Diverse Income Trust plc (LON:DIVI) fund managers, Gervais Williams and Martin Turner, provide their latest Investment Insights at 31 December 2021.
In the early part of December, investors were unsettled by the rapid rise of the Omicron variant of the Coronavirus. As the month progressed however, several reports implied that the numbers of those requiring hospitalisation wouldn’t increase as rapidly as the case load. Alongside, one of the advantages of the rapid rise in Coronavirus cases, is that hopefully it will reach its peak quickly, as may have already occurred in South Africa. Hence, as the month progressed, investors began to look through the current Coronavirus spike, towards a New Year when the lockdown constraints might be scaled back relatively quickly. The UK equity markets generally finished the month on a relatively strong note.
With markets performing strongly over recent quarters, many companies had concluded plans to raise additional capital ahead of the 2021 year end. Therefore, during November and December there were an unusually large number of small company fund-raisings, which led to some market indigestion. As the balance between buyers and sellers of the AIM listed investment universe edged towards profit takers, the outcome was that the FTSE AIM All-Share Index rose only a marginal amount. The outcome would have been even more disappointing other than the fact that the Clinigen takeover provided a meaningful uplift in December as well.
As the Trust has a significant cohort of AIM listed companies, these holdings held back the portfolio appreciation during the month. In addition, the FTSE 100 Index Put Option that had been the largest contributor to return during November as the first stages of the new Coronavirus variant became known, turned out to be the greatest detractor during December, as the FTSE 100 Index appreciated. We do take reassurance in the fact that most of the companies held in the portfolio reported good progress, therefore the dividend prospects remain as expected. Overall, these mixed trends resulted in the NAV of the Trust rising 3.14% during December.
