UK markets are “generationally mispriced”, one of the youngest investment trust managers in the UK has said.
Laurence Hulse, manager of the Onward Opportunities trust, led the first float of an investment trust since 2021 last year.
Now, at its one-year anniversary, the fund has grown 14 per cent and is one of the only investment trusts out there that the market values at a premium to its assets.
This is all despite investing in UK small companies, a market that has been not been doing amazingly in recent years.
However, Hulse said: “I’d be more concerned if they were popular, because an asset that’s unpopular is, almost by definition, there’s potential for it to be mispriced.”
While I may not be able to confirm he’s the youngest trust manager in the UK (GDPR strikes again), he’s definitely the youngest one I’ve met, and he has confirmed that he was the youngest trust manager to ever lead a trust to float.
Making the leap to launch an investment trust, especially in this market, is a scary move, and the manager was eager to start small and work up.
“We’ve not trying to find 100 companies, we’re trying to find 10 crackers and then another 10 exciting ones that you might not go all in on, but can certainly add to returns,” he explained.
Hopefully, UK smallcaps will never get this cheap again.
Laurence Hulse, manager of the Onward Opportunities trust
While the UK isn’t popular, investment trusts are really unpopular. There has only been one other trust float since Hulse launched, and appetite for them has fallen lower than ever.
Having spent eight years at smallcap-focused asset manager Gresham House, Hulse said he made the move to launch an investment trust because he always wanted “not just a day job, but building something”.
He added that now was the time to do it because “hopefully, UK smallcaps will never get this cheap again”.
He pursued a trust over an open-ended fund, like most vehichles in the UK, because of their status as “permanent capital vehicles”, meaning he was “not at the behest of inflows and outflows” and could invest as he pleased.
But how has he managed to keep a premium on his trust when only around 20 out of the 389 investment trusts tracked by the Association of Investment Companies have managed to do so?
Hulse argued while he can’t control the supply, he can “directly impact by generating interest by the old fashioned wearing out the shoe leather”.
Talking about the trust, and extolling the potential of the UK market, is the best way he can see to push the trust, and maybe the UK market as a whole, towards a brighter future.
“The city is the fuel for the wider economy and public markets can be fantastic for that.”
Laurence Hulse, manager of the Onward Opportunities trust
Nevertheless, Hulse was eager to suggest a range of reforms that would get the UK IPO market up and running again.
“The city is the fuel for the wider economy, and public markets can be fantastic for that,” he said.
While he said the newly announced British ISA was “not the silver bullet we need”, it was a start, and Hulse was eager to make the UK market a place that the world saw as appealing to put their money and their companies.
One of the trust’s largest holdings is Windward, a company that uses artificial intelligence to track the shipping industry.
The firm’s stock price is up 158 per cent in the last year, and Hulse said it was the “most interesting company” in his portfolio.
While they’ve been used by government for a while, “now most crucially they’re winning corporates,” said the manager, predicting sales to double as supply chain disruptions begin to rear their head again.
Another of the trust’s holdings is Liontrust, which I found strange considering the asset manager’s poor performance in recent months after its failed attempt to buy rival GAM.
However, Hulse described the holding as a “play on UK equities”, betting that since he thought the UK market was ready to bounce back, they would be well-positioned to benefit from new inflows into the market.
“If it works, fantastic, it might not, but we’ve got this very liquid stock,” he said.
As rumours circulate that Liontrust itself is next in line for a takeover attempt, the manager said that was a “blue sky scenario” and while he “wouldn’t rule it out”, that was not the main intention of holding the firm.