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Awards/Ratings have not been superseded to date.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 January 2025

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 0.2% in January, underperforming its benchmark, the Deutsche Numis Smaller Companies +AIM (excluding Investment Companies) Index, which returned 1.0%.¹

Global stock markets started 2025 strongly and despite three significant wobbles ended the month in positive territory. First, we had to navigate a sizeable bond sell-off as hawkish data pushed the UK 10-year bond yield to a +10 year high of +4.9% whilst the 10-year treasury yield hit 4.8% before both retraced on softer inflation prints. Second, the leftfield arrival of Deepseek’s new Artificial Intelligence (AI) model created some large existential questions on the valuations across a swathe of US technology leaders (NVIDIA lost +US$600 billion of value in a single day) not to mention consternation over the quantum of AI related capital expenditure and expected returns. Third, the growing spectre of a global tariff escalation as the new Trump administration moved to announce tariffs on Canada, Mexico and China. It’s incredible to think this all happened in the space of only one month, so if January is anything to go by, we are set for one extraordinary year. January proved once again a challenging month for the portfolio as persistent outflows and concerns over the health of the UK economy continued to weigh on UK small and mid-cap shares.

Rotork rose in response to H1 2024 results. Despite tough comps, the company delivered c.20% in their Oil & Gas and Power & Water divisions with a good margin performance driving a low single digit beat and more than offsetting the weakness in Chemical, Process and Industrial, driven by weakness in China. Guidance remained unchanged and the shares are currently trading on around 19x P/E (price to earnings ratio) 2025. LED lighting and wiring accessories supplier, Luceco, reported strong sales growth in the final quarter of 2024 with upgrades to full-year guidance, reflecting strong demand for its products, positive product mix and operational efficiencies. Recent acquisitions are integrating well the business is well placed to accelerate in 2025. Bathroom retailer, Victorian Plumbing, reported solid full year results that outperformed the wider RMI (repair, maintenance and improvement) market. The company’s brand strength and extensive product range saw positive order volume growth, while a mix shift to own branded products was beneficial to gross margins. Despite the challenging environment, and a cautious approach to marketing at the beginning of its financial year, the company has seen HSD (high single digit) growth in December and will continue to direct marketing spend through 2025 to continue to drive order volumes.

The biggest detractor was a short position in a UK listed semiconductor business that squeezed through the month. The company did announce record “bookings” in January (a metric that we have repeatedly expressed caution and a healthy degree of cynicism towards) in an otherwise brief statement with the only other important feature of note was confirmation that revenues would be at the lower end of guidance! The lack of progress on revenues, “ebitda” (earnings before interest, taxes, depreciation and amortization) and cash makes us very sceptical and we retain our short. Shares in Gamma Communications fell after announcing strong results and a large acquisition in Germany. In absence of the acquisition, we think the shares would have responded very well, but all the focus is clearly on this transformative deal in Germany where Gamma has acquired a sizeable channel-led SME (small and medium-sized enterprise) customer base with proprietary cloud telephony software and hardware. There’s quite a lot to digest here, and whilst we are fans of management and don’t necessarily disagree with the strategic rationale, we do think it changes the risk profile of the investment case and we have moderated our position accordingly. Shares in Trainline fell on the news that Department for Transport will soon begin a consultation process on the Rail Reform Bill, designed to establish Great British Railways (GBR) as the governing body for passenger rail.

It’s easy to bash the UK right now, so trying to make a constructive case for UK small and medium sized companies is not without its challenges! Valuations are undoubtedly cheap, as I am sure every UK small and mid-cap fund manager has been telling you, but this valuation argument has been true for some time and isn’t sufficient to turn the tide on sentiment and flows. Only PE (private equity) and Corporate bidders are taking full advantage of the valuation opportunity right now in my view.

But before we get too despondent and talk ourselves into a bearish frenzy, we should put some of the data into context: UK construction PMIs (purchasing managers index) may have come off the peak, but are still the strongest in Europe; mortgage volumes may have fallen 3.5% month on month in November, but were up in December 2024 and ended the year +40% (compare this with three consecutive months of -10% following the Truss mini-budget); aggregate employment is still strong (even as forward looking indicators moderate); Asda's Disposable Income Tracker is still growing roughly 10% on an annualised basis; and the savings rate is still above 10%, significantly higher than the pre-covid 20-year average of 7%; service sector PMIs remain hovering above 50, even as business confidence has fallen. Lastly, and perhaps key, is that the Bank of England's own view on inflation is much more sanguine than financial markets, leaving more scope to cut faster than currently expected particularly as growth weakens.

This along with the simple fact that several industries have effectively been in a volume recession for three years (think cement, housing starts, bricks, various industrial widgets, consumer electronics) a deep recession in the UK we think is unlikely, but our hopes for a V-shaped recovery in 2025 have been squashed.

The base case now is a return to the environment of 2023, subdued demand and anaemic growth. Downside risks from a further fiscal misstep or further punishment by the bond market are clear. Even in this tough environment we shouldn’t lose hope or rip up a longstanding tried and tested investment philosophy and process - we will continue to seek idiosyncratic investment opportunities where we see a compelling runway for growth and an asymmetric risk/reward opportunity right now, even though there may be more clouds on a short-term horizon. In many cases the valuations of what we consider to be the highest quality UK domestic assets are back at trough levels and very attractive on a medium-term view and trading remains solid despite the backdrop. We remain alive to the data and more importantly what companies are telling us and will adjust our positioning accordingly. In conclusion, we remain conscious of the challenging outlook for the year ahead and that is reflected in a gross exposure that is now down to around 110%, and a net exposure that is around 105%.²

We thank shareholders for your ongoing support.

¹Source: BlackRock as at 31 January 2025
²Please refer to Glossary for definition of net and gross exposure.
Unless otherwise stated all data is sourced from BlackRock as at 31 January 2025.

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 Scottish Mortgage Investment Trust plc, 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 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 Editor at Large 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 currently a Non- executive Director of Schroder Japan Trust plc and is a former Non-Executive Director of Murray Income Investment Trust plc, Baillie Gifford Shin Nippon Public Limited Company and Netwealth Investments Limited.

James Will was appointed to the Board on 1 January 2025. He is an experienced Chair and non-executive director with an extensive knowledge of the investment company sector. Mr Will previously held the role of Chairman of The Scottish Investment Trust plc and was a non-executive Director of JP Morgan Global Growth and Income plc. Mr Will is currently the Chairman of Asia Dragon Trust plc. Mr Will is also the Senior Independent Director of Herald Investment Trust plc and a non-executive director of JP Morgan European Discovery Trust plc.

Mr Will was until 2014 Chairman of Scottish law firm Shepherd and Wedderburn LLP where he was a senior corporate partner heading its financial sector practice. He has experience of working in a wide range of industry sectors including financial services, technology, energy and life sciences.

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.