par New Star Investment Trust PLC (isin : GB0002631041)
Half-yearly Results
New Star Investment Trust PLC (NSI) NEW STAR INVESTMENT TRUST PLC
This announcement constitutes regulated information.
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31st DECEMBER 2024
The Company’s objective is to achieve long-term total return through capital growth and income.
FINANCIAL HIGHLIGHTS
** The total return figure for the Company represents the revenue and capital return shown in the statement of comprehensive income before dividends paid, the B Share redemption payment and after deducting B Share issue costs.
INTERIM REPORT
CHAIRMAN’S STATEMENT
PERFORMANCE Your Company generated a total return of 0.41% over the six months to 31st December 2024. After dividends and the return of capital the net asset value (NAV) per ordinary share fell to 169.19p. By comparison, the Investment Association’s Mixed Investment 40-85% Shares Index gained 2.89%. The MSCI AC World Total Return Index gained 6.76% in sterling while the MSCI UK Total Return Index rose 1.64%. Over the period, UK government bonds declined 1.06%. Further information is provided in the investment manager’s report.
Your Company made a revenue profit for the six months of £1,801,000 (2023: £1,467,000).
RETURN OF CAPITAL Following a general meeting in July 2024, £17 million was returned to shareholders in August by way of a “B” share issue and a subsequent redemption of the shares at a price of 24p per B share. Following the scheme, your Company’s total issued share capital and voting rights were unchanged. The scheme involved reducing your Company’s holdings across the board with a view broadly to maintaining in percentage terms the asset allocation, including the allocation to cash. As a result, the portfolio’s risk profile was broadly unchanged.
CHANGE OF INVESTMENT OBJECTIVE At the annual general meeting on 5th December 2024, shareholders approved the proposal by your Board to change the investment objective from long-term capital growth to long-term total return through capital growth and income.
GEARING AND DIVIDENDS Your Company has no borrowings. It ended the period under review with cash representing 13.56% of its NAV and is likely to maintain a significant cash position. In respect of the six months to 31st December 2024, your Directors have declared an interim dividend of 1.70p per share (2023: 1.70p).
DISCOUNT Your Company’s shares continued to trade at a significant discount to their NAV during the period under review. The Board keeps this issue under review.
OUTLOOK
NET ASSET VALUE Your Company’s unaudited NAV at 28th February 2025 was 169.15p.
Geoffrey Howard-Spink Chairman 24th March 2025
INVESTMENT MANAGER’S REPORT MARKET REVIEW Investor enthusiasm about the commercial potential of artificial intelligence (AI) led to gains for US technology stocks, up 8.56% in sterling over the period under review. As a result, concentration in the US equity market ended 2024 at an historically high level, with just ten companies accounting for 32% of the market. While prospects for technology companies seemed clear, high valuations and exuberant investor sentiment left some stocks priced for perfection.
Since taking office, President Trump has expanded on his policy agenda of trade tariffs, immigration control, onshoring of manufacturing, deregulation and lower taxes. These policies may stimulate the economy in the short-term but they could ultimately prove inflationary and lead to interest rates remaining higher for longer. The Federal Reserve cut its official rate in December by a quarter percentage point to 4.25-4.5% but the pace of cuts is expected to slow, with rates expected to fall by just one half of a point in 2025.
UK equities underperformed, up only 1.64%, with the economy having stalled. In February 2025, the Bank of England cut its official rate by a quarter point to 4.5% and reduced its growth forecast for this year to just 0.75%. Inflation is, however, proving sticky, with the Bank forecasting a peak of 3.7% in 2025, well above its 2% target. Low growth and higher prices are an unattractive combination, suggesting the need for caution about prospects for smaller companies, which tend to be more sensitive to domestic trends than larger stocks trading on low valuations. UK government bonds fell 1.06% over the period as investor fears about higher public sector borrowing intensified.
Dollar strength proved a headwind for equities in emerging markets and Asia excluding Japan, up 1.28% and 3.31% in sterling respectively over the period. Chinese policy makers increased economic stimulus but slower growth, inflation close to zero and President Trump’s tariffs weighed on investor sentiment. Equities in Europe excluding the UK fell 4.04% in sterling because of fractured political leadership in France and Germany and the impact of cheap Chinese electric vehicle imports on Germany’s economy. By contrast with the US and UK however, the European Central Bank (ECB) expects eurozone inflation to be close to target in 2025 and 2026. In response, the ECB cut its key policy rate by a quarter point to 3% in December, with a similar cut in March 2025. Japan’s economy is growing faster than its long-term potential growth rate and the Bank of Japan is confident price increases are sustainable at its 2% target.
PORTFOLIO REVIEW Your Company’s total return was 0.41% over the six months to 31st December 2024. By comparison, the Investment Association (IA) Mixed Investment 40-85% Shares sector, a peer group of multi-asset funds with allocations to equities in the 40-85% range, rose 2.89%. The MSCI AC World Total Return and MSCI UK All Cap Total Return Indices rose 6.76% and 1.64% respectively while global bonds rose 2.47%.
In August 2024, £17 million was returned to shareholders via a “B” share issue and subsequent redemption. This was achieved through sales of portfolio investments on a broadly pro-rata basis to ensure the portfolio retained a similar investment exposure.
Your Company has maintained the dividend per share for the six months ended 31st December 2024 despite the significant return of capital to shareholders, which reduced the size of the portfolio while the number of shares in issue remained unchanged. The significant number of portfolio holdings managed in accordance with an income mandate, the allocation to bond investments and the cash allocation support the commitment to paying an income.
Polar Capital Global Technology, your Company’s largest holding, rose 8.93% over the period. The Polar technology team believes AI is in its infancy, comparing the likely trajectory of capital investment to the rollout of other technological advances such as the 19th century development of the railways. The Polar team has favoured hardware companies supplying AI infrastructure such as Nvidia, the leading designer of graphics processing units. In January, Polar took profits from Nvidia and some other infrastructure stocks in the wake of the announcement by DeepSeek, a Chinese company, that it has produced a large language model at a fraction of the cost of US competitors and made the code freely available. President Trump hailed this development as a “wake-up call” to US companies and the announcement sent ripples through the sector as investors reduced their forecasts for AI capital spending. Technology sector gains also contributed to a 9.59% return for the iShares S&P 500 exchange-traded fund (ETF). Your Company’s Polar Capital Global Technology investment was reduced by £3 million in October on grounds that high valuations left the sector vulnerable to disappointment.
The relatively high equity allocation to emerging markets and Asia excluding Japan hurt performance overall but there were strong performances from Sector Emerging Market Equities and Prusik Asian Equity Income, which returned 8.23% and 6.45% respectively. Sector Emerging Markets Equity, whose experienced manager has a high-conviction investment style, was launched in September 2023. It has a bias towards India and is highly concentrated, with ten stocks accounting for about half the portfolio. The holding was increased by £1.25 million in October 2024. By contrast, Prusik Asian Equity Income has a bias towards Hong Kong and South Korea, holding long-established companies such as CK Hutchison, Jardine Matheson and Standard Chartered. The contrarian approach has resulted in a dividend yield in excess of 5%, contributing to your Company’s ability to pay dividends.
Stewart Investors Indian Subcontinent fell 4.85%, lagging the Indian market’s 3.11% fall in sterling. Longer-term prospects for Indian equities remain positive because of high economic growth and the pro-business policies of the prime minister, Narendra Modi. Valuations were, however, relatively high over the period, leading to underperformance against some other emerging markets.
UK stocks rose just 1.64% but smaller companies did better, rising 3.84%. Within the portfolio’s UK holdings, Man GLG Income performed best, returning 1.55%. Two small company holdings, Chelverton UK Equity Income and Aberforth Geared Value & Income, were, however, conspicuously weak, returning 0.38% and falling 17.00% respectively. Aberforth Geared Value & Income was launched close to net asset value (NAV) on 1st July 2024 but the investment trust’s small size and specialist nature led to the shares falling to a large discount to NAV. The trust has a planned winding-up date of 30th June 2031 when investors will be offered an opportunity to redeem shares at close to NAV.
Within your Company’s fixed income allocation, the shorter-dated Schroder Strategic Credit holding performed best, returning 4.20%, while the longer-dated iShares Treasury Bond 7-10 Year sterling-hedged ETF and Franklin Templeton Emerging Market Bond returned 0.50% and 0.51% respectively. Your Company’s significant cash deposits in sterling and dollars contributed to your Company’s ability to pay a dividend.
OUTLOOK
There are grounds to be positive about equity market prospects overall. President Trump’s expansionary policies of lower regulation, lower taxation and trade protectionism are supportive for US stocks in the short term. Lowly-valued UK and emerging market equities provide diversification and may prove defensive should overall markets fall. US and UK inflation is proving more persistent than expected and US and UK interest rates are, therefore, likely to remain higher for longer. In this environment, shorter-dated bond investments provide some protection while your Company’s cash provides a defensive source of income.
Brompton Asset Management Limited
DIRECTORS’ REPORT
PERFORMANCE In the six months to 31st December 2024 the total return per Ordinary share was 0.41% (2023: 3.38%) before the return of capital. The NAV per ordinary share decreased to 169.19p, whilst the share price decreased to 107.50p. The fall in the NAV per ordinary share was due to the B Share issue and redemption of £17,046,000. The total return compares to an increase of 2.89% in the IA Mixed Investment 40-85% Shares Index.
The Company made a revenue profit for the six months of £1,801,000 (2023: £1,467,000). Costs remained relatively constant, but income increased by £345,000 (20.9%), as the Company increased its investment in income funds. The higher income was achieved despite the B Share redemption.
The management fee charged directly by Brompton is allocated to the capital account.
DIVIDEND The Directors propose an interim dividend of 1.70p per Ordinary share in respect of the six months ended 31st December 2024 (2023: 1.70p). The dividend will be paid on 29th April 2025 to shareholders on the register at the close of business on 4th April 2025 (ex-dividend 3rd April 2025).
INVESTMENT OBJECTIVE The Company’s investment objective is to achieve long-term total return through capital growth and income.
INVESTMENT POLICY The Company’s investment policy is to allocate assets to global investment opportunities through investment in equity, bond, commodity, real estate, currency and other markets. The Company’s assets may have significant weightings to any one asset class or market, including cash.
The Company will invest in pooled investment vehicles, exchange traded funds, futures, options, limited partnerships and direct investments in relevant markets. The Company may invest up to 15% of its net assets in direct investments in relevant markets.
The Company will not follow any index with reference to asset classes, countries, sectors or stocks. Aggregate asset class exposure to any one of the United States, the United Kingdom, Europe ex UK, Asia ex Japan, Japan or Emerging Markets and to any individual industry sector will be limited to 50% of the Company’s net assets, such values being assessed at the time of investment and for funds by reference to their published investment policy or, where appropriate, their underlying investment exposure.
The Company may invest up to 20% of its net assets in unlisted securities (excluding unquoted pooled investment vehicles), such values being assessed at the time of investment.
The Company will not invest more than 15% of its net assets in any single investment, such values being assessed at the time of investment. Derivative instruments and forward foreign exchange contracts may be used for the purposes of efficient portfolio management and currency hedging. Derivatives may also be used outside of efficient portfolio management to meet the Company’s investment objective. The Company may take outright short positions in relation to up to 30% of its net assets, with a limit on short sales of individual stocks of up to 5% of its net assets, such values being assessed at the time of investment.
The Company may borrow up to 30% of net assets for short-term funding or long-term investment purposes.
No more than 10%, in aggregate, of the value of the Company’s total assets may be invested in other closed-ended investment funds except where such funds have themselves published investment policies to invest no more than 15% of their total assets in other listed closed-ended investment funds.
SHARE CAPITAL The Company’s share capital comprises 305,000,000 Ordinary shares of 1p each, of which 71,023,695 (2023: 71,023,695) have been issued and fully paid. No Ordinary shares are held in treasury, and none were bought back or issued during the six months ending 31st December 2024.
PRINCIPAL RISKS AND UNCERTAINTIES The principal risks identified by the Board, and the steps the Board takes to mitigate them, are discussed below. The Audit and Risk Committee reviews existing and emerging risks on a six-monthly basis. The Board continues to monitor the geopolitical, societal, economic and market focused implications of the events since 2022.
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