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bill xxxx
Posted: 15 February 2023 22:56:32(UTC)
#865

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The numbers look right to me, but of course there are many who wouldn't include RCP in that peer group, they don't have 40% or whatever in private equity.

RCP's discount seems to have widened sharply around Q3 last year - we don't hold any private equity stuff, but from what I remember, that was well after the HVPE's etc of this world all de-rated. So far as I can see, the PE shares don't seem to have performed that badly in recent months.

So it's not obvious to me what triggered it. The only thing that comes to mind is that if you came down from Mars, you might want to value the private stuff on an HVPE type discount, say 40% ish. If you then apply a 10%-ish discount to the rest, you end up with an overall 20% discount. I don't know why that sentiment would suddenly take hold, though - I can't see any fundamental change in what they do which would involve such a de-rating.

Whether CLDN is a relevant comparison I don't know, as I don't know anything about it other than what's on HL, but it does seem to have about a third in private equity. I wouldn't know how its investments compare to RCP's, but it is apparently on a high 20's% discount - although I think that I read somewhere that it's very much a family-controlled company, which wouldn't help the rating.

I see that RCP's accounts are due out at the end of Feb. I'd be very surprised indeed if there were to be anything in them that suggested any kind of a shock, given their reputation and the generally reassuring comments in their prelims abouit valuation.

I don't know if there's any restriction on them buying back shares until after the accounts appear, but it looks like an obvious thing to do, when allowed to do so.

Until there's evidence to the contrary. my take is that this is a high quality, conservatively-run outfit, with a lot of skills, connections and experience. If the private equity bit is dead in the water for a while, then it'll come back as fast as everyone else. The only PE exposure we have is via RCP, and the mix of the rest of its assets looks pretty appealing.

Anyway, it looks pretty bombed out, and indeed, it does seem to have found a bottom. We're long-term holders, but I'd have thought there's good scope for a bounce on further reassurance from the forthcoming accounts, and hopefully buy-backs.
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Mr GL
Posted: 16 February 2023 07:43:32(UTC)
#866

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RE CLDN vs RIT

CLDN = 61% private equity (31% funds + 30% direct investments), 30% quoted equity and 9% cash January factsheet https://www.caledonia.co.../Factsheet-20230131.pdf

RCP = 41% private equity (28% funds, 13% direct), 21% Quoted equity and then 10% quoted hedged, 23% absolute return + credit, 5% other stuff November factsheet https://www.ritcap.com/s...%20Template%20FINAL.pdf

CLDN - Caledonia is 48% owned by the Cayzer family. https://www.caledonia.com/who-we-are/

RCP - The total interests notified to the Company that directly relates to, and is overseen by, the family offices of Lord Rothschild and Hannah Rothschild (including shares in which Lord Rothschild and Hannah Rothschild do not have voting rights conferred through a direct or indirect holding) is 20.94%. https://www.ritcap.com/significant-shareholdings

So CLDN is 61% PE vs RIT 41% and CLDN is 48% family owned vs RIT 21% family owned

CLDN 5yr NAV TR according to AIC is 65% and discount 28% - versus the 100% PE direct and funds which average 142%5yr NAV TR across the 10 listed investments OCI, III, HVPE, HGT, CTPE, NBPE, APEO, PIN, ICGT, APAX
Listed PE trades at even greater discounts (average is 31%) and don't have the family control situations...

So yes - it seems the RIT discount (17%) is currently best explained by its PE exposure...

I am hoping (expecting) that the 59% of RIT that is not PE will be able to show the benefits of its diverse strategies as expecting its china and credit/rates strategies to have performed well recently...

Jan NAV update due any day now and annual results at end of Feb.
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Logic Prophets
Posted: 16 February 2023 08:09:28(UTC)
#867

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‘RCP 41% PE’ . Well that is a bit more than I thought.

I am totally convinced that the markets do not believe the current general PE valuations for the reasons i have stated many times on here already.

Even if RCP’s PE valuations are conservative, they will still get hit by any general correction in valuations.

It has been trading at around 2000 for quite some time now and the price seems quite stable so any bad news might be priced in.
Might be a good level to buy/top up for the long term but to trade it short term is guess work akin to gambling.

On a separate note… comparing this to CGT, PNL, RICA tells us nothing at all.
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Mr GL on 16/02/2023(UTC)
Mr GL
Posted: 16 February 2023 08:45:46(UTC)
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Logic Prophets;257833 wrote:
‘RCP 41% PE’ . Well that is a bit more than I thought.

I am totally convinced that the markets do not believe the current general PE valuations for the reasons i have stated many times on here already.

Even if RCP’s PE valuations are conservative, they will still get hit by any general correction in valuations.

It has been trading at around 2000 for quite some time now and the price seems quite stable so any bad news might be priced in.
Might be a good level to buy/top up for the long term but to trade it short term is guess work akin to gambling.

On a separate note… comparing this to CGT, PNL, RICA tells us nothing at all.


the 41% PE has been mentioned many times before and is on their monthly factsheets... not a secret and shouldn't be a revelation to someone who has taken even a pretty superficial look at their factsheet

https://www.ritcap.com/s...%20Template%20FINAL.pdf

Private Investments - Funds 28% Absolute Return & Credit 23% Quoted Equity - Long 21% Private Investments - Direct 13% Quoted Equity - Hedge 10% Real Assets 2% Other Investments 2% Net Liquidity / Borrowings / Other Assets 1%


Yes- you are not unique in your view re PE trust NAVs - the market has clearly priced this risk on PE trusts NAV's - just look at the share price discounts of 45% with HVPE/PIN, 41% ICGT, 38% APEO, 34% CTPE, 30% NBPE.
The 100% PE trusts from above share prices are down an average 13% from their peaks (-26% to +11% range) the only 41% PE RIT share price is down 28% from its peak... so yes - seems a lot of bad news already priced in...

***YTD share price performance for PE trusts... III +25%, CTPE +15%, OCI +12%, HGT+5%, NBPE +3.5%, APEO +3%, PIN 0%, HVPE -1.5%, ICGT -4%, APAX -4.4%

and the 41% only PE RIT is down 6.3% YTD...

you give no credit for the 59% that is not PE and when looking at the +8.4% YTD move in VWRL what do you think that part of the portfolio has done?

The WP comparison of NAV performance is valid IF you have traditionally held RIT as a lower risk fund (closer to 40% quoted equity type risk) and when looking at each trusts' stated aims... I have also compared RIT to a 100% equity global tracker - VWRL - and the comparison there is pretty favourable over 3yr, 5yr and 10yr
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Fife Clive
Posted: 17 February 2023 10:11:20(UTC)
#869

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Another day of divergence, have sold £10k VWRP, bought RCP £19.39. Discount somewhere around 20-21%, feels worth a tickle. Will do this trade a couple times more until RCP hits 7.5% of my total exposure. Holding c£30k worth now only slightly underwater.
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dlp6666
Posted: 17 February 2023 10:11:57(UTC)
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Quote:
From #17183 (257992) on the Transactions thread:

"Pre Ka;257983 wrote:
part of article on moneyweek this morning on RCP by max king, i think he from investec or old mutual it was previously...
......
It is hard to imagine RIT under Jacob Rothschild, who previously ran the trust, investing in either Coupang or Robinhood. The team that took over from him (he left for good in 2019) are, perhaps, proving too clever for their own good. Two years ago, it seemed that they were managing well, but tougher market conditions have found them out.
...
Existing investors in RIT may get a better selling opportunity.

thoughts any one?"

I suppose everyone's entitled to change their mind in the face of new evidence, but Max King does seem to have blown hot and cold about RCP:

Dec20 - 'sell': https://moneyweek.com/in...way-now-and-six-to-sell

Sep21 - "RIT should be a key building block of any investment trust portfolio": https://moneyweek.com/in...-chapter-at-rit-capital

Might he change his tune if there's a performance upturn in the future, or is he saying it's a high risk there never might be one?
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SF100 on 17/02/2023(UTC)
Mr GL
Posted: 17 February 2023 10:14:49(UTC)
#871

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Mr GL;257997 wrote:
dlp6666;257992 wrote:
Pre Ka;257983 wrote:
part of article on moneyweek this morning on RCP by max king, i think he from investec or old mutual it was previously...

......
It is hard to imagine RIT under Jacob Rothschild, who previously ran the trust, investing in either Coupang or Robinhood. The team that took over from him (he left for good in 2019) are, perhaps, proving too clever for their own good. Two years ago, it seemed that they were managing well, but tougher market conditions have found them out.
...
Existing investors in RIT may get a better selling opportunity.

thoughts any one?


I suppose everyone's entitled to change their mind in the face of new evidence, but Max King does seem to have blown hot and cold about RCP:

Dec20 - 'sell': https://moneyweek.com/in...way-now-and-six-to-sell

Sep21 - "RIT should be a key building block of any investment trust portfolio": https://moneyweek.com/in...-chapter-at-rit-capital

Might he change his tune if there's a performance upturn in the future, or is he saying it's a high risk there never might be one?


RCP SP is currently trading 30% below its peak, at a likely 20%+ discount to NAV, for a fund that's NAV has performed inline with VWRL over the last 10 years... this doesn't sound like a selling opportunity.. further this is just a rehash of the broker report from end of last year, which the telegraph repeated in early jan and now money week are repeating... markets have a tendency to go too far to the upside and to the downside... he doesn't seem to have taken any notice of their published NAVs, the movement in the wider public market indices and that their portfolio is 59% non PE some / much of which may well have rallied with this year's wider market... he has failed to mention that RIT hedged much of their coupang exposure around the time of their public market float... as to history RIT owned/had some exposure to some interesting that then became shit dot com names in the dot com boom (I think they had a chunky exposure to ?bookham technology - although my memory may be dodgy on this one) - the point being that the implication that now lord Rothschild has stepped back they have gone dodgy is probably bollocks.
The comparison he makes with CLDN has been covered upthread / on the RIT thread - and somewhat negates his argument/point re lord Rothschild ...
this continues to be - in my opinion - all about fears over private equity and only time will tell wether the private equity industry is significantly misrepresenting the valuations of their portfolio companies or not... for a sanity check on valuations look at where public markets are trading.... the FTSE 100 is at an all time high the S&P is 15% below its high of Jan 2022... and VWRL is only 5% below (thanks to GBP weakness)... clearly RIT may have totally fcked up ... but I prefer to think they have managed to - at worse - performed no worse than the major indices... and to date their published NAVs imply such...
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Mostly Rational
Posted: 17 February 2023 10:35:23(UTC)
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Really, another copy of that investec report and markets lurch down again? Investors are ridiculous.

I'm calling this a 24% discount until evidence to the contrary emerges, and expect buybacks to resume after the annual report is published in a couple of weeks unless sentiment and the discount have reversed before then.
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dlp6666 on 17/02/2023(UTC), Low Returns on 17/02/2023(UTC)
Newbie
Posted: 17 February 2023 10:48:37(UTC)
#873

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Mostly Rational;258008 wrote:
Really, another copy of that investec report and markets lurch down again? Investors are ridiculous.

I'm calling this a 24% discount until evidence to the contrary emerges, and expect buybacks to resume after the annual report is published in a couple of weeks unless sentiment and the discount have reversed before then.

Well put.
No evidence, no facts, no new news - simply repeat of an already published article.
Simply supports the argument put forward by the departed FM of SMT, share prices are not dictated by fundamentals as such, but by brokers on all sides of the pond.
I am buying more !! Lemmings anyone ?
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dlp6666 on 17/02/2023(UTC), Sheerman on 17/02/2023(UTC)
Mr GL
Posted: 17 February 2023 11:15:39(UTC)
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full article - I hope LP doesn't see the comparison to CGT / PNL / RICA ... interesting bedfellows? and then a segue into CLDN...

I hold the following - all of which mentioned in this article

10.6% Capital Gearing CGT
5.7% Personal Assets PNL
6.0% Ruffer RICA
19.8% RIT Capital RCP
5.1% Caledonia CLDN


Where RIT Capital Partners went wrong
Weak returns and rising private-equity exposure mean the wide discount to NAV for RIT Capital Partners is justified.

Max King author headshot
by: Max King
16 FEB 2023

Shares in RIT Capital Partners, the £4bn trust controlled by the Rothschild family, fell to a 16% discount to net asset value (NAV) following a negative write up in The Telegraph, sourced from a research note by Alan Brierley at Investec.

Some are arguing that the shares are now compelling value as investment performance is likely to improve and so the discount will narrow or disappear. But buying trusts primarily because of a wide discount is not justified if the performance is poor and there is no evidence of an improvement.

A NAV return of 44% over five years is behind global indices (52%), although a little ahead over three (at 28%). Underperformance may be a price worth paying if it means a smoother ride.

This is what Personal Assets, Ruffer and Capital Gearing offer, with five-year returns of 25%, 40% and 30% respectively, but one-year returns of -4%, 8% and -3%. Yet the 2022 NAV return of RIT was -11%, and the price fell -21%. The shares have since fallen further, even while markets have rallied.

RIT’s exposure to private equity, both direct and through funds, has risen to 45% compared with just 24% two years earlier, Brierley points out.

Moreover, “while traditionally this portfolio has been balanced, there is now a significant tilt towards higher-risk venture capital, including around 4% in blockchain/crypto”. RIT does not disclose its full portfolio, but on 30 June the disclosed venture capital fund exposure alone was 18.5% of NAV, versus just 1% seven years earlier, he notes.

A false dawn in Korea for RIT Capital Partners

In mid-2021, it seemed that RIT’s record had been rescued by the flotation of Coupang, the Korean e-commerce firm that surged 40% on its March listing and accounted for 9% of the portfolio. The shares now trade 64% below the opening price, though there has been a partial recovery since last June.

The price of stock trading platform Robinhood, in which RIT had invested £29m, has collapsed 84% since August 2021. It is hard to imagine RIT under Jacob Rothschild,
who previously ran the trust, investing in either Coupang or Robinhood. The team that took over from him (he left for good in 2019) are, perhaps, proving too clever for their own good. Two years ago, it seemed that they were managing well, but tougher market conditions have found them out.

Valuations in private markets may have further to fall, which would hold RIT’s performance back. By mid-2022, the Nasdaq was down 29.5% and the Goldman Sachs Unprofitable Tech index was down 52%, yet Cambridge Associates’ US Venture Capital index was down just 12.5%, says Dan Rasmussen of Verdad Advisors. “This gap between private markets and public markets is the largest since the bursting of the dotcom bubble.”

RIT Capital's better-performing partner

Conversely, Caledonia Investments, the £2.7bn trust controlled by the Cayzer family, trades on a discount to NAV of 27%, despite returns of 67%, 46% and 9% over five years, three years, and one year. Its rating has suffered from its 30% exposure to direct private equity and 32% to private-equity funds compared with just 29% in quoted equities and 9% in cash.

Caledonia says that its two financial services businesses, 7iM and Stonehage Fleming, “continue to perform well despite challenging market conditions”. The merger of Liberation – its pubs, hotels and drinks business – with Cirrus Inns was accompanied by additional investment by both Caledonia and Cirrus’ investors.

The fund holdings returned 13.8% in the first nine months of 2022, with strong performance in North America, but mixed performance in Asia.

Existing investors in RIT may get a better selling opportunity. But new ones should consider Caledonia (for the bold), Ruffer or Personal Assets (for the cautious), or a combination.
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