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Mr GL
Posted: 18 March 2023 15:21:07(UTC)
#976

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I clearly have too much in RCP for this current market - at just under 20% of AUM, looking across my holdings I can see I am down 7%, 7.9%, 7.1%, and 10.31% from purchase price (most of it this year)...

Its shares are trading in share price terms (1860p) at the price they were at the end of 2016... so no change for 6 and a bit years... their NAV back then was 1730p (yes they were on a chunky premium) and - using their last NAV of 2432p - the NAV has supposedly increased by 40%.... so a NAV increase of 40% versus a no change in share price...

IF one can believe their last NAV then they are on a 24% discount to NAV.

Market risk... discounts have been widening out in many investment trusts / REITs etc... this is a general repricing of risk and tends to occur during periods of generally falling market prices - and the way things are going this market wide repricing of discounts to be even wider could well continue... so this isn't helping me near term!

Idiosyncratic risk ... is the PE / VC risk specific to RIT? - well not really.... Scottish Mortgage has been accused of the same issues by the same analysts (too much PE/VC that has not been marked down enough in line with recent public market falls - and now they have a public dispute with one of their directors)... Listed PE - HVPE is on a 50% discount... HGT on 25%....

The fear that I think is driving prices is that the whole PE / VC space is significantly overvaluing their investments and so their stated NAV's are inflated....

OK - so do a scenario analysis... How much SHOULD the PE/VC investments be market down - EQQQ (the NASDAQ 100) for GBP investors is 17% below its peak... Scottish Mortgage shares have halved in value from their peak... RITs NAV has gone from something line 2800p to 2400p a 14% fall - much closer to the falls seen in EQQQ... and RIT had 39% private investments (funds plus direct) at end of Jan. They have other stuff that has done much better... they claim it's all part of the diversified portfolio plan they have positioned for...

I dont doubt that the illiquid nature of PE investments means that they should have a 'haircut' - especially during tough times in markets - to reflect the lack of liquid buyers are that current price... (and this is why Berkshire Hathaway keep so much cash - they load up their buckets with cheap equities from cash strapped / distressed sellers every few years)...

The bit I am struggling with is why the Investec analyst wont put a price on their opinion of 'fair value'... or some reasonable estimate of what they think the NAV should be.... or what discount the fund should trade at....

As to the other mucky stuff - the implications of stuffing their own pockets etc... I can't comment - because I dont know - I hope it isn't overly cynical... and a few million in overcompensation to the mangers wouldn't be out of line with pretty much the whole financial services industry....

one day there will be an announcement regarding updating the valuations of some underlying managers and no doubt they will express shock that some subfund has dropped 50%+... and the shares will step lower and then could well end up higher on the day 'sell the rumour - buy the fact'.... I am just holding on as I think the facts will reassure ... hopefully!

BUT we all have to manage our overall portfolio risk... RIT is costing me this year - maybe 1.5% total loss to my AUM so far YTD... so a big proportion of my overall down 3.5% YTD... but I'm not panicking yet!
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Aminatidi
Posted: 18 March 2023 15:47:24(UTC)
#977

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Mr GL;261332 wrote:
The bit I am struggling with is why the Investec analyst wont put a price on their opinion of 'fair value'... or some reasonable estimate of what they think the NAV should be.... or what discount the fund should trade at....


I know this is a bit of a glib response but why should they?

Presumably RIT and the underlying funds have some sort of regulatory requirement to publish a NAV at certain intervals whilst analysts have no requirement to do so.

That seems to put RIT in a position where they need to come up with a valuation whilst presumably Investec and the other analysts who seem critical of RIT at the moment are confident enough to think those valuations are optimistic even if they aren't in a position to know what they think they should be.

Isn't their whole point that it's chock full of murky opaque stuff that's difficult to value?
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Isaac J
Posted: 18 March 2023 16:54:00(UTC)
#969

Joined: 25/05/2022(UTC)
Posts: 299
Strangways;261296 wrote:
https://www.thetimes.co.uk/article/rit-capital-managers-accused-over-payouts-cd7bc5v6q


Quote from article: "RIT said its portfolio had “outperformed global markets over the last three and five years and generated a 140 per cent total return over ten years"

Has it? At least not according to share price...

From Trustnet:
Trustnet table
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Thrugelmir
Posted: 18 March 2023 17:04:39(UTC)
#978

Joined: 01/06/2012(UTC)
Posts: 5,331
RIT benchmarks against the MSCI All Country World Index, on a 50% unhedged and 50% hedged basis. Currency hedging costs money.
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Mostly Rational
Posted: 18 March 2023 17:22:08(UTC)
#970

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Isaac J;261345 wrote:
Quote from article: "RIT said its portfolio had “outperformed global markets over the last three and five years and generated a 140 per cent total return over ten years"

Has it? At least not according to share price...

From Trustnet:
Trustnet table


I'm not sure which 10 year period the 140% figure is meant to be for, but from the end of 2012 to the end of 2022 they had a total return (NAV+dividends) of 127.7% (data). NAV is the correct measure for portfolio performance; share price is determined largely by the whims of investors and if you buy or hold an investment trust at a large premium, you deserve your inevitable comeuppance.
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dlp6666 on 19/03/2023(UTC)
The Pink Panther
Posted: 18 March 2023 18:38:56(UTC)
#971

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Mostly Rational;261349 wrote:
NAV is the correct measure for portfolio performance; share price is determined largely by the whims of investors and if you buy or hold an investment trust at a large premium, you deserve your inevitable comeuppance.

Always important to critique what's changed over the last 12 to 18 months to impact RIT. The obvious:

* Economic forecast (plus recent fears of banking problems - unfounded or not)
* Inflation proving to be somewhat sticky
* Ability to get a semi-decent return from fixed income
* Cash proving to be a proper alternative

RIT definitely offers something different / a bit of everything. But what box does it really fit into. Wealth preservation? No chance - not now. Low volatility? Not looking at recent performance. Growth? Hmm.

Wonder how PE valuations differ from 'zero interest rate / growth friendly environment' to an 'inflation and rising interest rates' one? Don't just mean valuation metrics - thinking more credibility, prospects, IPO and so on. And there's the problem I have with measuring NAV as the performance measure against a global tracker. Just how correct is the NAV for PE when factoring in the above. For all PE, not just RIT's. I'm not suggesting anything untoward BTW. Didn't some once say there's no issue with subprime?

My major problem with RIT is the cost. The one thing that gets paid no matter the climate or performance. The founders and managers have clearly done very well when their fund really hasn't (isn't there a saying about wine and gravy or something).... Alan in The Times makes an excellent point on this.

My recommendation to RIT (can hear them piss themselves laughing already). Be very clear on costs. Take some self-pain when the fund isn't doing well. Get an independent assessment on the whole portfolio in the current environment (I'm sure they do but look at the mess HOME is in). Explain what you're going to do to sort out the underperformance - not just share buybacks.

This is zero criticism of any RIT holder (remembering the importance of removing emotion from investing)...

Thanks SF100 for pointing out my error. RMT indeed. Drove past one of their picket lines on Friday. Must have stuck in the brain.
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SF100
Posted: 19 March 2023 00:30:38(UTC)
#974

Joined: 08/02/2020(UTC)
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The Pink Panther;261350 wrote:
RMT definitely offers something different / a bit of everything. But what box does it really fit into. Wealth preservation? No chance - not now. Low volatility? Not looking at recent performance. Growth?

I'd stick it in Infrastructure.
They need to focus on getting the trains back on the tracks & running on time.
That'll get the punters back on side.
Mick Lynch seems a solid pair of hands at the helm, but he's not bloody cheap!
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Jimmy Page on 19/03/2023(UTC), Simon Martin on 19/03/2023(UTC), The Pink Panther on 19/03/2023(UTC)
Big boy
Posted: 19 March 2023 07:51:27(UTC)
#979

Joined: 20/01/2015(UTC)
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Could “fair value” be closer to CLDN which is say 30% plus discount. Keep it simple..
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Strangways on 19/03/2023(UTC), dlp6666 on 19/03/2023(UTC)
Big boy
Posted: 19 March 2023 07:58:54(UTC)
#975

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SF100;261370 wrote:
The Pink Panther;261350 wrote:
RMT definitely offers something different / a bit of everything. But what box does it really fit into. Wealth preservation? No chance - not now. Low volatility? Not looking at recent performance. Growth?

I'd stick it in Infrastructure.
They need to focus on getting the trains back on the tracks & running on time.
That'll get the punters back on side.
Mick Lynch seems a solid pair of hands at the helm, but he's not bloody cheap!



I suppose you have a 50/50 chance of being right about “infrastructure” or do you know something International investors don’t know. If only it was that simple we would all be adding value daily.
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Apostate
Posted: 19 March 2023 08:07:17(UTC)
#973

Joined: 02/04/2018(UTC)
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The Pink Panther;261350 wrote:
Mostly Rational;261349 wrote:
NAV is the correct measure for portfolio performance; share price is determined largely by the whims of investors and if you buy or hold an investment trust at a large premium, you deserve your inevitable comeuppance.

Always important to critique what's changed over the last 12 to 18 months to impact RIT. The obvious:

* Economic forecast (plus recent fears of banking problems - unfounded or not)
* Inflation proving to be somewhat sticky
* Ability to get a semi-decent return from fixed income
* Cash proving to be a proper alternative


and of course the flip side of rising interest rates and the end of QE has meant the end of the cheap money that especially during the pandemic helped many stocks reach crazy values
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1 user thanked Apostate for this post.
The Pink Panther on 19/03/2023(UTC)
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