Onward and Active/Activist?

In a previous post from 2021 I bemoaned the dearth of UK-based value-inclined fund managers.

Since then, as my 2042 portfolio illustrates, I have found more such funds than I originally envisaged, albeit often having to look hard, and beyond the narrow confines of what the IWeb platform chooses to make available.

With April 6th and a new tax year approaching, thoughts have turned to next year's SIPP allocation, and in doing so a relatively new fund has caught my attention.

Onward Opportunities Trust

The Onward Opportunities is a rarity - a UK investment trust that launched in 2023. Not only that, it did so at the height of the Silicon Valley and Credit Suisse bank turmoil in the spring, and persisted despite 'only' raising about £12m, well below the £100m figure widely seen as the minimum for investment trusts to be viable.

The January 31st 2024 NAV of £1.097 shows well the trust performed in its first few months, despite an often hostile environment for UK small cap investing. This has prompted my initial investment outside my 2042 portfolio SIPP, and strong consideration of this trust to be one of those to which I hope to add in my SIPP each year until I reach 75.

The trust's approach of small cap value married with active/activist engagement accords well both with my value style inclinations, and two of my strongly performing existing holdings, Rockwood Strategic, and outside of my SIPP, the Japan focused Nippon Active Value.

The Onward Trust's admission document cites the work of a Duke University business professor, Alon Brav, and associates, which finds a value enhancing outcome from activist forms of investment, see for example this 2022 paper, Governance by Persuasion.

To be worthwhile for a retail investor, an active fund, particularly one like the Onward Opportunities Trust with a performance fee [my one reservation, albeit the manager confirms the NAV is quoted net of any such fee entitlement], the fund needs to be markedly different from the wider stock market.

To put it more concretely, when a trust portfolio includes companies you've never heard of (React, Transense) particularly at the 'micro' end of the small cap spectrum, it at least has the potential to perform very differently from a passive vehicle.

Additionally, as I've often stressed on this blog, investing is a human endeavour, subject to qualitative and social considerations. As an economic/investing counterpart to the ecological benefits of biodiversity, in a world where value investing vehicles are hard to find, new ones, and the emerging generation of fund managers behind them, deserve at least strong consideration.