Fund Information / Factsheet • Jan 31, 2018
Fund Information / Factsheet
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Menhaden Capital PLC (the "Company") seeks to generate long-term shareholder returns, predominantly in the form of capital growth, by investing in businesses and opportunities, irrespective of their size, location or stage of development, delivering or benefiting from the efficient use of energy and resources. Whilst the intention is to pursue an active, non-benchmarked total return strategy, the Company will be cognisant of the positioning of its portfolio against the MSCI World Index (Total Return, Sterling adjusted).
| Name | Total |
|---|---|
| X-ELIO * | 14.6 |
| Airbus | 10.5 |
| Safran | 8.6 |
| Volkswagen | 8.3 |
| Infigen Energy | 5.7 |
| Calvin Capital ** | 5.0 |
| Senvion | 4.6 |
| Brookfield Renewable Energy | 4.3 |
| Alphabet | 4.2 |
| Terraform Power | 3.6 |
| Total | 69.4 |
| *investment made through Helios Co-Invest LP |
**investment made through KKR Evergreen Co-Invest II LP
During January, the Company's net asset value ('NAV') per share was down 1.3%, the share price was unchanged, while the MSCI World Index (total return, sterling adjusted) gained 0.2%.
Airbus was the biggest contributor amongst our publicly traded equity positions, up 9.9% for the month, adding 0.9% to our NAV. Airbus made significant progress during Q4 2017 ramping up its new A320neo. In 2017, Airbus delivered a record number of aircraft (over 700) and ended the year having delivered over 180 A320neos to customers, which was more than expected. The company aims to deliver around 800 aircraft in total in 2018.
The strengthening of sterling against the dollar was a significant drag on our US publicly traded equity positions during the month, including both Brookfield Renewal Energy, which was down 9%, and Terraform Power, down 13%, which suffered share price declines that were exacerbated by rising US bond yields. This drag was offset by currency hedges on half our USD exposure.
The biggest detractor for the month was Adient, which declined by 22%, detracting 0.7% from our NAV, following a profit warning. The company attributed recent poor performance to greater than expected operational headwinds, particularly in its seat mechanisms business, as well as to higher commodity prices. However management remains committed to the previously guided 200bps margin enhancement by 2020. Moreover, Adient has signed a joint venture agreement with Boeing to form Adient Aerospace to explore the opportunity in lightweight aircraft seating.
The commentary continues on page 2.
Any opinions on individual stocks are those of the Company's Portfolio Manager and no reliance should be given on any such views. Any research in this document has been procured and may have been acted upon by Menhaden for its own purposes. The results are being made available to you only incidentally. The views expressed herein do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of Frostrow Capital LLP and no assurances are made as to their accuracy.
This document is for information purposes only and does not constitute an offer or invitation to purchase shares in the Company and has not been prepared in connection with any such offer or invitation. Before investing in the Company, or any other investment product, you should satisfy yourself as to its suitability and the risks involved, and you may wish to consult a financial adviser.
Any return you receive depends on future market performance and is uncertain. The Company does not seek any protection from future market performance so you could lose some or all of your investment. Shares of the Company are bought and sold on the London Stock Exchange. The price you pay or receive, like other listed shares, is determined by supply and demand and may be at a discount or premium to the underlying net asset value of the Company. Usually, at any given time, the price you pay for a share will be higher than the price you could sell it. For further information on the principal risks the Company is exposed to please refer to the Company's Annual Report or Investor Disclosure Document available at www.menhaden.com.
The Company, currently, deploys leverage using currency forwards. These are designed to, partially, protect/hedge the NAV from unfavourable movements in foreign exchange rates by reducing the Company's exposure to foreign currencies.The Company can borrow to purchase investments, this could potentially magnify any losses or gains made by the Company.
Portfolio management services are provided by Menhaden Capital Management LLP ('Menhaden'). Three of the partners of Menhaden, Ben Goldsmith, Luciano Suana and Graham Thomas, form the Investment Committee, which makes all investment and divestment decisions in respect of the Company. Their investment philosophy is to assess all investment opportunities through a value lens, with the aim of acquiring investments with low downside risk, backed by identifiable assets and cash flows, at attractive valuations. The team seeks to invest with a long-term perspective and with high conviction. Menhaden is authorised and regulated by the Financial Conduct Authority.
Graham Thomas is the non-executive chairman of the Investment Committee. Graham is the Chief Executive of Stage Capital, a private equity firm backed by Goldman Sachs Asset Management and Glendower Capital. Before Stage Capital, he chaired RIT Capital Partners plc's Executive Committee and was a member of its investment committee with responsibility for its private investments. Previously he held senior roles at Standard Bank Group, and was a partner at MidOcean Partners, having started his career at Goldman Sachs in London. Graham also serves on the investment committee of Apis Partners.
Ben Goldsmith is the Chief Executive Officer of Menhaden. Before co-founding Menhaden, Ben co-founded the WHEB group, one of Europe's leading energy and resource-focused fund investment businesses. Ben is a director of Cavamont Holdings, the Goldsmith family's investment holding vehicle and also chairs the UK Conservative Environment Network.
Luciano Suana is an investment manager at Menhaden. Before joining Menhaden, Luciano was a Director for Barclays Capital in the Capital Markets division where he ran the credit trading operations for Brazil out of São Paulo. Before Barclays, Luciano was a Director at Dresdner Kleinwort in London. There he focused mainly on Infrastructure, Utilities and Real Estate assets as head of the Illiquids Credit group.
Jessica Kaur is a Research Analyst at Menhaden. Before joining Menhaden, Jessica was an Associate Director at UBS in the Research division, where she was a covering analyst in the UK Midcap team. Before UBS, Jessica was a Research Analyst in the Capital Goods team at Goldman Sachs.
Edward Pybus is a Research Analyst at Menhaden. Before joining Menhaden, Edward was an Analyst at Exane BNP Paribas in the Research division, where he was a member of the Oil & Gas team and covered European integrated oil companies. Edward is a CFA Charterholder and qualified as a Chartered Accountant at Deloitte.
The Company's investment objective is pursued through constructing a conviction-driven portfolio consisting primarily of direct listed and unlisted holdings across different asset classes and geographies. The Company invests, either directly or through external funds, in a portfolio that is comprised of three main allocations: listed equity; yield assets; and special situations. The flexibility to invest across asset classes affords the Company two main benefits: 1) It enables construction of a portfolio based on an assessment of market cycles; and 2) It enables investment in all opportunities which benefit from the investment theme. Once substantially invested, it is expected the portfolio will comprise approximately 20 to 25 positions. Typically, the portfolio will not comprise fewer than 20 positions or more than 50 positions. For these purposes, an investment in an external fund is treated as one position.
The portfolio will be predominantly focused on investments in developed markets, though if opportunities that present an attractive risk and reward profile are available in emerging markets then these may also be pursued. While many of the companies forming the portfolio will be headquartered in the UK, USA or Europe, it should be noted that many of those companies will be global in nature so their reporting currency may not reflect their actual geographic or currency exposures. Subject at all times to any applicable investment restrictions contained in the Listing Rules, the Company will not make an investment if it would cause a breach of any of the following limits at the point of investment: 1) no more than 20% of the Company's gross assets may be invested, directly or indirectly through external funds, in the securities of any single entity; and, 2) no more than 20% of the Company's gross assets may be invested in a single external fund.
| Asset | Total |
|---|---|
| Public equities | 50.9 |
| Private investments | 25.5 |
| Yield investments | 13.7 |
| Liquidity | 9.9 |
| Total | 100.0 |
Source: All portfolio information sourced from Frostrow Capital LLP
| Asset | Total |
|---|---|
| Europe | 46.5 |
| US | 21.3 |
| UK | 7.8 |
| Asia | 5.7 |
| Unquoted UK LPs | 5.0 |
| Emerging Markets | 3.8 |
| Liquidity | 9.9 |
| Total | 100.0 |
Source: All portfolio information sourced from Frostrow Capital LLP. Geographic classification based on location of primary economic activity.
| Percentage Growth |
1 month | YTD | 1 Year | Since Inception* |
|---|---|---|---|---|
| NAV | -1.3 | -1.3 | +1.5 | -9.5 |
| Share Price | 0.0 | -0.4 | +11.9 | -31.5 |
| Index ^ | +0.2 | +0.2 | +11.3 | +44.3 |
Past performance is not a guide to future performance. The value of investments and the income from them may fall as well as rise and is not guaranteed. An investor may receive back less than the original amount invested.
^ MSCI World Index (Total Return, Sterling adjusted). The Company pursues an active, non-benchmarked strategy but is cognisant of the positioning and returns of its portfolio against the MSCI World Index. *NAV performance calculated after IPO costs. Share price returns based on issue price of 100p.
Infigen was the second material detractor for January, declining by 10%, costing us 0.6% of NAV. This continued decline is down, in our view, to a combination of general uncertainty over the Australian Government's future renewable energy plans (or lack of them) and the delay in Infigen's long-awaited debt refinancing. We expect the company to provide an update on its recapitalisation plans during March and we believe that the current share price continues to offer material upside.
In January we added a third name, Sabesp, to our portfolio of Brazilian regional water utility monopolies. Water is an increasingly scarce resource everywhere, with two-thirds of the world's population expected to face water shortages by 2025. As such, Brazil is significantly ramping up regulatory support for private sector water and sanitation infrastructure investment. These large, well-established regional monopolies offer attractive and predictable cash flows, backed by long-term contracts, with real potential for growth as water and sanitation reach more and more previously unserviced households.
Google is the world's largest buyer of electricity generated from renewable sources: 2,600 megawatts, which represents 100% of the electricity used by the company. Given this, after thorough analysis, we added Alphabet to the portfolio during January. We like businesses with strong market positions, and Google has a very strong position globally in search, with that position being strengthened significantly over time as more and more people switch to mobile, which favours Google. The company is highly cash generative, with an expected free cash flow conversion of around half of EBITDA during the next five years. Google's share price has lagged its technology peers in recent months, and offers good value at these levels, in our view.
Menhaden Capital PLC (the Company) is a public limited company whose shares are premium listed on the London Stock Exchange (LSE) and is registered with HMRC as an investment trust.
The Company has an indeterminate life although shareholders consider and vote on the continuation of the Company every five years (the next such vote will be held in 2020).
The Company may, but does not currently, borrow to purchase investments. Borrowing could potentially magnify any gains or losses made by the Company.
| AIC Sector | Environmental |
|---|---|
| Launch Date | 31 July 2015 |
| Annual Management Fee (payable by the Company): | |
| Portfolio Management Fee 1.25% p/a on first £150m of | |
| AUM, 1.0% thereafter; AIFM Fee 0.225% p/a up to £150m, | |
| 0.20% p/a thereafter up to £500m, 0.175% in excess of | |
| £500m | |
| Performance fee | See Prospectus for details |
| Ongoing charges* | 2.1% |
| Continuation Vote | At AGM in 2020; every 5 |
| years | |
| Year / Half Year | 31 December / 30June |
| Capital Structure | 80,000,001 Ordinary Shares of 1p |
*Calculated at the financial year-end, includes management fees and all other operating expenses.
| Number of Holdings | 21 | |
|---|---|---|
| Total Net Assets (£m) | £70.7m | |
| Market Capitalisation (£m) | £54.8m | |
| Dividend Policy | Target 2% per annum dividend yield once the Company's assets are substantially invested |
|
| Gearing (AIC basis) * | 0% | |
| Leverage**: Gross Commitment |
124.9% 101.2% |
|
| Share Price (p) | 68.50 | |
| NAV (p) | 88.35 | |
| (Discount) / Premium | (22.5%) |
* Calculated as borrowings / by Net Assets
** Calculated as exposures (as defined in the AIFMD) / Net Assets. The Gross method takes the absolute exposure of all instruments, including hedging arrangements, whilst the commitment method takes the net exposure. The Board has set a maximum leverage level of 200% under the gross method and 120% under the commitment method.
| Sedol | BZ0XWD0 |
|---|---|
| ISIN | GB00BZ0XWD04 |
| Legal Entity Identifier | 2138004NTCUZTHFWXS17 |
| Bloomberg | MHN LN |
| Epic | MHN |
Frostrow Capital LLP
25 Southampton Buildings, London, WC2A 1AL Tel.: 0203 0084910 Fax: 0203 0438889 Website: Hwww.frostrow.comU Email: [email protected]
This financial promotion is issued by Frostrow Capital LLP which is authorised and regulated by the Financial Conduct Authority ("FCA").
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