Analysts at Stifel Funds have warned that the premium on the £3.2bn RIT Capital Partners investment trust looks expensive after it endured a tough last year.
Shares in the trust are trading at a 5 per cent premium to net asset value (NAV), which Stifel analysts do not believe is justified by its underlying holdings.
The analyst group said that while they like the strategy and defensive qualities of the funds, the portfolio had a tough 2016 and so a discount of up to 5 per cent would be more appropriate.
RIT’s NAV was up by 12 per cent during 2016, and while a comparison with an index is difficult given the asset mix, the MSCI AC World rose by 18.9 per cent.
The portfolio’s comparatively low equity weighting at 56 per cent hurt the portfolio in a year of rising markets, and contributed only 0.4 per cent to the trust’s gains.
Return from its long-only equities and hedge fund holdings were also weak as managers were too slow to adjust their portfolios from defensives to cyclicals.
Absolute return and credit holdings and private investments contributed 2.4 per cent and 1.7 per cent, respectively, while real assets and government bonds failed to make any impact on the portfolio.
Although RIT offers something different to other funds with a multi-asset approach, good long-term performance and a well performing private equity portfolio, Stifel analysts said that its monthly reporting is too infrequent and that costs are high given its multi-managed approach.
Iain Scouller, analyst at Stifel, cautioned investors on the premium valuation as the shares have seen a significant re-rating from a small discount to a 5 per cent premium over the past year and the shares continue to trade near the top of their five year discount/premium range.
“Whilst we like the strategy and the portfolio's defensive qualities, we are wary of the valuation, especially given recent performance,” Mr Scouller said.