Member Info for fela96

Yeah but that was the GFC and everyone was losing money pretty much. S&P fell by almost 50% for example.

This time, SMT is doing much worse than its index (or any other major index), and the decline equals that during the GFC when everyone was losing their jobs and the global economy was in a dire state. Not only that but the decline has lasted longer already than the peak-to-trough GFC fall in SMT shares.

If a fund manager was forced to press the ejector seat and sell the entire fund, then unless they were a very small fund, they would get a much lower price for the holdings than what they are currently going for on the market. So I don't think NAV should be seen as the value of a fund in the event it is forced to liquidate.

Ultimately, the value of a holding becomes less and less well-defined, the lower liquidity is on that investment. So you have to go on the last price it was sold at, which for an early stage company is the valuation at the latest funding round.

The discount this is selling for is a bit like if you were to ask a bank for a mortgage, and they took a look at your house and decided it was worth 80% of what the other houses on the street sell for. With a house, this could be caused by things like rot infestation or subsidence, so I'm wondering where the rot is here which is causing that discount.

LLOL - a 20% discount is saying the unlisted holdings are worth a third of what the NAV says they're worth. I am only in SMT for the unlisted holdings (I can buy a bunch of listed stocks myself so why pay someone to do it for me?). So if they're worth a third of what the NAV says, that's a collapse in my view.

My personal opinion is that they should just abolish the PE limit and invest in whatever they think represents long term value, public or private.

You don't need to bother with all those calculations as the NAV is updated daily, and the discount to NAV is at 20% which is pricing in a collapse of the fund imo.

LLOL - UK specific inflation is irrelevant to this IT as it's virtually fully divested from the UK. What matters is global interest rates. But I agree with your analysis on UK inflation.

Seems like everyone and their dog has an opinion on where inflation is going. Can we inject some actual rational arguments into these opinions please?
My personal opinion is that the high levels of debt will quickly make the current interest rates unsustainable. We're already seeing bank runs in the US, and central banks are working off lagging data, a bit like driving whilst looking into the rear view mirror instead of the road ahead.
So on that basis I predict we will see a drop off in interest rates fairly soon - either that or economic carnage.

Yes exactly, as Picard says the relevant returns are annualised PCA returns. Saying you could have made X return if you'd bought at Y and sold at Z dates, isn't meaningful. If a PCA strategy on the trust yields negative returns after more than 5 years, and the same strategy on a global index wouldn't have, then the trust is the problem imo.

llol - sure, you're up if you bought 5 years ago, in absolute terms. Minus inflation you're barely up at all, and against its benchmark (the FTSE all world index), you're down over 5 years, which is kind of shocking given that SMT's volatility is much higher than that index - volatility should be a price you pay for better performance, not worse.

INOV is down 82% since 2019 so for all intents and purposes it was wound up. To be pedantic, it crashed and burned due to liquidity issues.

If SMT falls >80% never to recover, that is as good as being wound up for most holders. So the question we should ask ourselves is could the same fate befall SMT.

Remember WPCT was a close ended fund too and yet it was still wound up. I don't think closed ended funds are immune to liquidity issues. The problem there though was that the fund held large (majority?) stakes in a lot (most?) of its holdings, as did the OEICs Woodford ran too (in the same companies), so when they became forced sellers the companies themselves were screwed.

If SMT's underlying holdings (even a few of them) survive and fulfil even 10% of the growth the managers believe they can, then this trust is simply free money right now.

So if the chance of the fund going to 0 is very low, what explains the large discount? Isn't this essentially investors giving me (as a buyer) free money?

Didn't Anderson announce his departure more than a year in advance though? I find it hard to believe that is what has caused the discount, unless you're saying that it's as a result of people selling the trust (at below NAV!) because they no longer have faith in the managers.
Isn't the market meant to be efficient to some degree? I somehow doubt that a persistent 20%+ discount could be caused by anything other than a very real risk that the fund is going kaput, like what happened to WPCT. Any other explanation just leads to the idea that people are giving away free money, which seems absurd.

In other words, either the price is steadily declining towards 0 or thereabouts, or it needs to reverse course soon. I don't really see a middle ground here - how can such a large discount exist for years on a trust which isn't at risk of bankruptcy.

I remember when it was "sub-£10 and I'm buying aggressively" haha.

Market is pricing in total collapse of this fund imo. It's way down compared to the indexes. I don't know why a collapse is being priced in, but the market's meant to be smarter than me, so it's not very reassuring.

What's the fundamental reason for the 30% limit though? If they dropped that they could maintain flexibility no?

IMO the only risk facing SMT is the artificially imposed limit on PE exposure to 30%. If they increase this, say to 50% (it can be temporary), that will unlock sales of liquid listed stock so the capital there doesn't become trapped. I don't see any fundamental reason they would have to sell down listed stock apart from the artificially imposed limit on PE exposure. Leverage isn't that high, there would have to be a(nother) monumental stock market crash to cause any issues there.

The current discount is essentially saying the PE is worth less than a third of what the NAV says it's worth. If you believe in companies like SpaceX and Northvolt then you should be buying that discount...

"Realist", it's extremely hard to beat the S&P 500 as an active manager (because its stocks are so liquid), but if you impose on yourself that you must beat it in any given year, it's practically impossible without being a quant hedge fund. I think the idea with funds like BG US Growth is that you put money in and you expect that it'll beat the S&P over a longer period, say 5 or 10 years, but you also expect that it'll underperform in certain years. If you use the S&P 500 as a yardstick and are myopic enough to care about returns in a single year, you're much better off just buying a cheap S&P tracker imo.

Crayon, the entire point of this IT is to hold through volatility, that's the price of better long term returns. If you want short term profit go to a casino instead.

Dorset, if SMT is down in 20 years time then the world has bigger problems than my or your stock portfolio.

People thought Tesla was a pipe dream as late as 2019. Plenty of clickbait articles announcing its imminent bankruptcy. Plenty of people saying they wouldn't touch SMT with a barge pole because 6% of it was in Tesla.

If Moderna does manage to be successful in the way SMT hopes, then the stage it's currently at is probably comparable to where Tesla was in say 2014. Significantly above IPO price but really cheap compared to where it's headed. If the thesis proves correct, I don't think any of the prices Moderna has traded at in the past few years will seem expensive with hindsight. I doubt SMT managers are sweating about Moderna. Probably sweating more about their completely incorrect assessment of China as a place to consider investing in.

Pointless following daily moves, they are obviously unpredictable.