By Pascal Dowling Peter Webb, director and fund manager of niche trust Eaglet, expects the trust to...
By Pascal Dowling
Peter Webb, director and fund manager of niche trust Eaglet, expects the trust to move into the FTSE All-Share index next year.
The trust currently makes up 0.681% of the Fledgling index and Webb is confident it will graduate to the All-Share in January. The NAV on the trust has grown 50% over the last 12 months to the point where its assets are worth over £120m, well above the £77m threshold for the All-Share index.
Webb believes the move will result in an increase in demand worth for shares in the trust.
He said: "If we move into the All-Share index, index funds will need to buy and we expect this to provide about £20m worth of demand."
Webb also said he will not rule out the possibility of issuing shares next year. The trust, which invests in companies with a market cap of less than £50m, was standing at a premium of 10.1% to NAV according to the FT on Friday last week, although Reuters put that figure at 7%.
Webb said: "I would not be very comfortable to see the premium become too great, it would be unwise to rule out a small fund raising exercise if this was the case. However, any fund raising would be on a very small scale, I think moderation is essential in a situation like that."
Webb stressed that the trust is built on organic growth and he is loath to use a share issue as a measure to reduce the premium.
He said: "I can see no reason why a trust should not trade on a premium, the companies in our portfolio have excellent underlying fundamentals and strong growth. In the past, they have been overlooked by investors because they were too small, however as they have grown they have appeared on institutional radars and interest has picked up. The strong demand at the moment is the result of seven years of careful investment."
The trust has holdings in 32 companies, many of which are in the IT sector.
Webb said: "We do not take holdings in companies which do not make a profit. The types of IT companies we are interested in are primarily infrastructure providers. These are not cutting edge companies, they provide the nuts and bolts which allow the sector to function properly."
Webb also runs the Premier UK Smaller Companies unit trust. The fund is structured along similar lines to the investment trust. It currently holds around 22 stocks and is looking for profitable companies with an emphasis on those which are undervalued.
Webb does not believe shareholders will sell shares in Eaglet and transfer to the unit trust to take advantage of the high premium.
He said "While the two trusts are looking for similar characteristics, they are entirely different in the size of company they focus on. While Eaglet does not invest in companies worth more than £50m, the UK Smaller Companies unit trust looks at companies worth between £50-450m."
Will assess regulation
Client was warned of risk
Megan Butler keynote speech at Women in Finance summit
Market anticipates a May hike
Newly-formed Mobius Capital Partners