Offering a unique perspective

Annual Report 2023

Our investment philosophy

The investment philosophy employed by Asset Value Investors, the manager of AVI Global Trust, strives to identify durable businesses that are growing in value, trading at discounted valuations, with catalysts to unlock and grow value.

1

Investing in companies trading at a discount to their net asset value

2

Identifying good-quality underlying assets with appreciation potential at compelling values

3

Focusing on bottom-up stock picking

4

Looking for catalysts to narrow discounts

5

Focusing on balance sheet strength

How we invest

Closed-ended Funds
Asset-backed Special Situations
Holding Companies

Screening of the universe

Our screening process starts by looking at an investment universe which consists of global holding companies, closed-end funds and asset backed companies.

We have detailed models on approximately 400 companies out of this universe, which track stock prices and earnings information.

Filtering

Throughout the filtering process we ask the following questions

  • Is the stock trading at the wider end of its discount range
  • Are we comfortable with the NAV
  • Do we like the valuations
  • Do we want to own the underlying businesses
  • Does the business have a strong balance sheet
  • Is the company headed by an honest, intelligent management team with a good track record who is willing to engage with shareholders
  • Can we see a catalyst to bring the NAV back to its true value
  • Is the political and economic environment amenable

Research

Our analysts track stock prices, earnings and balance sheet information with an aim to identify good quality companies trading on a discount to their NAV which exhibit clear trends to create long-term value. Research includes:

  • In-depth analysis of company annual reports and filings
  • Consulting with industry contacts and brokers
  • Bottom-up analysis of a company’s fundamentals, management and industry trends
  • Specific focus on identifying the catalyst which will reduce the discount and unlock value
  • Regular meetings with top level management

Portfolio construction

The objective of our portfolio construction process is to end up with a concentrated portfolio of about 50-60 holdings, facilitating a clear monitoring process of the entire portfolio.

We pick stocks that meet our investment criteria and once we decide to invest we seek a minimum position size of approximately 2% of the portfolio, however the timing of the catalyst and the liquidity of the stock can result in the holding being greater or lesser than 2%.

We have detailed models on approximately 400 companies out of this universe, which track stock prices and earnings information.

Our Purpose

Helping our clients to make the most of their financial future.

The people at Asset Value Investors are committed to leveraging our long heritage, stewardship, and expertise to make investing responsible, accessible, and profitable for everyone – individuals, families, institutions, private companies, and listed companies. Financial returns matter but we are in a unique position to influence positive change by questioning the practices of the companies we invest in for a more sustainable future.

Our Philosophy

We are fundamentally committed to supporting long-ter sustainable businesses tha will grow and participate in th prosperity of the economy with a responsible approach t the environment, society, an governance.

We believe that the integration of ESG and sustainability considerations into our investment strategy is not only integral to comprehensively understanding each investment’s ability to create long-term value, but aligned with our values as responsible investors.

Our PRINCIPLES

We are aligned with the PRI’s belief that an economically efficient, sustainable global financial system is a necessity for long-term value creation.

Such a system will reward long-term responsible investment and better align investors with the broader objectives of society. AVI became a signatory to the UN-supported Principles for Responsible Investment (PRI) on 9 April 2021. In doing so, we have confirmed our belief in our duty to act in the best long-term interests of our beneficiaries.

Our APPROACH

As research-driven value investors, we seek to truly understand each company in our portfolio and the context within which it operates on a case-by-case basis.

AVI has built ESG factors into its proprietary database and implemented a number of processes to support the integration of ESG considerations into each stage of the investment process.

DEFINING ‘E’, ‘S’ & ‘G’

AVI has identified* the factors that we believe are the most material and relevant to our investments and developed a bespoke ESG monitoring system to track the performance and progress of our portfolio companies against defined ESG metrics.

We define environmental sustainability within the context

  • Environmental Impact
  • Tackling Climate Change
  • Sustainable Management

Our approach to governance includes

  • Quality of Governing Body
  • Corporate Strategy
  • Ethical Behaviour

Our social focus is divided into

  • Dignity and Equality
  • Wellbeing and Development
  • Community Engagement

Our metrics within each of these areas enable us to assess corporate governance practices and evaluate a company’s impact and dependencies on the environment and society, and the extent to which these are being effectively managed.

Our STEWARDSHIP

Good stewardship should be viewed as a continuous practice and is essential to preserving and enhancing long-term value.

Active engagement is at the core of our investment strategy and our ESG monitoring system plays an important role in helping us to identify potential areas of engagement. As long-term investors, our aim is to build constructive relationships with the boards and management of the companies in which we invest, addressing issues and offering suggestions to sustainably improve corporate value in consideration of all stakeholders and in the best long-term interest of our clients.

About us

AVI Global Trust plc (AGT or the Company) was established in 1889. The Company’s investment objective is to achieve capital growth through a focused portfolio of investments, particularly in companies whose shares stand at a discount to estimated underlying net asset value.

TOTAL ASSETS†

£1.0 billion*

LAUNCH DATE

1 July 1889

ANNUALISED NAV TOTAL RETURN SINCE 1985†

11.5%**

Expenses ratio†#

0.86%***

*
As at 30 September 2023.
**
Source: Morningstar, performance period 30 June 1985 to 30 September 2023, total return net of fees, GBP. The current approach to investment was adopted in 1985.
***
As at 30 September 2023, includes: management fee, marketing and administration costs.
For all Alternative Performance Measures included in this Strategic Report, please see definitions in the Glossary on pages 103 to 106.
#
For a detailed discussion of the Expense Ratio, please see Key Performance indicators on page 12.

Our Purpose

The Company is an investment trust. Its investment objective is to achieve capital growth through a focused portfolio of mainly listed investments, particularly in companies whose shares stand at a discount to estimated underlying net asset value.

Seeking opportunities globally

Our investments are distributed throughout the world.

North America

29%
2022: 28%

United Kingdom

3%
2022: 2%

Europe

33%
2022: 35%

Latin America, Africa & emerging Europe

6%
2022: 5%

Asia

10%
2022: 10%

Japan

18%
2022: 20%

Oceania

1%
2022: -

North America

29%
2022: 28%

United Kingdom

3%
2022: 2%

Europe

33%
2022: 35%

Latin America, Africa & emerging Europe

6%
2022: 5%

Asia

10%
2022: 10%

Japan

18%
2022: 20%

Oceania

1%
2022: -
The Company’s net asset value compared to the MSCI All Country World (£ adjusted total return)*
* The current approach to investment was adopted in 1985.
Dividend track-record (£)*
* Restated for Share Split.

Key performance indicators

The Company uses KPIs as an effective measurement of the development, performance or position of the Company’s business, in order to set and measure performance reliably. These are net asset value total return, discount to net asset value and the expense ratio.

Nav total returns to*
30 September 2023

+ 0.0
0.4
0.9
1.4
1.9
2.4
2.9
3.4
3.9
4.4
4.9
5.4
5.9
6.4
6.9
7.4
7.9
8.4
8.9
9.4
9.9
10.4
10.9
11.4
11.9
12.4
12.9
13.4
13.9
14.4
14.9
15.3
15.3
%

Discount*
30 September 2023

0.0
0.4
0.9
1.4
1.9
2.4
2.9
3.4
3.9
4.4
4.9
5.4
5.9
6.4
6.9
7.4
7.9
8.4
8.9
9.4
9.9
10.4
10.9
10.9
%

Expense ratio*
2023

0.00
0.01
0.06
0.11
0.16
0.21
0.26
0.31
0.36
0.41
0.46
0.51
0.56
0.61
0.66
0.71
0.76
0.81
0.86
0.86
%

AVI’S SUSTAINABLE APPROACH

AVI believes that the integration of ESG and sustainability considerations into our investment strategy is not only integral to comprehensively understanding each investment’s ability to create long-term value but is aligned with our values as responsible investors.

Aligned with the PRI

AVI is aligned with the UN-supported Principles for Responsible Investment (PRI)’s belief that an economically efficient, sustainable global financial system is a necessity for long-term value creation. Such a system will reward long-term responsible investment, and benefit the environment and society as a whole. AVI became a signatory to the PRI on 9 April 2021.

Active Ownership

AVI’s ESG monitoring system helps to identify weaknesses in a company and empowers us to engage effectively where appropriate. Through constructive engagement, we encourage and expect investee companies to take meaningful action in remedying weaknesses in the context of long-term value creation.

OUR CORE VALUES

Unique

A unique portfolio investing in holding companies, closed-ended funds and asset-backed special situations unlikely to be found in other funds.

Diversified

A select portfolio of 44 stocks, but with broad diversification of sectors and companies as a result of the holding structures which give exposure to multiple underlying companies.

Engaged

Seeking out good quality, misunderstood companies and engaging to improve shareholder value.

Active

Finding complex, inefficient and overlooked investment opportunities.

Global

Bottom-up stock picking, seeking the best investment opportunities across the globe.

Chairman’s Statement

It is pleasing to report a NAV total return of 15.3%, which was both a strong absolute return and notably higher than our benchmark index...

We look forward to the future with optimism and continue to believe that, over the long term, AVI will deliver attractive returns to AGT’s shareholders.

Graham Kitchen
Chairman

About Asset Value Investors

*
Refer to Glossary on pages 105 to 106 of the Annual Report.

Our edge

Asset Value Investors specialises in finding companies which have been overlooked or underresearched by other investors. Investments that for one reason or another are priced below their true value but can be made into profitable performers.

AVI believes its strategy and investment style differentiate it from other managers in the market because of the following
1.

38 years’ experience of long-term outperformance following our distinctive investment style (annualised NAV total returns of +11.5% since 1985*).

2.

AVI actively looks for the catalyst within a company which will drive fundamental change.

3.

AVI promotes active involvement to improve corporate governance and to unlock potential shareholder value.

The aim of AVI is to deliver superior investment returns. AVI specialises in investing in securities that for a number of reasons may be selling on anomalous valuations.

Our focus on buying high-quality businesses trading at wide discounts to their net asset value has served us well over the long term. There are periods of time, however, when our style is out of favour and the types of companies in which we invest are ignored by the broader market. This requires us to be patient and to remain true to our style, so that when other investors begin to appreciate the value in those companies, we are well placed to benefit. In the short term, this means that there could be some volatility in our returns. However, we are confident that we own highquality businesses, which are trading on cheap valuations.

Members of the investment team at AVI invest their own money in funds which they manage. As at 30 September 2023, AVI’s investment team owned 1,118,477 shares in AGT.

Ten Largest Equity Investments

The top ten equity investments make up 60.7% of the net assets*, with underlying businesses spread across a diverse range of sectors and regions.

All discounts are estimated by AVI as at 30 September 2023, based on AVI’s estimate of each company’s net asset value.

*
For definitions, see Glossary on pages 103 to 106.
**
% of net assets.
60.7%**
1 2 3 4 5 6 7 8 9 10
39.3%**
1. SCHIBSTED B
Classification
Holding Company
2. OAKLEY CAPITAL INVESTMENTS
Classification
Closed-ended Fund
3. KKR & CO
Classification
Holding Company
4. AKER ASA
Classification
Holding Company
5. FEMSA
Classification
Holding Company
6. PRINCESS PRIVATE EQUITY
Classification
Closed-ended Fund
7. APOLLO GLOBAL
Classification
Holding Company
8. PANTHEON INTERNATIONAL
Classification
Closed-ended Fund
9. D'IETEREN GROUP
Classification
Holding Company
10. CHRISTIAN DIOR
Classification
Holding Company
1. SCHIBSTED B
Classification
Holding Company
2. OAKLEY CAPITAL INVESTMENTS
Classification
Closed-ended Fund
3. KKR & CO
Classification
Holding Company
4. AKER ASA
Classification
Holding Company
5. FEMSA
Classification
Holding Company
6. PRINCESS PRIVATE EQUITY
Classification
Closed-ended Fund
7. APOLLO GLOBAL
Classification
Holding Company
8. PANTHEON INTERNATIONAL
Classification
Closed-ended Fund
9. D'IETEREN GROUP
Classification
Holding Company
10. CHRISTIAN DIOR
Classification
Holding Company

Investment Manager’s Report

In this market we believe that hard work, a focus on idiosyncratic catalysts to unlock value, together with our own activism, are key tools to drive returns.

Joe Bauernfreund
Chief Investment Officer

Case studies

D'IETEREN

D’Ieteren is a seventh-generation Belgian family-controlled holding company whose crown jewel asset is a 50% stake in unlisted Belron, the global no.1 operator in the Vehicle Glass Repair and Replacement (VGRR) industry.

Princess private equity

During FY2023, we built a 10% stake in Princess Private Equity (PEY), a London-listed closed-end fund managed by Swiss private equity manager Partners Group (PG).

FEMSA

Over the last year FEMSA, the Mexican family-controlled holding company, has been one of our strongest performers, taking considerable steps to unlock the sum-of-the-parts discount at which it trades.

D'IETEREN

D’Ieteren is a seventh-generation Belgian family-controlled holding company whose crown jewel asset is a 50% stake in unlisted Belron, the global no.1 operator in the Vehicle Glass Repair and Replacement (VGRR) industry.

Princess private equity

During FY2023, we built a 10% stake in Princess Private Equity (PEY), a London-listed closed-end fund managed by Swiss private equity manager Partners Group (PG).

FEMSA

Over the last year FEMSA, the Mexican family-controlled holding company, has been one of our strongest performers, taking considerable steps to unlock the sum-of-the-parts discount at which it trades.

Market reaction is overdone

Why is AVI looking at PE/VC now?

Valuations – that’s the key driver for us. We’ve been active in the sector for 15 years and it’s responsible for some of the best returns across our portfolio, but our exposure has waxed and waned in line with opportunities. In the wake of the Global Financial Crisis (GFC), a lot of companies got themselves in trouble in the PE sector and were trading on extraordinarily cheap valuations and a very wide discount to NAV. That’s when we were most active: we tend to be contrarian investors, so buying things when they’re cheap and a little bit out of favour. Our exposure came down over the following five years and then ramped back up as discounts to NAV have widened, as the opportunity set has broadened for us.

Why is PE/VC specifically attractive to investment trusts versus open-ended funds?

It comes down to a huge liquidity mismatch. If you manage an open-ended fund investing in AstraZeneca or Glaxo etc., and your investors want their money back, all you have to do is sell your shares and hand their money back. But not all assets are quite so liquid, such as open-ended property-focused funds. Every time there’s some sort of crisis – be it the GFC, the Eurozone crisis or Covid, for example – these property funds put up their gates and prevent investors from redeeming their shares. That’s because investors all run for the exit at the same time and the underlying assets aren’t liquid enough to allow the managers to raise cash quickly and fund those redemption requests.

A privately owned company is also a very illiquid asset. That means the close-ended structure (such as an investment trust) is the only structure that could possibly work for privately held companies because investors don’t redeem their shares. If an investor wants to sell out of a closed-ended fund, they sell out their shares in a stock exchange to another investor and no money goes in or out of the fund.

How does the current economic environment affect your PE/VC exposure at AVI?

We invest in PE and VC through publicly quoted investment companies, so we don’t have any direct private asset exposure at all. There are about a dozen listed PE companies on the London market and those range from uberdiversified fund-of-funds to concentrated single-manager funds. Diversified fund-of-funds are good proxies for the broader PE market because there aren’t any idiosyncratic factors present driving their share price or discount.

Going into mid to late 2021, those funds were trading at between 15% to 20% discount to Net Asset Value (NAV). If you look at them today, they’re trading anywhere between 15% to 40% discount to NAV. That change could be the market saying valuations are stale and they’re going to have to come down to meet share prices, which means it isn’t a real discount. But we happily take the other side of that argument and think private valuations do lag public markets, but that they lag on the way up, too.

Private NAVs didn’t creep up the same way public markets did but there was an essence of in-built equity valuation buffer. The real damage we saw in public markets was in the unprofitable tech sector, to which PE isn’t particularly exposed. Companies that have high free cashflow and are in defensive sectors have held up much better than public markets, and those tend to be overrepresented in PE portfolios. As we only invest in quoted investment companies, the financing market drying up hasn’t really had much of a direct impact on our portfolio companies because their portfolios were all fully formed by late 2021.

But we have seen a dramatic slowdown in both the pace of these companies’ new investments and in the pace of their exits. That means we need to scrutinise the balance sheets of our investee companies, making sure they can withstand periods where exits dry up, making sure they have enough cash on the balance sheet to cope with that sort of environment, and making sure they have prudent banking facilities in place. In an environment like this, the metrics we use to analyse companies change, so as the backdrop worsens, we’re focusing on the balance sheet much more than we were previously. The sell-off in public markets and fears around PE and VC has meant listed companies across the board have become very cheap. So, starting in early 2022, we ramped up our PE and VC exposure; some of the discounts to NAV are at extraordinarily wide levels. Overall, while there are genuine concerns out there and there are reasons to be fearful, we think the market reaction has been overdone.

Portfolio Review

Source / Schibsted
Source / Philips UK and Ireland
Copyright / Aker BP
Source / Turo

Portfolio Review

Schibsted / Adevinta

Adevinta owns a collection of high-quality classified ads businesses that exhibit dominant network effect-protected positions, which translates into significant pricing power and considerable organic growth, with prospects for high-teen EBITDA growth in the years ahead as margins expand and monetisation levels improve.

% of net assets

8.6%

Portfolio Review

EXOR/Philips

Philips is a Dutch healthcare-focused conglomerate, in which EXOR built a 15% stake in 2023. The shares trade c.60% below their April 2021 high following high profile issues with the disintegration of sound abatement foam within its devices causing possible health issues. The investment diversifies the cyclicality of EXOR’s NAV and offers ample opportunity for EXOR to add value as an engaged and active board member – from improving governance, to improving operational procedures and longer term questions about unlocking value from the Personal Health business.

% of net assets

2.0%

Portfolio Review

Aker ASA/Aker BP

Aker BP is a listed E&P company operating on the Norwegian Continental Shelf. The company is a low-cost-low-emission oil producer, with an attractive production growth schedule. We believe oil will likely play an important and extended role in the energy transition.

% of net assets

6.3%

Portfolio Review

IAC/Turo

Turo is the world’s largest car-sharing marketplace with operations across the US, Canada, the UK, France, and Australia. Turo is aiming to put the world’s 1.5bn cars to better use, giving hosts the ability to rent out their idle vehicles, and offering users an unparalleled and convenient assortment of vehicles. The company boasts a large addressable market, strong network effects and attractive unit economics.

% of net assets

3.3%

Awards

Investment Trust
Awards 2023

Winner

Global Equities

Investment Company of the Year
Awards 2023

Highly Commended

Best Report and Accounts (Generalist)

Investment Company of the Year
Awards 2023

Winner

Global Equities