BlackRock Throgmorton’s balanced approach well set up to capitalise over the coming years

BlackRock Throgmorton Trust plc (LON:THRG) has announced its portfolio update.

All information is at 31 December 2023 and unaudited.

To learn more about the BlackRock Throgmorton Trust plc please follow this link: blackrock.com/uk/thrg

Performance at month end is calculated on a cum income basis

Sources: BlackRock and Datastream

*With effect from 22 March 2018 the Numis Smaller Companies plus AIM (excluding Investment Companies) Index replaced the Numis Smaller Companies excluding AIM (excluding Investment Companies) Index as the Company’s benchmark. The performance of the indices have been blended to reflect this.

1. Calculated using the 2022 final dividend declared on 10 February 2023 and paid on 31 March 2023, together with the Interim Dividend declared on 7 July 2023 paid on 29 August 2023.

2. Includes current year revenue and excludes gross exposure through contracts for difference.

3. Long exposure less short exposure as a percentage of net asset value.

4. Excluding 7,479,000 shares held in treasury.

5. The Company’s ongoing charges are calculated as a percentage of average daily net assets and using the management fee and all other operating expenses, excluding performance fees, finance costs, direct transaction charges, VAT recovered, taxation and certain other non-recurring items for the year ended 30 November 2023.

6. With effect from 1 August 2017 the base management fee was reduced from 0.70% to 0.35% of gross assets per annum. The Company’s ongoing charges are calculated as a percentage of average daily net assets and using the management fee and all other operating expenses, including performance fees, but excluding finance costs, direct transaction charges, VAT recovered, taxation and certain other non-recurring items for the year ended 30 November 2023.

7. Effective 1st December 2017 the annual performance fee is calculated using performance data on an annualised rolling two-year basis (previously, one year) and the maximum annual performance fee payable is effectively reduced to 0.90% of two year rolling average month end gross assets (from 1% of average annual gross assets over one year). Additionally, the Company now accrues this fee at a rate of 15% of outperformance (previously 10%). The maximum annual total management fees (comprising the base management fee of 0.35% and a potential performance fee of 0.90%) are therefore 1.25% of average month end gross assets on a two-year rolling basis (from 1.70% of average annual gross assets).

Commenting on the markets, Dan Whitestone, representing the Investment Manager noted:

The Company returned 7.9% in December, whilst its benchmark, the Numis Smaller Companies +AIM (excluding Investment Companies) Index, returned 8.5%.

December was another strong month for markets. The rally sparked in November was further fuelled by another soft inflation print in the US and the third consecutive Federal Reserve (Fed) meeting with no rate rises and Chairman Powell speaking openly about when it will be appropriate to cut rates. Even UK CPI (Consumer Price Index) came in softer for November and is now 3.9% having been 6.7% only in September. The broadening of markets that has been happening since November also continued, with the mid-cap in the UK outperforming large-cap by almost 350bps in the month. Managing the short book remains a challenge in markets like this as the “junk” often rallies hardest in the initial stages. We acted in November to close parts of the short book most exposed to this, but ultimately this still hurt performance in the month.

The largest positive contributor during the month was from our long position in IntegraFin, the operator of the UK investment platform, Transact. The shares rose in response to solid full year results, demonstrating the strength of its platform and continued success in winning market share in flows against a challenging backdrop. The second largest contributor to performance was our holding in challenger bank, OSB, which rose along with many UK domestic shares on an improving economic backdrop. The third biggest contributor was from a short position in an online card retailer which announced a slowdown in growth prompting downgrades to analyst forecasts.

Turning to the detractors, the biggest detractor was our long position in Future PLC, the specialist media platform, which fell after reporting a decline in profit, particularly in the US, due to the challenges facing the advertising market. Shares in Indivior weakened in response to the company announcing it had settled the bulk of its outstanding legal issues, albeit for a slightly higher cost than anticipated. With continued strong trading in the core and regulatory risk in the rear-view mirror we are frustrated by the performance of the shares which have been impacted by a few factors in recent months; a poorly explained acquisition to insource some manufacturing, some higher-than-expected SG&A (Selling, General & Administrative) costs, the launch of a competitor product and some weaker prescription data in the latter months of the year. The first two we are less concerned about and think represents management sensibly investing some of the earnings beats into strengthening the business. We are keeping a closer eye on the prescription data and the competitor and have discussed both at length with management. With the shares trading on under 10 times PE (price to earnings) and a double digit % of its market cap in net cash (adjusting for remaining legal liabilities) we think the shares are far too cheap and retain a holding. Digital payments business, Boku, fell despite no stock specific news-flow and the shares have rallied since the beginning of 2024.

Whilst December was another month that was heavily influenced by macro sentiment, we are encouraged by the increasing role of stock specifics in returns as well as the more recent broadening of market leadership. We continue to see a number of areas of exciting company and industry developments and significant mis-pricings across markets and think the Company’s current balanced approached is well set up to capitalise over the coming years. The net of the Company remains around 106% while the gross is around 114%.

We thank shareholders for your ongoing support.

¹Source: BlackRock as at 31 December 2023

To learn more about the BlackRock Throgmorton Trust plc please follow this link: blackrock.com/uk/thrg