Aberforth Geared Value & Income (AGVI)

Aberforth Geared Value & Income (AGVI) invests in cheap UK small-caps, and uses an innovative structure and a fixed life to take on significant gearing in order to boost income and capital growth potential. For those looking to take advantage of the cheap valuations in the UK stock market, AGVI compounds this with a value strategy that sees the managers identify undervalued stocks and Gearing through zero dividend preference shares (ZDPs) worth c. 37.5% of net assets at launch.

The first year of the trust’s life has been difficult from a capital perspective, but very positive as regards income. Our analysis of income earned but not yet distributed suggests the board will have the firepower to exceed the dividend range given in the prospectus while still paying into reserves. Thanks to the Discount, a payment at the top end of the 4–5p range given at launch would imply a prospective yield of 6.0%. Income generated has been healthy thanks to good operational performance from portfolio companies.

However, since the trust was launched in July 2024, sentiment to the UK economy has weakened. Meanwhile, threats of heavy tariffs by the Trump administration have weighed on sentiment to companies exposed to trade. As a result, the NAV has been broadly flat (see Performance), but the shares have fallen onto a wide discount.

AGVI is managed by a team at Aberforth Partners, who only do UK small-cap value and run a number of portfolios to a very similar strategy. They highlight that their strategy looks very cheap compared to typical valuations over the 30 years of Aberforth’s history, and at levels that would imply annual gains of 15% per annum, judging by past historical patterns.