BlackRock Throgmorton Trust plc

About this investment trust

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

The Company aims to provide shareholders with long-term capital growth and an attractive total return by investing primarily in UK smaller companies and mid-capitalisation companies traded on the London Stock Exchange.

Why choose it?

The BlackRock Throgmorton Trust looks to back the UK’s emerging companies. An unusual feature of the Trust is its ability to ‘short’ companies that we find unattractive, enabling us to profit if the share price falls. This gives the Trust’s manager the opportunity to back investment ideas with real conviction, within a strong risk framework.

Suited to…

Investors who want a dynamically managed portfolio of growing companies but are comfortable with a limited degree of ‘short’ exposure.

AJ Bell Online Personal Wealth Awards 2021: As at 8 March 2021.
AJ Bell Award: As at 3 September 2021.

Awards/Ratings have not been superseded to date.
Past performance is not a reliable indicator of future results and should not be the sole factor of consideration when selecting a product or strategy.

What are the risks?

• Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
• Net Asset Value (NAV) performance is not the same as share price performance, and shareholders may realise returns that are lower or higher than NAV performance.
• The Trust’s investments may have low liquidity which often causes the value of these investments to be less predictable. In extreme cases, the Trust may not be able to realise the investment at the latest market price or at a price considered fair.
• Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.
• The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss.
• Derivatives may be used substantially for complex investment strategies. These include the creation of short positions where the Investment Manager artificially sells an investment it does not physically own.
• Derivatives can also be used to generate exposure to investments greater than the net asset value of the fund/investment trust. Investment Managers refer to this practice as obtaining market leverage or gearing. As a result, a small positive or negative movement in stockmarkets will have a larger impact on the value of these derivatives than owning the physical investments. The use of derivatives in this manner may have the effect of increasing the overall risk profile of the Funds.

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Fund manager commentary

31 October 2024

Comments from the Portfolio Manager

Please note that the commentary below includes historic information on the Company’s NAV performance and index performance. 

The figures shown relate to past performance. Past performance is not a reliable indicator of future results.

The Company returned -2.5% in October, while its benchmark, the Deutsche Numis Smaller Companies +AIM (excluding Investment Companies) Index, returned -2.1%.¹

October witnessed a weak month for markets, with bonds and equities falling across the globe, however the drivers varied by market. In the US, equities fell on better-than-expected economic growth as well as a tick up in core CPI which resulted in a reappraisal of the speed and number of rate cuts ahead. The increase in bond yields was driven from the growing belief of a Republican clean sweep and the potential for fiscal policy risk amidst inflationary protectionist measures. As for the UK, markets continued to weaken into the Budget and then took a further leg down on rising concerns over the quantum of tax rises and borrowing.

Overall portfolio performance during the month was hurt particularly in rate sensitive areas like property and consumer. However, we did have several successes in Industrials, for example Morgan Sindall and Ibstock. Shares in Morgan Sindall rose after a strong trading update. Trading in its “fit out“ division was the driver of the upgrade as several large contracts were won in the period which should benefit 2024 and 2025. Morgan Sindall is the number one player in the market and post the recent demise (bankruptcy) of the number two player; this favourable evolution of market structure should lead to improved returns and further market share gains from here. Digital payments business Boku continued to rise during the month following strong interim results released at the end of September, which showed continued growth in transaction volumes across all Local Payment Methods, driving a 24% increase in H1 revenues. Shares in brick manufacturer Ibstock rose in response to its third quarter trading update, which showed flat year-on-year sales, but with early signs of an improving demand outlook. We have spoken many times about our thesis around Ibstock and the industry backdrop for brick manufacturers, where volumes are running more than 30% below pre-covid levels, and therefore we see significant upside to sales and profitability as housebuilding volumes begin to recover through 2025.

Great Portland was the biggest detractor which fell in the month on renewed concerns for the outlook in the UK, UK interest rates and the impact of the budget. This came despite a trading statement highlighting continued resilient lettings performance, renting space out at 7% ahead of ERV (Estimated Rental Value). Workspace also fell on fears around the UK and interest rates in the month despite a resilient statement on trading with strong pricing across its estate. Shares in WH Smith gave back some of its strong performance from September following its positive trading update, with concerns around the impact of the budget adding further pressure to the shares. As a reminder, last month we highlighted the mix of the business now consists of more than 80% of profits coming from its travel division.

The UK budget is now behind us, but it has not been the clearing event we had quietly hoped for, with the consequences ahead of us. We have not added to rate sensitive areas in this most recent budget induced sell-off, yet we haven’t panicked either and made wholesale changes to the portfolio. We are keeping a wary eye on bond yields, 5-year swap rates and incoming data on economic activity, mindful of any budget induced impacts. We do have some short positions to high staff-based companies with low margins where we can see additional staff costs (either through NI, or more problematic is the increase in numbers/percentages of temporary staff who will now be caught up in this tax grab) adding pressure to fragile unit economics, and we have added to short exposures here. It remains to be seen how swathes of leisure, retail and hospitality sectors will react to these cost headwinds, with some unable to pass it on due to competitive pressures.

The gross exposure remains lower than normal levels at around 11% but the net of the portfolio has increased to around 109% as we think the broader UK small and mid-cap sector remains very cheap.2 However, with the UK and US elections and the UK budget now out of the way, we are more minded to add back to the gross exposure of the portfolio, but to do so gradually as opportunities present themselves. 

We thank shareholders for your ongoing support.

¹Source: BlackRock as at 31 October 2024

Unless otherwise stated all data is sourced from BlackRock as at 31 October 2024. 

Any opinions, forecasts represent an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research, investment advice or a recommendation.

Risk: Reference to the names of each company mentioned in this communication is merely for explaining the investment strategy and should not be construed as investment advice or investment recommendation of those companies.

Portfolio manager biography

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Daniel Whitestone, Managing Director, is Head of the Emerging Companies team, within the Fundamental Equity Division of BlackRock's Active Equity business. He is the lead Portfolio Manager for BlackRock Throgmorton Trust plc, BlackRock UK Emerging Companies Hedge Fund and BlackRock UK Emerging Companies Absolute Return Fund.

Dan's service with the firm dates back to 2013. Prior to joining BlackRock, Dan worked for UBS, where he was the head of the UK small and mid-cap sales desk and ranked the number one salesperson in the Extel Small/Mid-Cap sales ratings in 2011 and 2012. Prior to working at UBS, Dan joined Noble and Co in 2006 as a UK small and mid-cap salesman. He began his career at Accenture, in 2003 as a strategy consultant.

Dan earned a BA Hons degree in Combined Studies from the University of Newcastle-Upon-Tyne.

Board of directors

All the Directors are non-executive, independent of the Investment Manager and members of the Audit Committee, Management Engagement Committee and the Nomination Committee.

Christopher Samuel (Chairman) was appointed to the Board in June 2016. He was Chief Executive of Ignis Asset Management from 2009 until its sale to Standard Life Investments in 2014. He was previously Chief Operating Officer at Gartmore and Hill Samuel Asset Management and was a partner at Cambridge Place Investment Management. He is a Non-Executive Director of Quilter plc (including subsidiaries Quilter Financial Planning Limited, Quilter Investment Platform Limited and Quilter Life & Pensions Limited). Mr Samuel was formerly Chairman and a Non-Executive Director of JP Morgan Japanese Investment Trust plc and a non-Executive Director of the Alliance Trust plc, UIL Limited and its subsidiary UIL Finance Limited. He graduated from Oxford with an MA in Philosophy, Politics and Economics. He qualified as a Chartered Accountant with KPMG.

Angela Lane was appointed to the Board in June 2020. She had previously spent 18 years working in private equity at 3i, becoming a partner in 3i's Growth Capital business managing the UK portfolio. Since 2007, Angela has held several non-executive and advisory roles for small and medium capitalised companies across a range of industries including business services, healthcare, travel, media, consumer goods and infrastructure. She is currently the Audit Chair and Non-Executive Director of Pacific Horizon Investment Trust plc, Dunedin Enterprise Investment Trust plc and Seraphim Space Investment Trust plc.

Louise Nash was a UK Small and Mid-Cap Fund Manager, firstly at Cazenove Capital and latterly at M&G Investments which she left in 2015. She now works for family wine business Höpler. She also acts as a consultant to JLC Investor Relations. Louise holds an MA in German and Politics from the University of Edinburgh and the IMRO Investment Management Certificate.

Nigel Burton was appointed to the Board in December 2020. He has spent over 14 years as an investment banker at leading City institutions including UBS Warburg and Deutsche Bank, including as the Managing Director responsible for the energy and utilities industries. Nigel has also spent 15 years as Chief Financial Officer or Chief Executive Officer of a number of private and public companies. He is currently a Non-Executive Director of AIM listed companies DeepVerge plc, Microsaic Systems plc, eEnergy Group plc and Location Sciences Group plc. He was formerly a Non-Executive Director of Digitalbox plc, Corcel plc, Modern Water plc, Alexander Mining plc, Mobile Streams plc and Chairman of Remote Monitored Systems plc.

Merryn Somerset Webb was appointed to the Board in March 2021. She has significant experience of financial matters through her role as a senior columnist for Bloomberg Opinion and writes extensively on this subject across radio and television. She is also a former Editor-in-Chief of MoneyWeek, the UK personal finance magazine. Merryn brings valuable investment trust specific experience. She is a former Non-Executive Director of Murray Income Investment Trust plc, Baillie Gifford Shin Nippon Public Limited Company and Netwealth Investments Limited.

ESG Integration

The fund noted above does not commit to sustainable criteria nor does it have a sustainable investment objective.

BlackRock considers many investment risks in our processes. In order to seek the best risk-adjusted returns for our clients, we manage material risks and opportunities that could impact portfolios, including financially material Environmental, Social and/or Governance (ESG) data or information, where available. See our Firm Wide ESG Integration Statement for more information on this approach and fund documentation for how these material risks are considered within this product, where applicable.