The MIGO Opportunities Trust, previously known as Miton Global Opportunities, seeks to exploit mispricings in the investment-trust sector. Trusts’ share prices trade at the balance of supply and demand in the open market – this can differ dramatically from the value of the underlying portfolio.
We seek out investment trusts trading at a discount to the value of their underlying investments – or net asset value, NAV – and offering a catalyst for both a rerating in the share price and an appreciation in the portfolio. This “double whammy” can produce attractive returns, especially when a particular asset class returns from a period of being out of favour.
The new China
Covid-19 will be with us for a long time, so we’re looking for trusts that benefit from some of the trends accelerated by the pandemic. Vietnam is profiting as firms diversify manufacturing and supply chains away from China. The trend has brought about increased urbanisation and a growing middle class in Vietnam; an extensive infrastructure plan by the government should stimulate further growth.
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We hold the Vinacapital Vietnam Opportunity Fund (LSE: VOF) and Vietnam Enterprise Investments (LSE: VEIL), both of which have excellent management teams and complement each other, with the former’s focus on private equity and the latter’s on public markets. These trusts trade on very wide discounts, a legacy of oversupply given the vast sums raised by Vietnamese funds in the noughties. We expect demand to rise as the positive view about Vietnam gains greater acceptance, while both trusts are shrinking supply through share buybacks.
A cheap inflation hedge
The Baker Steel Resources Trust (LSE: BSRT), which develops mining projects, is on a double-digit discount to NAV. It controls several interesting projects that could be ripe for selling or listing. One recent flotation, a tungsten mine in Devon, gave the trust’s valuation a welcome fillip. It has struggled to monetise its holdings during the pandemic: due diligence has been difficult for geologists owing to travel restrictions.
The trust focuses on metals that will be used in the electrification of the global economy. Moreover, it consists of a portfolio of real assets, which should temper concern over inflation. For now, mining finance remains heavily out of favour as the Chinese economy slows.
Georgia on our minds
We seek out unloved and overlooked situations where an investment has fallen below the radar. One such example is Georgia Capital (LSE: CGEO), which focuses on the Eastern European country. Its shares currently trade at around half of the latest valuation of its underlying portfolio.
This seems to be due to complete lack of interest at a time when many frontier-market specialist finds are shutting their doors. As a result, there seems to have been constant selling of Georgia Capital’s shares over the past few mo
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