Momentum Multi-Asset Value Trust
21 June 2022
Results for the year ended 30 April 2022
Momentum Multi-Asset Value Trust plc ('MAVT' or 'your Company') seeks to apply a value lens to identify the most compelling investment opportunities across a highly diversified range of asset classes. MAVT is designed to appeal to investors who wish to combine the benefits of a quarterly income along with long-term capital growth.
Chairman's Statement
Highlights
- Net asset value total return +0.9% vs Benchmark +15.0%
- Share price total return +1.5%
- Annual volatility 12.5% vs 16.6% for the MSCI UK All Cap Index
- Dividends for the year increased from 6.72p per share to 7.20p per share
- Yield of 4.0% based on the 181.5p year-end share price
Source: MSCI/Morningstar/Momentum Global Investment Management
Overview
When writing the Half Year Report in December, I noted the rise in the cost of living at that time, largely caused by supply chain bottlenecks and labour shortages in some sectors. Since then, the invasion of Ukraine by Russia has been affecting the lives and livelihoods of millions of people and leading to untold suffering for the people of Ukraine. The effect on inflation has been quickly felt in the energy markets, and there have already been significant price increases across many agricultural products. Other impacts, less forecastable today, must also be likely. The effects of the COVID-19 pandemic included labour market upheavals and dislocations, and the reversal of globalisation, both of which were already causing inflation to rise. The invasion of Ukraine has exacerbated these economically negative effects. What of China in all this? Its economic importance to the prosperity of the West is hard to overestimate and dangerous to underestimate. As of now, China is pursuing a near zero COVID-19 policy with the result that large parts of its population, and therefore economy, are locked-down. China's current attitude towards Russia and the West is hard to read but we can be certain it will be whatever the Chinese authorities believe to be in their own best interests over the long term; and their view of the long term is usually much longer than ours.
Your Company performed well during the last year in the periods when the Manager's Refined Value investment approach would have been expected to do well, specifically when the Value Investing style outshone Growth Investing. The latter style is now under pressure, most obviously illustrated by the decline in valuations of many US technology companies, largely as a result of rising interest rates in response to rising inflation. As I commented in the Half Year Report, rising inflation is rarely good for equities but, if any are favoured, it is usually those already lowly valued and when the Value style should do relatively well.
Performance
Against this backdrop, for the year to 30 April 2022 (the 'Period') MAVT generated a net asset value ('NAV') total return per share of +0.9%, compared with the Benchmark return of +15.0%. Over the last five years, your Company has generated a NAV total return per share of +32.0% (equivalent to 5.7% per annum) compared with +41.8% (equivalent to 7.2% per annum) from the Benchmark.
MAVT adopted the Benchmark of CPI plus 6% per annum in July 2017. We measure performance against this Benchmark over a 'typical investment cycle' which is defined as one that spans five to ten years. As recently as both the Half Year Report and last year's Annual Report, MAVT was well ahead of its Benchmark over the respective trailing five years. The events of this Period have led to a somewhat mediocre performance by MAVT, especially when compared to its Benchmark which has been turbocharged by the rise in inflation. The consequence is that MAVT is now behind its Benchmark over five years though it could be argued the recent period is not within the bounds of what might be considered 'typical'. It certainly feels as though the Benchmark will be a challenging hurdle for some time, though the last two or three years have amply demonstrated how quickly and significantly things can and do change.
It is worth noting your Company has now passed the 10-year anniversary of its current investment policy. Over this period the NAV total return per share has been 8.5% per annum compared to its blended Benchmark total return of 5.2% per annum. This is a creditable absolute return and relative performance over the 10-year period.
The Manager's Review provides greater analysis and explanation of MAVT's performance for the year.
Dividends
Your Company will pay a fourth interim dividend of 2.16 pence per share (on 20 June 2022), which, when added to the three preceding interim dividends of 1.68 pence per share, produces total dividends of 7.20 pence per share for the year ended 30 April 2022, an increase of 7.1% over the previous year. That represents a yield of 4.0% on the share price of 181.5 pence that prevailed at the year-end. The Board has previously made clear its intention to increase dividends by at least inflation over a typical investment cycle. The dividends of 7.20 pence per share for the year represent an increase of 17.3% over five years which compares to inflation of 16.6% over the same period, as measured by the CPI.
The dividends for the year were covered by earnings but, even if these had not been sufficient, the Board would have made the same decision in relation to the dividends paid to Shareholders this year. One of your Company's great strengths is the structure of its balance sheet reserves which can be drawn upon to enable dividend policy to be set without impinging upon your Manager's freedom to make portfolio changes that might reduce revenue if that is in the interests of achieving the best possible total return.
Looking forward, it is the Board's intention, barring unforeseen circumstances, at least to maintain the aggregate dividends for the year to 30 April 2023 at 7.20 pence per share, meaning a quarterly rate of 1.80 pence per share. Given the outlook for inflation, it is very likely the fourth interim dividend next year will be higher than 1.80 pence per share consistent with the Board's intention to increase dividends by at least inflation over the longer run.
Discount Control Mechanism ('DCM')
The DCM has been in operation since 1 August 2016. During the Period MAVT bought back 4,210,500 shares costing GBP7.8 million and issued 165,000 shares raising GBP0.3 million. Since being put in place, the operation of the DCM has resulted in the issuance of 13,920,000 shares and the buy-back of 22,525,513 shares: a net buy-back of 8,605,513 shares. As shares are issued at a small premium and bought back at a small discount, the NAV of your Company has been enhanced by GBP514,288 after all applicable costs.
The Board believes the liquidity provided to Shareholders and the lack of any material discount of the share price to the underlying NAV of MAVT are of real value to Shareholders and remains resolute in its application of the DCM to ensure these benefits are maintained.
Gearing
MAVT has a GBP10 million revolving credit facility with The Royal Bank of Scotland International Limited and, at the financial year-end, GBP7 million was drawn down. During the Period the average net gearing level was 9.5%. A small amount of the drawn facility is held in cash to allow instant access to funds should the need arise. The undrawn element of the facility is in place largely to assist with the operation of the DCM, enabling gearing levels to be maintained when the DCM results in the issuance of new shares, and providing short-term working capital, if necessary, when shares are bought back.
Board Changes
I have been a non-executive Director of MAVT for just over nine years, having been Chairman for virtually all of that time. I will retire at the AGM in July 2022 when James ('Jimmy') McCulloch will succeed me. Jimmy has been on the Board for seven years, for the last three as Senior Independent Director. I am confident that his leadership and guidance will serve Shareholders well. Sue Inglis will take over from Jimmy as the Senior Independent Director.
The Board was also pleased to announce the appointment of Jeroen Huysinga as a non-executive Director with effect from 1 June 2022. Jeroen is a highly experienced global equities investment professional, and the Board and Manager look forward to his insights and contribution.
My tenure on the Board has witnessed many changes and I am indebted to my current and past Director colleagues for their support and commitment. When I consider the resilience and flexibility of your Company's mandate, as well as the professionalism and capability of your Manager, I remain confident that MAVT can serve Shareholders well in the future.
Annual General Meeting ('AGM')
This year's AGM, which will be your Company's 26(th) AGM, will be held at 12 noon on Tuesday 26 July 2022 at MGIM's offices in London.
We are looking forward to welcoming Shareholders in person this year, particularly given the constraints we have faced over the past two years. Shareholders will also be able to view the AGM live via an online platform. Information on arrangements and how to register to attend, either in person or online, can be found in the Annual Report and on the Company's website at https://momentum.co.uk/MAVT.
At the 2021 AGM, Shareholders approved all resolutions, each by a majority of over 99% of shares voted. These resolutions included those that help with the effective management of the DCM, specifically allowing the Company to issue shares on a non pre-emptive basis equivalent to 30% of its equity and to buy-back up to 14.99% of the shares in issue.