BlackRock Throgmorton Trust Plc - Portfolio Update

 BLACKROCK THROGMORTON TRUST PLC (LEI: 5493003B7ETS1JEDPF59)
 

All information is at 30 April 2020 and unaudited.
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 2019 interim dividend declared on 23 July 2019 and paid on 28 August 2019, together with the 2019 final dividend declared on 06 February 2020 and paid on 27 March 2020.

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 0 shares held in treasury.

5. Calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs for the year ended 30 November 2019.

6. With effect from 1 August 2017 the base management fee was reduced from 0.70% to 0.35% of gross assets per annum.

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:

During the month the Company returned 13.8% (net of fees), outperforming our benchmark which returned 13.2%. The positive performance was generated by the long book, with the short book detracting modestly (circa 0.5%).

Equity markets rebounded during April as news flow surrounding COVID-19 showed signs of improvement, with many countries appearing to have passed the peak and taking steps to lift restrictions. Meanwhile monetary support continued to provide liquidity to financial markets, with governments around the world signalling the intention to use a wide variety of measures to stimulate economic activity, which is being significantly impacted by lockdowns.

Whilst the long book benefited from the reversal in performance of many shares that were impacted during the initial market sell-off back in March, our short book also experienced a similar effect. It is often the case that in the early stages of a recovery/rebound, our shorts recover faster than our longs, vindicating our decision to close a number of shorts in late March / early April.

Two of the largest contributors to performance came from holdings in Consumer Services, a sector that has been impacted by Government lockdowns. Games Workshop, the creator of the Warhammer miniatures game, rose in response to a positive trading update where the company confirmed that online orders would recommence in May following assessments to ensure health and safety for staff. Shares in luxury watch retailer, Watches of Switzerland, also rallied from their March lows. While sales in airport outlets will undoubtedly be impacted by travel disruption, we believe this is a market where long-term demand exceeds supply and we believe Watches of Switzerland has built itself an advantaged market position.

Companies at the forefront of digital transformation have fared particularly well. This is an industrial trend we have highlighted before and remains a key investment proposition for the Company. Looking forward, we expect an acceleration in digitisation across many business verticals (niche businesses serving a specific audience) and we have deliberately sought to increase exposure to this multi-year secular trend across digital payments, software-as-a-service, unified communications, and exchanges to name but a few. Our holding in Gamma Communications, a UK leader in unified communications-as-a-service, was a top contributor during the month, and we expect the company to continue to benefit from this trend.

There are little conclusions to be drawn from detractors during the month, with many simply being companies that failed to keep pace with the market rally or those which gave back some relative outperformance from the prior month, for example, Team17 which was the largest positive contributor during March. Similarly, Qinetiq and Serco both underperformed during the month, which we would attribute to these businesses being more defensive.

The economic backdrop remains highly uncertain as a result of the ongoing COVID-19 pandemic. We are continuing to engage with companies to understand the trends and impacts to the industries in which they operate, and how Management teams expect to deal with this disruption. We believe that this crisis is likely to see an acceleration of some secular industry trends, notably to the benefit of digital-ready businesses and businesses that enable the digital transformation. Other companies with strong financial footing with a differentiated product offering should be able to use this market disruption to their long-term advantage, as and when competitors and capacity exit the market. Therefore, we do not expect to alter the positioning of the portfolio materially but are always looking to add or remove individual holdings where our latest research suggests there is change occurring. We continue to operate with a lower gross exposure than usual given the ongoing market volatility but have started to increase our net exposure in recent weeks as we have reduced/taken profits in a number of shorts that had fallen a long way. We continue to thank shareholders for their ongoing support.

29 May 2020

¹Source: BlackRock as at 30 April 2020

ENDS

Latest information is available by typing www.blackrock.co.uk/thrg on the internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV terminal).  Neither the contents of the Manager’s website nor the contents of any website accessible from hyperlinks on the Manager’s website (or any other website) is incorporated into, or forms part of, this announcement.