Here’s my portfolio review for the first quarter of 2024. I was up 4.2% while global markets powered ahead once again with an 8.6% gain.
My performance
This table summarises both my recent and longer-term performance against a range of comparators:
| Portfolio/comparators | Q1 2024 | 2023 | 2022 | Annualised since Jan 2018 |
|---|---|---|---|---|
| My portfolio | +4.2% | +9.2% | -13.0% | +7.1% |
| Vanguard FTSE Global All Cap (fund) | +8.6% | +14.7% | -8.0% | +9.7% |
| Vanguard LifeStrategy 60 (fund) | +4.2% | +10.1% | -11.2% | +4.9% |
| Vanguard UK All-Share Index (fund) | +4.0% | +7.8% | +0.3% | +4.2% |
| FTSE Closed-End Investment (index) | +2.3% | +4.9% | -16.6% | +5.5% |
Notes: The Vanguard global tracker fund is my main benchmark while the more conservative LifeStrategy 60 fund (essentially a global 60% equity/40% bond portfolio), a UK index tracking fund, and an index of UK investment trusts are additional reference points. All returns are pre-taxes and measured in sterling using a unitised method that adjusts for any money put in or withdrawn. All my trading and admin costs are included in my returns but not for the fund and index returns.
After the sharp rebound in the final quarter of 2023, the first quarter of this year has seen a continuation of that trend but with a bit more variation in individual markets. Global markets were up 8.6% so they have gained more than 15% over the last six months despite all the geopolitical turmoil.
These are the local currency returns for various major indices over the first quarter of 2024, all of which are in positive territory even before accounting for any dividend income:
- FTSE All-Share +2.8%
- S&P 500 +10.8%
- Nasdaq 100 +10.3%
- Euro Stoxx 600 +7.1%
- S&P/TSX Composite (Canada) +6.2%
- Topix (Japan) +16.4%
- S&P BSE Sensex (India) +1.9%
- Shanghai Composite (China) +2.7%
Japan continues to lead the way with the US and Europe also performing well. The pound has been roughly flat against the US dollar and Euro this quarter but has risen a little against the Japanese yen and Swiss Franc, meaning there has been little overall currency effect for us UK-based investors. The ten-year gilt yield has risen from around 3.5% to 3.9% as markets have become a little more cautious about the likely speed of any rate cuts both in the UK and elsewhere.
Gold was up around 7% at $2,200 but its rebellious cousin, Bitcoin, saw a near 60% increase to $70,000 following the launch of various Bitcoin ETFs and enthusiasm about the upcoming halving of its block creation rate. Oil was up around 15% to $87.
My performance by holding
Here’s how my positions did on a share price and NAV basis along with their quarter-end premium/discount:
| Holding (ticker) | Share price return Q1 2024 | Net asset value return Q1 2024 | Premium/ (discount) |
|---|---|---|---|
| JPMorgan Global Growth & Income (JGGI) | +12.3% | +13.6% | +0.4% |
| Vanguard All-World ETF (VWRL) | +9.0% | +9.0% | n/a |
| Lindsell Train Global | +6.3% | +6.3% | n/a |
| Fundsmith Equity | +9.6% | +9.6% | n/a |
| Smithson (SSON) | +0.9% | +1.1% | -12.0% |
| RIT Capital Partners (RCP) | -6.2% | +2.0% | -28.0% |
| Keystone Positive Change (KPC) | +2.9% | +2.5% | -13.6% |
| Gresham House Energy Storage (GRID) | -61.7% | +0.6% | -71.8% |
| Bluefield Solar Income (BSIF) | -13.8% | +1.7% | -26.3% |
| HICL Infrastructure (HICL) | -7.3% | +1.3% | -21.1% |
| HgCapital Trust (HGT) | +8.6% | +0.3% | -5.3% |
| Bellevue Healthcare (BBH) | -0.8% | -0.1% | -6.7% |
| Worldwide Healthcare (WWH) | +7.7% | +9.7% | -12.8% |
| International Biotechnology (IBT) | +2.2% | +7.2% | -11.6% |
| Baronsmead Venture Trust (BVT) | +4.8% | -0.1% | -4.8% |
| Henderson Smaller Companies (HSL) | -5.9% | -0.4% | -15.2% |
| BlackRock Smaller Companies (BSRC) | -3.8% | -0.1% | -13.1% |
| KR1 (KR1) | -1.6% | +18.2% | -30.0% |
Note: the links go to my trust profiles, all of which were written some time ago. My views on most of them probably haven’t changed that much but the information they contain will be quite dated.
The weighted average discount across all my positions was 4.9% at the end of March. That compares to 4.9% at the end of 2023 and 4.0% at the end of 2022. There was a fair bit of variation beneath that, though, with HgCapital seeing a much-reduced discount but ratings deteriorating on my infrastructure/renewables and, to a lesser extent, UK smaller companies and biotech/healthcare.
In terms of top-ups, I have added to Bluefield Solar Income following its news about teaming up with GLIL to co-fund its pipeline. I also participated in the JPMorgan Global Growth & Income fundraise. This proved to be very popular and as the size of the retail offer was limited to €8m for regulatory reasons, I believe everyone just got 40% of the amount they applied for.
My global holdings have continued to move ahead, although RIT, Keystone, and Smithson, the three smallest positions, have struggled to keep up. My UK smaller company trusts are still snoozing but biotech/healthcare has picked up a little. Infrastructure/renewables have had a torrid time with Gresham House Energy Storage (GRID) being my worst performer by a country mile — weakness in UK battery storage revenues has persisted leading to it postponing its dividend and curtailing its expansion plans.
Turning to the individual holdings, here are some thoughts on their progress…
Global
There’s not much to say about Fundsmith, Lindsell Train Global, and VWRL. JGGI has swallowed another, much smaller JPMorgan trust and continues to trade at a small premium thanks to its recent strong performance.
The concerns about the valuation of RIT’s private assets seem to have abated somewhat but it has signalled that it wants to let its unquoted exposure fall naturally by adding fewer new positions. There is a new CIO and CEO in place and, sadly, Lord Rothschild, the founder of the trust, passed away a few weeks ago. The NAV return has been hit by a slight lagging effect with year-end valuations for private assets yet to come through. I’ll be keeping an eye on what changes, if any, the new management team make.
The board of Smithson have been making the headlines this quarter by initially deciding not to hold a continuation vote despite its average discount exceeding its specified 10% level for doing so. Investors quite rightly kicked up a fuss and the decision was quickly reversed. The AGM is being held on 25 April and it’s hard to see the Chairman being re-elected given what’s happened. It’s been two years now since a discount opened up so an increase in the rate of buybacks wouldn’t go amiss either.
Keystone has moved in a fairly narrow trading range for almost two years now and arguably become my most boring holding! I still like the basic idea behind the trust and there’s the recently promised continuation vote in 2027 to provide a longstop.
Renewables and Infrastructure
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HICL has continued to make disposals and should soon be able to repay the amount outstanding on its revolving credit facility and have enough left over to fund a £50m share buyback programme.
Bluefield Solar has begun a £20m share buyback programme after its discount widened once again. The interim results released in February appeared pretty solid to me, hence the reason I have been topping up here recently. Power prices have been weakening but Bluefield appears to have agreed slightly longer power price agreements than usual and cushioned itself from this somewhat.
GRID has had a horrible quarter. After trading sideways for the last several weeks of 2023, it plunged from around 105p to 50p in January as analysts questioned whether the low revenues of recent months would lead to its dividend being cut. GRID and fellow battery trust Harmony Energy Income eventually updated the market and confirmed that would be the case while Gore Street’s international diversification has helped it maintain its payout for now. Although GRID’s share price recovered to around 60p after its last update, it has since fallen back to the low 40s. It hit a high of 180p just eighteen months ago.
GRID is yet to publish its end of 2023 NAV but its annual results should be released in early April. At the time of writing, GRID is trading on a massive 70% discount to its September 2023 NAV. I suspect we will see its December 2023 NAV cut by at least 10% and probably quite a bit more than that (Harmony revealed a 10% decline in its NAV for the three months to 31 January). Although GRID has hinted that it is unlikely to increase the discount rates it uses, the revenues it was forecasting for the next few years are likely to be slashed and we may even see longer-term revenue estimates cut as well.
GRID has been buying back its shares, spending just over £2m in the last several weeks, but it’s symbolic rather than needle-moving. GRID has also changed its expansion plans, preferring to upgrade a number of its 1-hour sites to 2 hours rather than building new sites while its US project has been put on hold indefinitely. Net debt at the year-end was around £70m, with £40m of cash and £110m drawn down on its £355m debt facility. Some asset sales would be nice but transactions involving operational battery assets seem to be few and far between.
After record lows in January and February, UK battery revenues picked up a little in March. But it’s just one month and they were still just half the level they were at the start of 2023 (it’s great that we can monitor industry revenues in real-time without having to wait for the trusts in this sector to update us). I am encouraged by the fact that we have seen a few operators announce some very large new projects suggesting that not everyone is bearish on the long-term prospects for the UK battery storage market.
I’ve sat on my hands with this holding recently after increasing my position size by around 20% from May to November last year before the full extent of the revenue decline became apparent. My instinct is that the shares have fallen too far and that there’s an opportunity to top up here but clearly, many investors bought them for the yield and have been selling out.
Caution and patience are required in situations like this I have found. I’ll run some numbers when the annual results are published before deciding whether to add fresh money but after its recent share price fall this has become a very small position for me that requires a lot of work to monitor, so it’s also possible that I may decide my time is best spent elsewhere.
Tech-Focused Private Equity
HgCapital Trust posted an 11% NAV gain for 2023 with its NAV per share topping £5 for the first time. Its operating metrics seem to be holding up well and it’s been able to continue making disposals at a decent premium to carrying value.
Biotechnology and Healthcare
Worldwide Healthcare appears to be picking up a little ahead of its next set of full-year results in May when its directors said they would be commenting on its underperformance of the last few years. I wonder if we may see a fee cut or a performance-based tender offer introduced given that the discount is around double the 6% level the board targets.
International Biotechnology should soon deliver its first report since its management team transferred to Schroders in November last year. From my perspective, it’s been a relatively smooth transition so far.
Bellevue Healthcare has been the weakest performer of this trio with its tilt toward mid and small caps continuing to hold it back. Somewhat perversely it has the smallest discount of the three although its latest annual redemption facility saw 14% of shares repurchased, a much larger amount than in previous years.
UK Smaller Companies
The growth bias at both Henderson Smaller and BlackRock Smaller has seen both trusts continue to lag the sector average a little. The performance of these two trusts has been very similar for a while now, so I am wondering if it is worth holding them both, but I find them pretty low maintenance.
Crypto
KR1’s NAV saw a solid increase over the first quarter but the discount has widened out to 30% again so it’s actually down a little in share price terms, despite the huge gain posted by Bitcoin. There was one new investment announced, the first one for six months.
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Disclaimer
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Nothing on this website should be regarded as a buy or sell recommendation as I'm just a random person writing a blog in his spare time and I am not authorised to give financial advice. Always do your own research and seek financial advice if necessary!
It felt like a tough quarter if you weren’t in SPY!
Re: RIT, I heard that Lord R was the main conduit for the unquoted stuff, through relationships he’d built up over time, so makes sense for them to not add.
Lindsell Train makes me so sad, the change in LTI since the glory days… Hoping there’s a gradual turnaround – they seem to be focusing more on their ‘tech’ stuff, though with Energy running again, they’ll find it hard to beat the UK index.
Yep, US tough to beat… again. Interesting re: RIT. I hadn’t heard that but then we don’t hear much of anything from RIT so hopefully the new management team will be a little more forthcoming in the way of presentations etc to explain the methodology. I suspect the PE connections for the funds are fairly well established now but there may be fewer opportunities for direct investments.
LTI does seem to grind lower given it has so much in LT Limited and the funds have continued to flow out the door. LT Global has matched Fundsmith since the end of 2021 FWIW.
I’ve sold out of fundsmith completely now. I have had an exceptional run and thank Terry for that. Seeking yield I’ve added to my LGEN, Aviva and Phoenix. US looks very toppy and overly optimistic on AI so happy to take profits.
Thanks for the analysis, very interesting.
Any idea when RCP may re-rate and close the discount? It’s one of my biggest positions and it’s so frustrating to watch the whole market explode while RCP is still lower than it was back in April 2020. Seems like a great buy at -30% but I can’t bring myself to buy any more of it.
@M
Very difficult to say when RCP’s discount might narrow. It feels rather entrenched now and even the significant level of buybacks over the last year have had little impact (although perhaps the discount would have been even wider without them). I suspect we will need to see multiple things improve to narrow the rating.
Personally, I want to see much more from the trust in terms of marketing to investors and explain what they are doing with the underlying strategy and how they plan to move forward without Lord Rothschild. I also don’t like the 50/50 hedged benchmark they use as it seems unnecessarily complicated and has flattered their performance for a long time now. I don’t mind the fact they use hedging but breaking down the NAV return with attribution analysis would be a clearer way of showing what benefit this has.
Of course, performance needs to pick up as well although I think RIT will always find itself lagging during long bull markets given the way it is set up.
Thank you for the thorough response.
I’m content with lagging during bull markets as long as they capture at least SOME of the gains, and reduce the fall during bear markets. Seems like they have been sort-of delivering on this promise in terms of NAV, at least.
Why is the fund not marketing more to investors? Is there anything that we as shareholders can push them on?
@M
They haven’t really needed to market the trust in the past as the shares often traded around NAV or at a premium and the fact Lord Rothschild was at the helm was a big draw. No harm in contacting the trust to make your views known… https://www.ritcap.com/contact-us
Thank you for the quarterly updates and analysis. Really appreciated. Over the last few years I have also seen my Investment Trust portfolio impacted by out of favour sectors (UK Small Cap, REITs, Growth focus) and manager changes etc. whilst my equity index trackers have continued to perform well.
Reluctantly I’ve decided to transition out of ITs over the next 5 years (when hopefully the sector will have recovered) and keep it simple with just 50% Vanguard Life Strategy 80% and 50% VWRL and go and enjoy the garden! Are you tempted 🙂
@JCB
It’s certainly been a tough few years for the sector as a whole and those sectors have been hit harder than most. Styles and sectors ebb and flow all the time of course and my general approach is to try and avoid getting too cute when timing such things. I think that’s a hard thing to do and something I find particularly difficult to do consistently.
I suspect I might move more towards trackers at a later stage when I want to spend more time doing other things, and I think that’s a perfectly valid approach. But for now I love the challenge of investing too much! The garden seems to have screaming children in it for now so it’s not as peaceful as it could be 🙂
Hi, I always read your commentary of quarterly performance of your portfolio. I hold VWRL/MRCH but always tempted to buy some of the other holdings like Fundsmith or LT Global. Recently bought BSRC & HSL but was forced to sell by my platform IBKR as they are not allowing holding IT as they think it is complex leveraged investments and need HNI to hold them. Always read monthly commentary by Lindsell Train in their fund factsheets for their LT UK/Global& US fund + 2 ITs though they have overlapping holdings in all 5. Always keeping eye on widening discounts in whole IT sector and especially RCP one as I used hold them till 2016. I don’t need regular income but bought AGT/FGT/ASL & BNKR just to cash in widening discounts of 10%. Might go for few more in space of UK Equity Income space like Murry Income and DIG but not sure if discounts will narrow down in near future. Looks like Index Funds and tracker is way to go.
@Milind
The complex instrument issue does seem to be affecting more and more trusts on various platforms of late. I’ve not encountered it myself yet but I would hope a more sensible balance can be struck.
The discounts on pure equity trusts haven’t widened as much as other trusts — maybe from 5% to 10% on average — but it seems reasonable to assume that the trend should reverse at some point once the sector has digested the various cost disclosure and demand/supply imbalance issues.