Trust news: Scottish Mortgage, Fidelity Special Values and more

Our investment trust round-ups took a break while events were dominated by the Budget and the American elections but they return today, although in future we plan to publish longer updates on a roughly monthly schedule. In this edition we have news from Scottish Mortgage, Fidelity Special Values and other trusts.

Scottish Mortgage halves Nvidia stake
Scottish Mortgage, a popular trust among private savers, released its half-year results last week. The trust reported that it had more than halved its holding in Nvidia, the AI chipmaker, to 4.1% of the portfolio. 

Tom Slater, a Scottish Mortgage co-manager, said: ‘Despite growing conviction that generative artificial intelligence (AI) will be a transformative general-purpose technology, we reduced our position in Nvidia, the leading designer of semiconductors for AI. The primary challenge hindering large-scale AI adoption remains the high cost. Companies must find ways to offer competitively priced AI systems while managing the skyrocketing costs of training them. This raises concerns about the sustainability of current capital equipment spending, including Nvidia chips.’

The trust also said the percentage of the portfolio accounted for by unlisted companies had fallen to 23.3% from 26.2% at the end of March and 30% a year ago. The large private exposure has been seen as one reason for the discount at which the trust’s shares have traded over the past couple of years (currently 9.8%).

The falling exposure to unlisted businesses came about partly because of reductions in their valuations, partly because of a rise in the value of the trust’s listed portfolio and partly because one private holding floated and is now public.

Scottish Mortgage’s net asset value per share increased by 1.9% over the first six months of the current financial year and the trust is continuing to buy back its own shares. Share buybacks are explained here.

Fidelity Special Values reports strong year

Fidelity Special Values has celebrated its 30-year anniversary with a year of ‘strong absolute and relative performance’, in the words of one broker. In the year to 31 August, the trust’s total return in net asset value terms was 24.1%, compared with 17% for the FTSE All-share index.

The board has recommended a final dividend of 6.3p, bringing the total for the year to 9.54p, an increase of 8.4% relative to last year. This marks the 15th consecutive year of growth in the annual dividend. The raised payment implies a yield of 3.1% and dividend cover of 1.2 times earnings, according to Numis, the broker. It said the year had been ‘a period of strong absolute and relative performance, driven primarily by stock-specific factors, as well as M&A [mergers & acquisitions] activity in the portfolio’.

Sunday (17 November) will mark 30 years since the trust’s launch.

‘Material cost savings’ for Supermarket REIT 

The manager of Supermarket Income REIT is to be paid a percentage of the trust’s market value instead of a percentage of its net asset value from next July. The result will be a lower fee as long as the trust is trading at a discount, as it has mostly done for the past two years. The current discount to net asset value is about 24%. The fee will remain tiered, so it will fall in stages from 0.95% a year on the first £500m of market value to 0.4% above £2bn in market value. The board said the changes would ‘deliver material cost savings’ to the trust.

Asia trusts to merge

Asia Dragon, which is managed by Abrdn, and Invesco Asia have announced plans to join forces. If the merger is approved by both sets of shareholders, those in Asia Dragon will receive new shares in Invesco Asia and the combined fund will be managed by Invesco. Asia Dragon shareholders will have the opportunity to give up part or all of their holding for cash, subject to an overall limit of 25% of the trust’s shares.

Trust raises management fee

Literacy Capital is to raise its management fee from 0.9% to 1.5% a year. The increase goes against a trend of falling fees in recent years. The trust’s manager said the rise would give it ‘the resources necessary to build the scale and capabilities within its team to continue to deliver strong investment returns’. The change will take effect in the new year.

Strategic review for Korea fund

The Board of Weiss Korea Opportunity has announced that it intends to undertake a strategic review to consider its future and to explore the strategic options available. The decision comes after the fund’s manager told the trust that it ‘believes that the opportunity set and strategy for the fund continuing in its current form is less attractive than it has been in the past … and that it does not think this change in circumstances is likely to improve in the foreseeable future’.

Scottish Oriental Smaller Companies to split shares

Scottish Oriental Smaller Companies has said it plans to conduct a five for one share split ‘to improve liquidity and marketability’ of its shares. Share splits are explained here. The current share price is about £14.40 and, if it stays the same until the share split takes place, it will then fall to 288p. Shareholders will be asked to approve the proposal at the annual meeting on 29 January. 

JPMorgan fund to disappear

JPMorgan Global Core Real Assets has confirmed earlier plans to wind itself up and return the proceeds of selling its assets to shareholders. The board said the winding down would require shareholder approval and that full details of the proposals, including further information on the expected timeline for the sale of the trust’s assets, would be published as soon as practicable.

Trusts change names

Impact Healthcare REIT has become Care REIT and Tufton Oceanic Assets is now Tufton Assets, while BlackRock Sustainable American Income has dropped the word ‘sustainable’ from its name.
 

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Investment trust shares are listed on the London Stock Exchange and their price is affected by supply and demand. The investment trust can gain additional exposure to the market, known as gearing, potentially increasing volatility. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of   Fidelity’s advisers or an authorised financial adviser of your choice.