# Monks Investment Trust underperformes with NAV total return of -3.3%

- Link: https://www.directorstalkinterviews.com/monks-investment-trust-underperformes-with-nav-total-return-of-3.3/4121135616
- Published: 2023-12-08T07:40:48+00:00
- Author: Amilia Stone

**Monks Investment Trust PLC** (LON:MNKS) has announced its results for the six 
months to 31 October 2023.

**Chairman’s statement**

**Performance**

During the first half of the financial year, the Company produced a net asset value(
NAV) total return of -3.3% compared to +2.1% for the comparative index (FTSE World
in sterling). The share price total return was -7.3%, as the discount widened from
8.7% to 11.6%. The investment trust sector is trading at discounts last seen during
the financial crisis.

This is disappointing. Beyond the seven mega-cap stocks in the US, growth stocks
have been out of favour during a period of rising interest rates. We believe that
in the long run growth stocks will continue to deliver better investment returns,
particularly as technology continues to transform economies in sometimes unpredictable
ways. We also share the investment managers’ optimism that the period of sharply
rising rates is now behind us. Some of the underperformance, however, has been driven
by specific stock selection, and commentary on the largest detractors from performance
over the period is included in the Managers’ report.

**Discount management**

Apart from challenging the manager, an essential role of an investment company board
is to determine the company’s policy in respect of discount management.

Monks Investment Trust has bought back approximately £300m of its own stock since
the beginning of last year, when the Company’s shares moved from a premium to a 
discount. Repurchasing shares provides NAV accretion, reduces share price volatility
and reassures shareholders and potential investors that the Board is alive to the
question of discount management. The Board therefore intends to continue to buy 
back while the Company’s shares trade at a substantial discount to NAV. It continues
to evaluate the range of alternative options at its disposal to seek to address 
the discount. 

**Gearing**

An advantage of the investment trust structure is that the Company can deploy borrowing
to enhance returns in the long run. In 2020, the Board took advantage of low interest
rates to issue debt to an insurer to provide structural gearing, securing £100m 
of borrowing with a maturity of 30 years at an interest rate of 1.8%. The Board 
believes that it is beneficial for the Company to have flexibility in its capital
structure, so not all of the Company’s borrowing is structural. The Company also
has a revolving debt facility of £150m at a floating rate of interest, the cost 
of which has risen with market rates. This facility expires in November 2024. The
Board is considering potential options to replace this facility and will update 
shareholders in due course.

**The Board**

As previously reported, Jeremy Tigue has indicated his intention not to offer himself
for re-election at the AGM in September 2024 and, accordingly, Belinda Richards 
has succeeded him as Senior Independent Director (‘SID’) in order to oversee the
necessary recruitment and succession planning. A recruitment process is under way
to add further members to the Board. We expect to be in a position to announce the
new appointments before the end of the Company’s current financial year.

**Outlook**

Monks Investment Trust has a well-diversified portfolio of growth stocks, with less
than 4% underlying exposure to unquoted companies. The Board believes that the Company’s
diversified approach offers investors exposure to a wide range of growth opportunities
that are likely to drive returns in the years ahead. 

Karl Sternberg

Chairman

7 December 2023

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