AVI Global (AGT)

AVI Global (AGT) has a unique investment philosophy that generates growth from global markets in a truly active, truly differentiated manner, offering a complement or alternative to increasingly concentrated market indices. The portfolio is invested in companies with complicated structures that are trading well below their intrinsic value, which means mainly closed-ended funds, family-controlled holding companies and asset-backed special situations in Japan. Over the past year the manager has increased the fund’s exposure to South Korean holding companies, believing that ongoing corporate governance reforms could lead to the same re-rating that has delivered such good performance from the Japanese holdings.

Manager Joe Bauernfreund and his team often take an activist approach to unlocking the value in their investments, seeking rationalisation of company structures, divestment of assets or the return of cash to shareholders. This provides a source of alpha that is uncorrelated to the direction of the market and therefore to the AI boom that has sucked investors in over the past three years.

While it has therefore been swimming against the current since 2022, AGT has delivered strong returns on a five-year view. This year has been a less successful one, although returns have been positive, thanks largely to issues at one particular holding (see Performance).

However, the opportunity continues to look exceptional in AGT’s investment universe: discounts to fair value are close to record levels, with Joe able to reinvest capital from successful multi-year trades, such as a winning position in private equity managers, into lots of new ideas, including exceptionally cheap Korean companies. The double discount, accounting for the discount of the underlying companies to their NAV as well as the Discount of AGT’s own shares to its NAV, was 38% at the end of September, reflecting huge performance potential if that value can be unlocked.