Manager Commentary

Please read in conjunction with the Performance section above.

31 May 2020Nick Greenwood

In May the NAV was up 4.33% and the share price was up 2.57%. The FTSE All- Share was up 3.42%. Markets continued their upward momentum during May as Europe and the US began to ease their lockdown restrictions. Duke Royalty was the best performer over the month highlighting how it is uncertainty, rather than the certainty of bad news, that puts pressure on share prices. As a lender to smaller companies via “corporate mortgages”, investors were nervous that their borrowers would struggle to service their loans. During the month, the trust released an update to investors to reassure them that although there were some companies in the portfolio that needed help, the majority were up to date on their payments. This reassurance sent the share price considerably higher.

We sold out of Rights and Issues which had been an excellent long-term performer in the trust. The discount was historically wide but had narrowed significantly in the past year and we recycled the money into increasing our UK micro cap exposure. Markets have rebounded strongly since their March lows in response to fiscal and monetary stimulus. Whilst we believe a pause for breath is now needed, economies will open up and recover. Later in the year, growth, combined the vast amount of liquidity which has been pumped into the financial system, may create a surge in the markets. Further out there will be challenges caused by authorities’ responses to the virus, which may lead to a period of instability.