Miton Global Opportunities (MIGO) seeks to provide returns in excess of those on cash by exploiting opportunities from pricing inefficiency among under-researched investment companies. With manager Nick Greenwood unconvinced by the near-term prospects for mainstream equity markets, the portfolio is developing more of a focus on specialist strategies and alternative asset classes. Recent performance has been strong and the trust has beaten its absolute benchmark (sterling three-month Libor +2%) over the last four discrete years (see below) and on a cumulative basis over all periods of five years and less (see page 6). Measures to raise MIGO’s profile and improve liquidity in its shares, including the engagement of Numis as broker and Frostrow Capital for administration, distribution and marketing, may be reflected in a narrowing discount.
Investment strategy: Seeking value opportunities
MIGO seeks capital growth by investing in a portfolio of closed-end funds where manager Nick Greenwood sees long-term potential and attractive valuations. The manager has long experience in the sector and has managed the trust since launch in 2004. He blends top-down macro views, quantitative screens, fundamental analysis and extensive company meetings to arrive at a globally diversified portfolio with a tilt towards unloved funds and sectors and, increasingly, to alternative asset classes. The manager believes a combination of asset revaluation, narrowing discounts and the potential for realisation at a price closer to NAV means these holdings give a margin of safety in an uncertain equity market environment.
Market outlook: A holiday romance?
Equity markets are currently confounding those who felt 2016 would be a year to ‘sell in May and go away’, posting strong summer gains buoyed by better US data and Bank of England stimulus. However, the factors that drove earlier uncertainty – notably the UK’s future in Europe and the US presidential election – have not gone away, and could spark further volatility in share prices and investment trust discounts.
Valuation: Discount narrower than average
At 6 September MIGO’s shares were trading at an 8.4% discount to cum-income net asset value. This is narrower than the averages over one, three and five years, but wider than the 6-7% seen in late July and early August, close to a five-year low. The slight widening was caused by a c 5% rise in the NAV while the share price rose by c 2%. Underlying funds still trade at historically wide discounts, holding out the possibility of significant upside if these discounts narrow.