InvestmentsOct 21 2014

Walls weighs up investment in flagging World Mining Trust

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Unicorn Asset Management’s Peter Walls is considering putting some of his huge cash pile to work in BlackRock’s under-pressure World Mining Trust.

Mr Walls, who runs Unicorn’s £20m Mastertrust, said he had been unable to find any attractively priced investments lately and had let cash drift up to 18 per cent – well above the more usual 4-5 per cent.

“I cannot get any recommendations from brokers on where to put my money, so I have just resorted to storing it in cash,” he said.

“My feeling is that if you cannot find anything you want to buy, do not buy anything.”

But the manager said he might have found one potential opportunity in BlackRock’s World Mining Trust, run by Evy Hambro, which has seen its share price come under pressure recently.

The trust’s shares have dropped nearly 31 per cent, from 507p on August 11 to 350p as of last week. Year to date, the trusts shares have fallen 17.8 per cent, according to data from FE Analytics.

The £838m trust saw its share price fall when it was forced to take a hefty writedown in its investment in the London Mining Marampa Contract, which was in its top-10 holdings.

London Mining signed a $110m (£69m) royalty agreement with BlackRock’s World Mining Trust for iron ore sales from its Marampa mine in Sierra Leone in July 2012.

However, the iron ore producer issued a statement earlier this month warning its investors there was little to no value left in its equity since the operation had run out of funding.

The BlackRock trust held 4.3 per cent of its portfolio in the Marampa contract.

Because of the incident, the trust’s shares fell further, dropping from 414p on October 8 to their present level.

Mr Walls said this could prove a good point of entry, since the trust will be trading at a discount compared to where it has been.

However, he is weighing up whether he wants exposure to this area of the market.

Having a high level of cash is not a new occurrence for Mr Walls. In 2011, his allocation reached 20 per cent.

Anticipating a market sell-off, he held cash as the markets rallied through July that year and was protected when the fall came in August, allowing him to find new opportunities to reinvest the money.

The Mastertrust fund has delivered top-quartile returns in 10-, five- and three-year periods, according to data from FE Analytics.

Since its launch in December 2001, the fund has returned 201.7 per cent – well above the average return of 82.4 per cent by peers in the IMA Flexible Investment sector, according to data from FE Analytics.

Elsewhere, the manager recently topped up existing investments in Polar Capital Global Financials, Artemis Alpha, Fidelity Asian Values, Templeton Emerging Markets and Caledonia Investments.

The Mastertrust fund invests solely in investment trusts; as at the end of August, it had 47 holdings.