TIDMAGT
RNS Number : 5985S
AVI Global Trust PLC
16 November 2021
AVI GLOBAL TRUST PLC
Monthly Update
AVI Global Trust plc (the "Company") presents its Update,
reporting performance figures for the month ended 31 October
2021.
This Monthly Newsletter is available on the Company's website
at:
AGT-OCT-2021.pdf (aviglobal.co.uk)
Performance Total Return
This investment management report relates to performance figures
to 31 October 2021.
Month Fiscal Yr Calendar
* Yr
to date to date
AGT NAV(1) 4.4% 4.4% 21.0%
MSCI ACWI Ex US(2) 0.7% 0.7% 8.1%
MSCI ACWI(1) 3.4% 3.4% 16.5%
* AVI Global Trust financial year commences on the 1(st)
October. All figures published before the fiscal results
announcement are AVI estimates and subject to change.
1 Source: Morningstar. All NAV figures are cum-fair values.
2 From 1st October 2013 the lead benchmark was changed to the
MSCI ACWI ex US (GBP) Index. The investment management fee was
changed to 0.7% of net assets and the performance related fee
eliminated.
Manager's Comment
AVI Global Trust (AGT)'s NAV returned +4.4% in October. Key
contributors were KKR, Apollo, Pershing Square Holdings, and EXOR.
Fondul Proprietatea, and to a lesser extent Nintendo and FEMSA,
detracted from returns. The portfolio weighted average discount
narrowed 170bps over the month to 27.5%.
KKR
Share Price: +31%
NAV: +21%
Discount: -21%
US-listed alternative asset managers
Apollo
Share Price: +25%
NAV: +7%
Discount: -23%
US-listed alternative asset managers
KKR & Co and Apollo Global Management were our two largest
contributors over October, adding +1.5% and +0.7% to AGT's NAV on
account of +25% and +31% increases in their respective share
prices.
Driven by persistently strong results, we believe the wider
market has begun to better appreciate the highquality
characteristics of companies operating within the alternative asset
management industry, and the secular tailwinds at their back that
we believe are likely to drive growth long into the future. While
October was a good move in share price terms for all of the large
listed US managers, KKR and Apollo's moves were particularly
outsized.
There was no specific news during the month that drove KKR
higher, although read across from the stellar results from
early-reporting peer Blackstone (the first to report Q3 earnings)
saw KKR's share price respond well. While Blackstone's results also
doubtless aided Apollo, the latter's share price performance can be
specifically attributed to its Investor Day.
Our investment case for Apollo has rested in part on what we
perceive to be the market's continued misunderstanding of its
annuity business Athene (recall that Apollo is merging with
Athene), and its failure to appreciate the prodigious amounts of
cash flow that the combined entity will generate (and the
associated optionality provided by that cash-flow).
While the nature of Athene's business means it requires a
sizable amount of capital on its balance sheet, we think two key
points have been missed regarding its future funding requirements.
Firstly, the "sidecar" arrangements put in place two years ago
whereby third-party Apollo LPs contribute a portion of Athene's
capital requirements; secondly, the growth and scale of Athene's
earnings and resulting cash inflows. Relatedly, we think the recent
rebasing of Apollo's dividend was more significant than the market
fully understood.
Marc Rowan, Apollo's impressive CEO, brought all this together
at the Investor Day by disclosing that Athene will only need to
fund 55-60% of its annual growth with its own capital. When
combined with cash-flows from the rest of the business, and in
light of the new dividend policy, he expects Apollo to generate
$15bn of cashflow over the next five years (for context, Apollo's
post-merger market cap will be $44bn at the current share price )
with $5bn to be paid out under the new fixed dividend policy, $5bn
ear-marked for additional shareholder returns via buybacks or
special dividends, and $5bn set aside for "growth investments".
This last point is of most interest. In the words of its CEO,
Apollo is "a growth business that has starved itself of capital" in
the past. We concur - the company's historical pass-through
dividend policy has translated to very little retention of capital.
With exciting growth opportunities in the mass affluent retail
market, where Blackstone's early success (now running at a
remarkable >$3bn of inflows per month) has made its peers sit up
and take notice, it makes sense for more capital to be retained and
reinvested in the business. We note that KKR was earlier in
recognising the benefits of using its balance sheet to accelerate
growth, and that KKR have also expressly identified the retail
market as a top priority. With their strong brands and distribution
networks via their insurance divisions, we are optimistic for the
prospects of both companies in this still-nascent growth area.
Apollo also laid out five-year targets for doubling AUM,
increasing fee revenue by 2.25x, and increasing feerelated earnings
by 2.5x. None of these forecasts/targets should have been a
particular shock given the business strength and tailwinds, but
Apollo has been very much a sector laggard in share price terms (in
part due to the fall-out from the Leon Black/Jeffrey Epstein
controversy) and its valuation discount vs peers was looking
increasingly untenable.
EXOR
Share Price: +12%
NAV: +7%
Discount: -36%
Italian family-backed holding with exposure to autos, luxury and
capital goods
During the month EXOR announced an agreement to sell reinsurer
Partner Re (25% of NAV) to Covea for $9bn. This is the second (and
hopefully last!) time such a deal has been agreed.
As readers will remember the same deal was agreed in March 2020,
only for Covea to renege on their offer a little while later. John
Elkann, EXOR's chairman, stood firm and did not allow Covea a
cut-price deal.
EXOR, Partner Re, and Covea did manage to stay on amicable
terms, keeping the relationship open through an agreement for Covea
to invest in special purchase reinsurance vehicles managed by
Partner Re. In turn this, combined with Covea's lack of other
credible means through which to enter the reinsurance business,
meant a new deal was agreed this October.
In relative terms Partner Re was not an especially successful
investment for EXOR, returning an estimated +45% inclusive of
dividends, versus a +109% return for the MSCI ACWI ($). That said,
we felt it provided a useful counter-weight to the inherent
industrial cyclicality found in other parts of EXOR's NAV.
Certainly though, reinsurance was a harder business than EXOR
anticipated, and their ownership period coincided with what was an
unusually difficult operating environment.
Post-deal (inclusive of EXOR's purchase of Covea's special
purpose reinsurance fund interest), EXOR will have gross cash of
EUR8.1bn (26% of NAV), and net cash of EUR3.9bn (13% of NAV).
Rumours continue to swirl that EXOR will make a sizable investment
in the luxury goods industry. Time will tell and the devil will be
in the detail, but directionally it seems the re-orientation of
EXOR's portfolio to higher quality assets bodes well for the
discount. EXOR shares jumped +12% over the month yet still stand at
a 36% discount. There seems ample room for this to tighten and we
look forward to hearing more about Mr. Elkann's capital allocation
plans at the upcoming Investor Day later in November.
Other activity:
We have continued to add to Wacom, the global number one
graphics tablet company. Since the appointment of Nobu Ide as
Global CEO in 2018, sales have grown by an annualised +6% and
operating margins improved from 7% to 12%. Wacom benefits from
c.80% market share in the high-end creator segment, while also
boasting robust relationships with Samsung, Lenovo, Disney, and
other large clients, all of which use Wacom's digital pen
technology. Wacom trades at 9.4x EV/forecast EBIT while listed
peers traded on an average 15.6x. Across AVI funds we own over 5%
of the Company and are using our increased influence to
constructively engage with the Company. Having established some
early rapport with management, we are excited by the prospect of
future engagement on operational and capital efficiency issues,
estimating a conservative potential upside in the region of
+60%.
As well as this, during the month we exited a successful
investment in Secure Income REIT. We initiated a position last
October as part of a broader UK "re-opening trade", taking stakes
in a handful of economically sensitive companies likely to benefit
from the re-opening of physical economies. Over the life of the
investment AGT earned a +52% IRR, which compares favourably to the
MSCI ACWI ex-US (+11) and EPRA UK REIT index (+25%).
Contributors / Detractors (in GBP)
Largest Contributors 1 month contribution Percent of
bps NAV
KKR 146 6.3
Apollo Global 72 3.7
Pershing Square Holdings 71 8.3
EXOR 65 7.0
Aker ASA 58 5.3
Largest Detractors 1 month contribution Percent of
bps NAV
Fondul Proprietatea -42 3.9
Nintendo -34 2.6
FEMSA -20 2.7
Keisei Electric Railway -17 2.8
Fujitec -12 1.5
Link Company Matters Limited
Corporate Secretary
16 November 2021
LEI: 213800QUODCLWWRVI968
The content of the Company's web-pages and the content of any
website or pages which may be accessed through hyperlinks on the
Company's web-pages, other than the content of the Newsletter
referred to above, is neither incorporated into nor forms part of
the above announcement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
DOCFLFEDLDLRLIL
(END) Dow Jones Newswires
November 16, 2021 13:00 ET (18:00 GMT)
British Empire (LSE:BTEM)
Historical Stock Chart
From Mar 2024 to Apr 2024
British Empire (LSE:BTEM)
Historical Stock Chart
From Apr 2023 to Apr 2024
