Update: MIGO Opportunities Trust (MIGO) fund managers Tom Treanor and Charlotte Cuthbertson have backed the call from a fellow activist investor for Gresham House Energy Storage (GRID) to put itself up for sale.
In their second quarter report, Treanor and Cuthbertson said the £533m battery fund was their biggest contributor to MIGO’s 5.9% investment return in the three months to 30 June. This overlapped by one month with the annual results to 30 April released earlier this month which showed a 20.6% return.
A 22% rise in GRID shares saw it account for 9.5% of MIGO at the half-year stage and provide 1.7%, or nearly a third, of the quarterly return.
The AVI fund managers, who specialise in buying out-of-favour investment companies, hold nearly a third of the portfolio in listed renewable infrastructure funds. They said GRID maintained its strong run after a capital markets day in May was followed by three of its pipeline projects receiving finance and equity co-investors, which greatly reduced the risk to shareholders, and Ofgem included its Ocker Hill project in the West Midlands in the energy regulator’s long duration scheme.
The shares were also buoyed by the company’s forecast that its capital spending would add 56p to net asset value per share that stood at 115p with the shares then at 89p.
Nevertheless, while acknowledging the excellent management of Gresham House, the MIGO duo said they agreed with Primestone Capital, which last month issued an open letter calling on the board to launch a formal sales process later this year.
“We agree that a sale of the company, which is the largest owner of battery storage assets in the UK, is likely to elicit the best outcome for shareholders. The board of GRID is aware of our views,” they said.
MIGO and other funds run by Asset Value Investors (AVI) own about 3% of GRID. Primestone has said it has a 7% interest.
Bluefield bid boost
MIGO, a £69m trust in the AIC Flexible Investment sector, also benefited when Bluefield Solar Income Fund (BSIF), a 5.9% position in the previous quarter, succumbed to a £548m cash bid from Drax Group at a 17% premium to its then share price. The MIGO managers made a 22% turn on their investment having bought into BSIF last October when its share price slid 10% after the company proposed a merger with its fund manager that would have led to a dividend cut. The pair rightly concluded that the negative investor response would force the board to put the company up for sale, which it did two weeks later.
Treanor and Cuthbertson also successfully stagged the National Investment Fund of the Republic of Uzbekistan (UZNF), generating a 31% gain between May when the company listed and they sold out in June. The managers said it was unusual for them to back an initial public offer but they knew and rated the Franklin Templeton running the fund from AVI Global Trust’s (AGT) long-standing investment in Romanian fund Fondul Proprietatea (0OKS). They were further reassured by the shares priced at a 20% discount to net asset value.
They also continued to profitably trade the volatile shares of Seraphim Space (SSIT). However, it was not all easy going with the fractious split between the board and manager of Aquila European Renewables (AERS) contributing to its poor performance, while issues at Partners Group Private Equity (PEY), Home REIT (HOME), Chrysalis Investments (HRY) and RM Infrastructure Income (RMII) also weighed.
Private equity reshuffle
Elsewhere the managers took advantage of “aggressive” share buybacks by Pantheon International (PIN) after the private equity fund sold a chunk of its portfolio. They exited the shares on a low-20%s discount and switched back into Oakley Capital Investments (OCI) which they viewed as unusually cheap with its shares standing at a steep discount in the high-30%s.
They said they remained “highly excited” by the outlook for their strategy. “The London-listed closed-end fund market is ripe with opportunity – discounts remain wide, and corporate activity an important source of returns.”
MIGO shares stand on a narrow 4% discount to net asset value and have returned 31% over three years.
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