Investment trust Odyssean is just over two years into its journey, but the manager behind the fund is confident that, like Homer’s Odysseus who took ten years to travel back to Ithaca from the Trojan War, perseverance will reap its rewards.
Stuart Widdowson set up the £76million trust in May 2018 to invest in small companies listed on the London Stock Exchange.
This was after previously running a similar investment trust called Strategic Equity Capital for investment house GVQ.
Performance: Over the past year the trust has recorded a loss of just under 9 per cent
Although Widdowson had to take compassionate leave last year for family reasons, he is now running the trust from home in Guildford, assisted by co-manager Ed Wielechowski (working 35 miles away in Beaconsfield).
The trust’s performance numbers are not brilliant in absolute terms. It has generated losses of more than 11 per cent since launch and over the past year it has recorded a loss of just under 9 per cent.
Yet Widdowson is convinced the trust’s strategy will win through. ‘We’re only interested in investing in companies with good prospects,’ he says. ‘Businesses that will over time make our shareholders money.’
The trust has 19 holdings, most of which are either part of the FTSE All-Share or AIM indices. Typically, they are small in terms of market capitalisation – between £150million and £750million – although not so small that Widdowson cannot sell the trust’s stakes if thing go wrong.
It’s very much a hands-on approach. Widdowson explains: ‘We are engaged investors. We like to invest in good companies that we believe can do things better. We take a meaningful stake in the business and then we encourage them to improve.
‘This could be through helping them with their investor relations – making them more appealing to a wider net of potential investors. Or it could be by encouraging them to be more shareholder-friendly in terms of environmental, social and corporate governance issues.’
The trust has 19 holdings, most of which are either part of the FTSE All-Share or AIM indices
One company that Widdowson persuaded to reach out to new shareholders was sausage skin manufacturer Devro. The result was a re-rating in the company’s shares.
Although the coronavirus pandemic has taken its toll on Devro’s share price – down more than 20 per cent over the past year – Widdowson is convinced the company is a cash generator.
‘It’s got processing plants all over the world.’ he says. ‘Its earnings are resilient and unlike many businesses it has no need to raise more cash.’
With cash released through the recent sale of holdings in healthcare company Huntsworth and Consort Medical – the companies were respectively taken over by private equity and Swedish firm Recipharm – Widdowson is looking to make new investments.
One new stake is in pharmaceuticals specialist Clinigen while two other positions have been built. Widdowson has a shortlist of six other companies that he would like to buy at some stage this year, provided he can purchase them at the right price.
Although Odyssean’s focus on small UK-listed companies means it will be too risky for some investors, it’s not without reassuring risk controls.
Unlike other investment trusts, it is not willing to borrow money to increase its exposure to the UK stock market.
It steers clear of companies with big pension deficits and it has set up an investment advisory committee that the two managers use to bounce investment ideas off. The trust’s on-going charge is on the high side at 1.58 per cent a year.