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Momentum Multi-Asset Value Trust says portfolio seems well placed for inflationary environment


The inherent value in the trust’s UK equity investments has been evident with takeover approaches for a number of portfolio companies

Momentum Multi-Asset Value Trust PLC (LSE:MAVT) maintained its dividend at the half-year stage and said after the spectacular recovery in stock markets the company’s portfolio, a period of relative calm was “perhaps to be expected”.

The investment trust kept its quarterly payout at 1.68p per share, which represented an annualised yield of 3.6% based on the 188.5p period-end share price.

It reported a net asset value (NAV) total return of 2.1% and share price total return of 3.4% versus the 6.2% for its benchmark.

Annualised volatility was 9.9% compared to 13.4% for the MSCI UK All Cap Index.

“Your board is primarily interested in performance over longer periods, in particular over a ‘typical investment cycle’ which we define as one that spans five to ten years,” said chairman Richard Ramsay in the statement alongside the results.

Over the last five years, he noted the company has generated a share price total return of +43.8% and a NAV total return per share of +44.0%, both comparing favourably with +38.2% from the benchmark.

During the period the MAVT trust bought back 2,207,500 shares costing £4.1mln and issued no new shares.

Ramsay noted the old saying in the investment world that “it is better to travel than to arrive”, with the practicalities of deployment and the realities of COVID-19’s evolution causing worries for governments and investors, including the appearance of the Omicron variant.

“Overall, the corporate sector has dealt with the re-opening of economies very well, but supply chain bottlenecks and labour shortages in some sectors continue to prove problematic. All of us are experiencing these in one way or another, and the result is that the cost of living is rising. We have enjoyed such a long period of very low inflation (or even deflation in many areas) that dealing with resurgent inflation is a challenge for many. How high inflation gets and for how long it lasts are crucial questions without definitive answers at this stage,” he said.

He noted that history shows that equities generally do not perform particularly well when inflation rises, as multiples or valuations decline.

“But history also shows that Growth stocks are much more harshly treated than Value stocks in this kind of environment.

“Given the particularly elevated valuations currently ‘enjoyed’ by Growth stocks, the risk of reassessment by investors appears real.

“MAVT however seems well placed. The inherent value in MAVT’s UK equity investments has been evident with takeover approaches for a number of portfolio companies.

“Also, not only are MAVT’s direct and indirect equity investments of a Value style, but many of its specialist asset investments are in real assets with inflation-linked or protected revenue streams,” he said.

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