AVI Global Trust (AGT – previously British Empire Trust) seeks to generate capital growth for investors through investment in a reasonably concentrated portfolio of listed companies whose shares trade at a discount to the managers’ estimate of fair value.
Under current manager Joe Bauernfreund, who took over in 2015, AGT has evolved its investment strategy, looking to increase portfolio concentration, utilise attractive borrowing rates on long-term debt, and place a greater emphasis on identifying a catalyst for value realisation (amongst other factors).
Holdings can be categorised as either: 1) closed-ended funds, 2) family-backed holding companies, or 3) asset-backed special situations, which currently consists primarily of Japanese cash-rich operating companies. The exposure to Japan has been gradually increasing in recent years, as AVI believes there is a substantial investment opportunity in their investment strategy in this area, so much so that they launched a separate investment vehicle focussing solely on this opportunity.
Whilst focussed on accessing high-quality assets, the managers of AGT are cognisant of the price they pay for these holdings and look to acquire them at substantial discounts to their assessment of fair value. Presently, the look-through double discount to ‘fair value’ stands at c. 50% (as at 30/04/2020); as discussed in the Portfolio and Performance sections, this is anomalously wide relative to AGT’s history. Previous instances where the double discount has reached this level have tended to lead to subsequent periods of outperformance.
Gearing has been tactically utilised in recent months, and the team tell us the recent market sell-off has created new buying opportunities in high-quality assets.