The Temple Bar Investment Trust outperformed its benchmark in the first half of the year, after swapping its investment manager.
The trust’s net asset value performance was 19.3 per cent, compared with its benchmark, the FTSE All-Share index, which returned 11.1 per cent.
The £714m trust follows a value strategy, which tends to do well when the economy is growing and inflation and interest rates are rising, but this has been out of favour for the past decade.
In a statement to the market this morning (August 20), Arthur Copple, the trust's chairman, said: “The period under review stands in sharp contrast to the corresponding period in 2020.
“The first half of 2021 saw your company perform extremely well as mispriced value stocks generally did significantly better than the rest of the UK market.”
He added there was reason for optimism.
“Clearly, in the current circumstances it is difficult to predict the movement of markets, but your board and your investment manager believe there is every reason to be cautiously optimistic about the second half of your company’s financial year,” he said.
Last September the trust swapped its management from Ninety One to RWC Asset Management following an “exhaustive” review. At the time, the board said it hoped RWC would “reinvigorate the trust” and return it to its former position as “one of the leaders” in the UK equities market.
Over the past five years, Temple Bar has been one of the worst performers in its sector, the AIC UK Equity Income, returning 15.5 per cent while its sector returned 38.2 per cent.
Over the past year, however, it has been one of the best performers in its sector, returning 48.7 per cent compared to 38.8 per cent for its sector - though more recently, over one and six months, its performance has struggled again.
“Mispriced” value stocks
In the results statement, Ian Lance and Nick Purves, the trust’s managers, explained why value stocks continue to be attractive, and warned investors not to base their assumptions on performance on the past year.
“Although value stocks have staged a strong recovery from the lows reached in the summer of last year, we would encourage shareholders not to anchor off the share prices of that time as valuations had become extreme,” they said.
“Despite the recovery in share prices since the vaccine news last November, valuations in some areas continue to be exceptionally attractive.”
The pair highlighted banks as a case in point.
“All are well capitalised (some have excess capital) and offer the potential for a 10 per cent return on equity and yet they continue to be priced at very meaningful discounts to book value.”
In June, Adrian Gosden, investment director at Global Asset Management, highlighted why financial services firms are likely to buck the trend in dividend payments and recover their payments faster.
He said: “Financials will cause the biggest delta, because they were asked by the regulator to [make] provisions for the pandemic.”
He explained that the actual hit of the pandemic was much less traumatic on the financial services industry than expected, and the regulator is now allowing the firms to distribute the provisions via dividends.
“That will be the biggest one into the pockets of investors.”
sally.hickey@ft.com
