Trustnet Magazine Issue 46 December 2018 | Page 16

Your portfolio
[ TRUST PICKS ]
14 / 15
Markuz Jaffe, Cantor Monica Tepes, finnCap
Cantor investment companies
analyst Markuz Jaffe currently
favours a blend of defensive
strategies alongside higher risk ones,
particularly those that have de-rated
in the recent volatility.
In terms of defensive strategies, Jaffe
is still keen on his trust-picks from
last year – NextEnergy Solar Fund
and Greencoat UK Wind – which he
selected for their ability to provide
long-term inflation-linked income.
“A particularly interesting angle
here is the lack of acquisitions from
the solar funds, where market pricing
for subsidy-backed UK assets is
too expensive to meet their return
targets,” he says.
“This could imply that the carrying
value of the listed funds’ assets is too
conservative and therefore contains
upside potential, even when adjusting
for the relatively small premium
rating on the shares.”
For the higher-
risk section of his
portfolio, Jaffe says
a UK equity strategy
such as Henderson
Opportunities Trust
is appealing.
The analyst
notes Monica Tepes, head of investment
companies research at finnCap,
believes most asset classes will
struggle to deliver even high single-
digit returns in the near to medium
term. However, one investment
company she believes has a good
chance of making 10 per cent or more
over the coming year is Grit Real
Estate Income.
“Grit, founded in 2014 and listed
on the London Stock Exchange in
July 2018, is a $450m market cap
pan-African real estate company
which invests in politically stable and
investor-friendly countries outside
South Africa,” says Tepes.
“Its tenants are blue-chip
multi-
FE TRUSTNET
that not
only have UK
equities been
beaten down in the
ongoing Brexit saga,
but smaller companies have been hit
particularly hard as sentiment has
soured on UK-sourced revenues.
“A double-discount opportunity
exists via Henderson Opportunities
Trust, which trades around a low-teen
discount and has a significant exposure
to smaller, higher growth companies
which themselves trade at depressed
levels versus history,” he says.
“Also, an allocation to sterling-
denominated assets should mitigate
against losses on non-sterling
investments should sterling strengthen
from its weak
position.”
nationals such as BP, Barclays and
Vodacom, who pay rents in dollars
and euros.”
Grit pays a covered dividend of 8.5
per cent, which is expected to grow
by more than 3 per cent or more per
annum, and targets annual NAV total
returns of 12 per cent.
Tepes notes that both the dividend
growth and NAV total return target
are underpinned by the contracted
index-linked annual rent increases of
3 to 5 per cent a year.
“So as long as these blue-chip
tenants keep paying their rents
(I would say the risk of default is
relatively low), the income should
grow and so should the property
valuations, assuming no
widening of yields,” she
continues.
“Additionally, further
NAV growth can come
from redevelopment of
existing assets, lowering
the cost of debt, yield
compression on improving
macroeconomics and
achieving savings as new
tax rules come
into force.”
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