This week I am looking at Monks Investment Trust, which aims to achieve long-term capital growth from a global equity portfolio.
It is now just over two years since investment management partnership Baillie Gifford, which is responsible for Monks, announced that the management team of Gerald Smith and Tom Walsh were being replaced with its Global Alpha Equity Team in an attempt to improve performance. The new management team wasted no time in implementing its investment process. This involves seeking out attractively priced growth companies and allocating these investments into one of four growth buckets that make up the portfolio. The first bucket is “Stalwarts”, which are companies that are expected to deliver reliable earnings growth of 10% per annum. The second bucket is “Rapids”, which are companies with a 15-25% expected growth rate per annum. The third bucket is “Cyclicals”, which are companies with volatile earnings that should nonetheless deliver earnings growth of around 10% per annum over a cycle. The final bucket is “Latents”, which are companies that are considered slow burners and do not have a specific target but are expected to see accelerating growth over time.
Since reorganisation, the trust’s net asset value (NAV) has gained 45% against a FTSE World benchmark gain of 37%. We are very happy with the new management team and believe the fund provides attractive exposure to global growth companies. However, the strong performance has seen the share price move to a premium against its NAV (whereas historically it has tended to trade between a 10% and 15% discount) and this makes it less attractive in the short term.