‘Curious movements’ in growth shares blow Monks off course

A rapid change in sentiment towards growth companies has been blamed for hitting the Monks Investment Trust’s one year numbers.

Manager Gerald Smith said in the trust’s results for the year to April 30, that some of his best holdings throughout the year were also the ones which fell the most rapidly in March and April therefore eradcating the outperformance which had been built up.

The trust delivered a share price total return of 5.4 per cent compares to the FTSE World index’s 6.8 per cent return, according to the manager.

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However, he called this “undoubtedly disappointing” given as recently as February the year-to-date net asset per share total return was “in double digits and more than five percentage points ahead of the comparative index”.

“Over the last two months of the year there was a sharp reversal of fortune, exaggerated by the share price volatility of a number of our holdings and the very significant differences between the portfolio and composition of the comparative index,” Mr Smith said.

“The short-term behaviour of markets is almost impossible to predict and frequently hard to explain. We have no better explanation for the curious movements of share prices over this period other than there was a change in sentiment towards the shares of rapidly growing companies.”

The manager said a number of the holdings that fell the most during March and April were Alnylam Pharmaceuticals, Sky Deutschland and Xero.

“These stocks also appear on the list of top positive contributors over the full year as the sharp falls in the final two months of the year only partly reversed earlier more substantial gains,” he added.

Chairman James Ferguson said the trust’s net asset value per share reached a “record month-end” in February but “performance deteriorated from this point” due to the setback in growth stocks.

Performance was a key focus for the board last year when it “undertook a thorough review of the causes of performance in recent years”.

The outcome of the review was to appoint Tom Walsh as deputy manager alongside Mr Smith.

“The success of these steps cannot be evaluated over a period as short as a year, given the company’s objective of capital appreciation over the long term, but there have been encouraging signs of an improvement in trend, notwithstanding the influence of some extreme share price moves in the last two months of the period,” Mr Ferguson said.

The trust has outperformed its index in 10 years, however, has underperformed it in five- and three-year periods, according to data from FE Analytics.

Elsewhere, Mr Smith said the trust had swayed towards the US in terms of stocks and away from emerging markets but added this was an “incremental change” and “does not represent” a change in his long-term bias towards developing countries.

The trust paid a total dividend of 3.95p.