Gresham House Strategic plc (LON:GHS) describes itself as a ‘strategic public equity’ fund, meaning it takes a private equity-style approach to investing mainly in listed companies, buying significant stakes and engaging proactively with holdings to create and unlock value through operational, strategic and management initiatives. It currently has 18 holdings (15 equities and three convertible loan notes) spread across a range of industries, but all based in the UK. Performance has been strong in the past year (NAV TR +22.6% and share price TR +52.5% over 12 months to 31 January 2020), with a large contribution from top holding Augean (share price +224% in 2019). The management team at Gresham House argues that this validates the strategy, and the narrowing in the discount over the past 12 months (from c 25% to 2.3% in late 2019) suggests the market is beginning to appreciate what GHS offers.
The manager’s view: ‘Primed for further outperformance’
The team says it is excited about the current investment environment. Staveley says that UK small-caps below £200m market cap are clearly out of favour, adding: ‘Furthermore, the team’s “value” philosophy is driving an ever-increasing pipeline of new investment.’ He argues that Gresham House Strategic’s private equity-style approach to public markets is clearly differentiated from the broader small-cap space, and adds that the team sees the current portfolio as cheap, and ‘primed for further outperformance’.