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Cape Town - Overberg Asset Management analyst Kirk Swart lists attractive offshore investment trusts to strengthen diversity in your portfolio in his weekly share watch.
1. Catco Reinsurance
The Catco Reinsurance Opportunities Fund is a closed end fund listed on the London Stock exchange that offer shareholders the opportunity to invest in linked catastrophe reinsurance risks. This is done by investing in fully collateralised reinsurance contracts as well as various other insurance based investments.
The fund targets an internal rate of return in excess of the London Interbank Offer Rate (LIBOR) plus 12% to 15% per annum, including a dividend each year of LIBOR plus 5% of the NAV at fiscal year-end. Due to the low disaster claim rate worldwide the fund has grown over 20% in dollar terms since June last year. The fund is trading around NAV per share.
2. HP Capital Trust
There has been renewed interest in private equity as of late. HG Capital Trust offers investors the opportunity to invest in one of the best managed private equity funds listed on the London Stock Exchange. As any seasoned investor would know, timing the market can be a very hard thing to do. However, HG Capital's management team has a strong record in timing the private equity market and works closely with companies to deliver strong organic growth while enhancing margins. Over the past ten years the fund grew NAV by 158%.
Historically HG Capital has traded at a narrow discount to NAV. Currently HG Capital is trading at a discount to NAV that is far below historical levels.
HG Capital offers a dividend yield of 3.4% in Sterling terms.
3. BH Macro EUR
The BH Macro shares is a way for investors to invest in the Bevan Howard master fund. This fund is an absolute return fund that applies a ‘Black Swan’ approach to investing. For the readers that do not know, a Black Swan event is one that comes as a surprise with a low probability of occurring. Therefore, the fund rewards investors in times of high market volatility by investing in very cheap out of the money options. In less volatile times, the downside is limited to the small option premium paid, while in volatile times (as we are currently experiencing), some of the options expire in the money and rewards investors handsomely.
Since inception in 2003, the fund delivered an average return of 7% per annum.
4. New India Investment Trust
The outlook for emerging markets has been dire and still remains very negative. Many emerging markets are overly exposed to resources leaving them vulnerable to a slowdown in world growth and trade. The economic outlook for India however, is better than its emerging market peers. Their economy is growing in excess of 7% and under President Modi the country is implementing structural reforms to stimulate growth and keep government finances in check.
The New India Investment Trust is positioned to take advantage of the growing Indian economy. The trust has an objective of investing in growth companies that offer long term capital appreciation by either being located directly in India or which derive significant revenue from India. The trust trades at a discount to NAV of 8%.
5. Apple
Apple's shares are trading at a Price to Earnings ratio of around 10 and has pulled back to around $90 per share. The market's pessimism towards Apple is due to their slowing growth in iPhone sales. With more than $200bn in cash, Apple needs to invest in something that will grow earnings to show that the company has not gone ex-growth.
Last week the news broke that Apple is investing in the Chinese car hailing service called Didi. It is a $1bn investment. It is believed that with the investment, Apple is trying to take on Uber in a race to become the dominant player in the Chinese taxi industry. Whether this investment is fuelled by desperation will be seen in the future.
Do you agree with Kirk's stock picks? Send us yours and tell us why.
* Kirk Swart is an analyst at Overberg Asset Management, an Authorised Financial Services Provider (No 783) which specialises in the private management of local and global discretionary portfolios as well as pension products.
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