless specified otherwise.
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]]>The S&P 500 edged towards 7,800, buoyed by second quarter earnings that soothed nerves over AI spend and a mercifully uneventful inflation print. However, investors could be forgiven for reaching for their oxygen masks after Moderna rocketed 180% on clinical trial results for its personalised mRNA melanoma vaccine. Kudos for making Palantir’s 50% gain look distinctly pedestrian.
Back home, the UK’s heatwave fizzled out into an anticlimactic and rather damp bank holiday, with the FTSE 100 also following suit as it crawled back towards its February high. The FTSE 250, however, staged a minor renaissance, chalking up a 4% plus gain enroute to an all time high. Analysts have been busily revising earnings forecasts upwards, while corporate and financial buyers continue to see the value, hoovering up the yellow-stickered Tate & Lyle, Spire Healthcare and easyJet.
So, which shares and funds were red-hot with UK investors in August, and which were more reminiscent of a wet weekend?
These were the most (and least) popular shares with UK retail investors on three of the largest investment platforms last month:
AstraZeneca (AZN) had a rather turbulent month. Its proposed mega merger with Bristol Myers Squibb landed poorly, with investors questioning the logic of tying AZ’s fortunes to BMS’s looming patent cliff, not to mention the antitrust scrutiny likely to accompany the combined oncology portfolio. The shares fell nearly 10% in a single session before talks were abandoned.
It was also a mixed bag on the pipeline front. AZ discontinued trials of its lung-cancer immunotherapy challenger to Merck’s Keytruda, following in the steps of Wainua. But positive results in lung cancer and asthma trials lifted the shares by almost 10%.
Despite the volatility, UK investors continued to see value in one of the UK’s crown jewels. The broader biotech sector has hit record highs as investors look beyond the Magnificent Seven for growth, and AZ joined a select group agreeing to lower drug prices in exchange for tariff relief, removing a lingering policy overhang.
SpaceX (SPCX) may have topped buy lists but fell sharply back to earth after its first earnings report. Revenue nearly doubled year on year, but a 20 fold increase in AI spend dragged the shares below their $135 IPO price before they recovered to sit around $140.
Source: FE Analytics
Past performance is not a reliable indicator of future results
As ever with Elon Musk’s brainiac schemes, it’s hard for investors to pin down what they’re actually investing in. Starlink is the golden goose of the piece, with Musk hinting it could compete with the likes of Verizon and AT&T in the terrestrial space.
The launch business is edging towards breakeven but it’s the space vision that excites investors, from colonies on Mars to data centres in space. This may sound fantastical even for Elon Musk, but there’s commercial logic in harnessing a direct source of sunlight without the need for large-scale cooling. Whether that’s deliverable is another matter, not to mention the need for external funding.
Having taken a breather last month, NVIDIA (NVDA) returned to favour, though just as many investors took profits on a one year gain of 30%. With a $5 trillion market cap, quarterly earnings are very much seen as a bellwether for the wider tech sector.
Expectations may have been sky-high for the chip giant but its quarter two results smashed them out of the park, easing nervousness around a slowing of the AI spending boom. Sceptics may say that elephants can’t gallop but this elephant delivered a more than doubling in year-on-year revenue, with operating profit following suit. No mean feat when you consider that annual revenue was just $27 billion in 2023 but topped $200 billion in the last financial year.
The company also issued full-year guidance for the first time, pencilling in 70% revenue growth for FY2028, apparently constrained only by supply. It also launched a financing model allowing customers to use AI chips as collateral, backed by $500 billion of external capital, though the debate about usable asset lives for chips rumbles on.
Rolls Royce (RR), Legal & General (LGEN) and Vodafone (VOD) all saw buying on weakness, with geopolitical tensions and stubborn oil prices weighing on investor sentiment.
Palantir (PLTR) jumped 50% on spectacular quarterly results as revenue soared by more than 90% and full year guidance was raised. The rally reversed most of the earlier slide driven by fears that AI would erode software stacks.
Bears still point to the European pushback over data sovereignty, though Palantir’s software remains deeply embedded across the US government. With a forward P/E of around 110x, profit taking did seem rather inevitable.
Once again, growth seekers stocked up on Scottish Mortgage (SMT), which offers a healthy dose of SpaceX, chip giants TSMC and NVIDIA and ByteDance, perhaps best known for TikTok. All eyes were on whether SMT would start to reduce exposure once the first lock-in expired, though the share price fall has reduced its portfolio weighting from 25% to 18%. The managers don’t expect material changes and intend to retain the flexibility to hold a significant stake in the poster child for space investing.
Polar Capital Technology (PCT) is also a SpaceX fan, buying at IPO due to its merits as a “unique, vertically integrated business…at the centre of several attractive, underpenetrated markets” (Arguably space fits this bill better than most). NVIDIA and TSMC also sit in the top five, but it’s more Magnificent Seven focused than SMT. While SMT may sit in pole position, PCT has significantly outperformed it over the last year, serving up a 60%-odd return to SMT’s 35%.
Greencoat UK Wind (UKW) was also popular with investors, topping the buy list on interactive investor. The appeal is straightforward: pure exposure to the economics of UK wind farms and, with it, a dividend yield of just under 10%. However, concerns over the new energy price regime have weighed on the shares, leaving UKW trading at a near 20% discount. For income seekers, the combination of regulated cashflows, a high yield and depressed valuation proved hard to ignore. Meanwhile, The Renewables Infrastructure Group (TRIG) offers a broader remit, blending wind and solar assets to deliver a comparable 10% yield.
Income trusts were in high demand overall, with Murray Income (MUT), Henderson Far East Income (HFEL) and JPMorgan Global Growth & Income (JGGI) also making the cut.
The Fed is openly discussing rate hikes if inflation sticks, and markets seem to be pencilling in an ECB move. A Bank of England hike looks less likely, though three MPC members voted for a raise at the last meeting.
The bigger challenge is borrowing costs: new PM Andy Burnham faces the highest funding costs since 2008, with the 10 year gilt yield at 5.20%. Fiscal headroom is minimal, and while markets might welcome a Musk style chainsaw to public spending, further tax rises look more realistic. Not great news for consumer-facing stocks.
For now, investors may want to lock in this year’s tax free allowances, so here’s our pick of the best ISA platforms and best SIPP providers.
All data as at 02/09/2026 unless stated otherwise, returns based on share price total returns.
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