BlackRock Throgmorton Trust (THRG)

BlackRock Throgmorton Trust (THRG) offers investors an exposure to the small- and mid-cap UK equity market through a strategy employed by portfolio manager Dan Whitestone that is unapologetically focused on generating long-term capital growth. As discussed in Portfolio, THRG offers an extension to traditionally long only equity strategies, since Dan is afforded the flexibility to short stocks he believes are being left behind or are victims of industry change. Short positions are held using contracts for difference (CFDs), which are also used as the preferred method for gearing, increasing exposure via long positions on preferred companies. The pressures on valuations across the small- and mid-cap universe over the past couple of years have meant Dan has reduced the short book to a below-average 3.2% of net assets, whilst gradually increasing the long exposure, meaning THRG’s net market exposure has risen to 114.7% (see Gearing).

Dan is able to pull a variety of levers in an effort to generate alpha. However, the focus on identifying high-quality, fundamentally strong companies has been the ultimate driver of long-term performance, with THRG outperforming the Deutsche Numis Smaller Companies Plus AIM (ex ICs) Index by 13.9 percentage points over the past five years (see Performance).

Since the start of 2022 the tough macroeconomic environment has made it more challenging for growth strategies. However, THRG outperformed over 2023, with relative performance accelerating in the last few months as SMID-caps and growth stocks rallied sharply on expectations that interest rates had peaked. Additionally, Dan notes that the underlying holdings displayed operational resilience throughout the year, evidencing the quality he looks for. Although investor sentiment may have improved slightly, this is yet to be reflected in THRG’s 10.5% discount which is wider than its five-year average of 2.5%.