UK Edition
Questor: Caledonia’s lacklustre year was just a blip – at a 20pc discount it remains a ‘buy’
One of Questor’s favourite “buy-and-forget” trusts may have proved something of a disappointment since we tipped it a year ago, but it’s in the nature of these slow-and-steady, conservative funds that they will sometimes underperform a rising market and, far from selling, we see the current large discount as a buying opportunity.
Caledonia Investments, tipped here in June last year at £28.81, announced its annual results on May 24 and among the highlights was a 4pc rise in the full-year dividend – the 51st consecutive increase.
But performance in other respects was underwhelming. Net asset value grew by just 1.4pc over the year, with dividends reinvested.
With a longer perspective, however, there is no cause for complaint: the fund grew at an annual rate of 10.1pc over the five years to the end of March, against 6.6pc a year for the index.
The trust is structured as a long-term vehicle for capital preservation, reflecting its origins as the repository for the wealth of the Cayzer shipping family, who retain a large stake and board representation.
Assets are divided into four “pools” to aid diversification: quoted assets, income investments (some of them quoted), unquoted assets and funds. About 11pc of the fund is currently in cash.
Since our original tip the shares have slipped by 4.5pc or 131p, although dividend income over the period was 155.4p. We reiterated our “buy” advice at £26.85 in February after the sharp sell-off that month; readers who bought then have gained 2.4pc.
The trust remains a solid choice for steady long-term growth and is one of our preferred “all-in-one” funds for those who want a simple, low-maintenance portfolio.
The large current discount also makes now a sensible time to buy.
Winterflood, the trust’s house broker, said recently: “It is difficult to justify Caledonia’s discount of 19pc [now 19.7pc], given its long-term record and exposure to a diversified range of companies, both quoted and private. We believe that the fund’s long-term, disciplined investment approach has merit and should be well suited to investors of a similar mindset.”
Questor says: buy
Ticker: CLDN
Share price at close: £27.50
Investment trust news
More bad blood has emerged between the board and outgoing managers of Invesco Perpetual Enhanced Income.
On Monday the board accused Invesco, which resigned as manager in April but has, as a large shareholder itself, requisitioned an extraordinary meeting to unseat two board members, of “using its clients’ ownership position to disrupt the tender process for a new manager”.
In a letter to investors the board said: “Your company is a small company facing a self-interested onslaught from a large and powerful group.” It urged shareholders to vote against Invesco’s resolutions and called on Invesco to meet the costs of the meeting and of recruiting a new manager, which it said could reach £440,000.
The fund manager responded by saying its resignation was not, as the board suggested, caused by a dispute over fees but “due to the breakdown of our relationship with the board”, which it said had been “overly aggressive, culminating in the issuance of a 48-hour ultimatum”.
Invesco added: “If our clients’ shareholding has been a cause for concern for the board, it is not one they have previously raised.”
The extraordinary meeting is due to take place on July 20. Our recommendation remains sell and switch to City Merchants High Yield.
Stenprop, a property fund listed in South Africa, has converted to a Reit (real estate investment trust) and is due to list its shares on the London Stock Exchange tomorrow. It will gradually sell its holdings in Switzerland and Germany to concentrate on “multi-let” industrial property in Britain.
Ranger Direct Lending is to wind itself up.
Templeton Emerging Markets is to cost less. A charge of 1pc will apply to the first £1bn of net assets, with 0.85pc thereafter. Previously the higher charge applied to the first £2bn. Net assets are currently £2.3bn.
F&C UK High Income has cut its fee from 0.75pc to 0.65pc of net assets.
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Caledonia's net asset total return over one year has been corrected. It previously read 2.7pc