While finding discount opportunities in the investment-trust sector has always been at the core of the Migo Opportunities Trust strategy, Migo 2.0 now overlays this with increased activism, engagement and concentration. Higher interest rates, flawed regulation surrounding cost disclosures and wealth-manager consolidation have jointly created the most fertile hunting ground in a generation. We intend to exploit this opportunity by finding the best-value opportunities in the sector and unlocking that value for shareholders.
For some, activism is a dirty word. But, at its best, it is often centred on dialogue with shareholders aimed at creating a consensus. This then allows for a sharper and more coherent message to be presented to boards when engaging to create value. Most of our work happens in private. Intensive and detailed research is required when evaluating private-asset vehicles, where we believe the most exciting opportunities reside. Here are three such investments from the portfolio.
Funds focusing on private assets
Chrysalis Investments (LSE: CHRY) has a portfolio of mature venture-capital investments with holdings in several of the biggest European fintechs, such as Klarna and Starling. CHRY has had an extremely rocky ride in recent years, with its net asset value (NAV) hitting 251p in July 2021 during the post-Covid bubble before falling to 130p in March 2023 as its investee companies raised new money at materially lower valuations.
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Scepticism surrounding even these reduced valuations led to the discount to NAV widening considerably. CHRY still trades at a 27% discount today despite using cash from recent realisations of portfolio holdings to buy back shares. Although tariff-induced US stock market volatility put the planned flotation of Klarna on hold, we believe a listing will be revived later in the year, which would provide further liquidity for continued buybacks or a tender offer.
Battery-storage funds began 2024 in the doldrums thanks to a combination of reduced wholesale power price volatility and the National Grid’s system sidelining battery storage, which severely reduced revenue generation and, for some trusts, resulted in the suspension of dividends and concerns around gearing levels.
This year has been a very different story for these funds and Gresham House Energy Storage (LSE: GRID) has put in place tolling agreements, which provide a reliable floor for revenue generation. The recent bids for Harmony Energy Income Trust (another battery storage trust) from Drax and Foresight highlighted the potential of GRID’s portfolio. The fact that there were two bidders further emphasises the appeal to private buyers of portfolios of battery-storage assets.
Trusts in wind-down can prove to be very profitable investments. However, this involves modelling out timeframes and sales prices to try to ensure that even in a “worst case” scenario, returns remain attractive. Aberdeen European Logistics (LSE: ASLI) is an example where we have enjoyed returns from the disposals already achieved, but also believe there is value from here.
ASLI invests in “big box” logistic hubs and urban list-mile warehouses across continental Europe. Despite an attractive set of assets, ASLI entered into a managed run-off in May 2024 after a sustained period of trading at a persistent discount and has been selling off the portfolio and handing cash back to shareholders. The pricing achieved so far on the realisation process highlights the portfolio’s quality.
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