Investment trusts

About this investment trust

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

The Company aims to provide shareholders with long-term capital growth and an attractive total return by investing primarily in UK smaller companies and mid-capitalisation companies traded on the London Stock Exchange.

Why choose it?

The BlackRock Throgmorton Trust looks to back the UK’s emerging companies. An unusual feature of the Trust is its ability to ‘short’ companies that we find unattractive, enabling us to profit if the share price falls. This gives the Trust’s manager the opportunity to back investment ideas with real conviction, within a strong risk framework.

Suited to…

Investors who want a dynamically managed portfolio of growing companies but are comfortable with a limited degree of ‘short’ exposure.

AJ Bell Online Personal Wealth Awards 2021: As at 8 March 2021.
AJ Bell Award: As at 3 September 2021.

Awards/Ratings have not been superseded to date.
Past performance is not a reliable indicator of future results and should not be the sole factor of consideration when selecting a product or strategy.

What are the risks?

• Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
• Net Asset Value (NAV) performance is not the same as share price performance, and shareholders may realise returns that are lower or higher than NAV performance.
• The Trust’s investments may have low liquidity which often causes the value of these investments to be less predictable. In extreme cases, the Trust may not be able to realise the investment at the latest market price or at a price considered fair.
• Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.
• The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss.
• Derivatives may be used substantially for complex investment strategies. These include the creation of short positions where the Investment Manager artificially sells an investment it does not physically own.
• Derivatives can also be used to generate exposure to investments greater than the net asset value of the fund/investment trust. Investment Managers refer to this practice as obtaining market leverage or gearing. As a result, a small positive or negative movement in stockmarkets will have a larger impact on the value of these derivatives than owning the physical investments. The use of derivatives in this manner may have the effect of increasing the overall risk profile of the Funds.

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Fund manager commentary

29 February 2024

Comments from the Portfolio Manager

Please note that the commentary below includes historic information in respect of the performance of portfolio investments, index performance data and the Company’s NAV and share performance.

The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results.

The Company returned -1.6% in February, outperforming its benchmark, the Deutsche Numis Smaller Companies plus AIM (excluding Investment Companies) Index, which returned -2.2.¹

Markets continued where they left off in January, with global markets led by the Nasdaq and large cap shares. Mid-cap markets broadly underperformed, still bumping along the bottom of a protracted drawdown. Specifically, within the UK, small & mid-cap stocks continued to underperform their larger peers, but the portfolio was able to outperform the benchmark reflecting some significant stock specific wins across a broad range of longs, shorts, and overseas holdings.

The largest positive contributor during the month was a short in an animal genetics company which issued a large profit warning, highlighting falling volumes in China, where trading conditions in its beef and dairy segments remains challenging. The second largest contributor was Medpace, a US pharmaceutical services company that manages clinical trials for small and mid-sized biotech companies. Despite a 2-year long winter in biotech funding, Medpace has continued to grow 20% and take market share. Their best-in-class service, offering and ability to pick the best clients and programmes, means they have avoided the crunch that has affected many in the sector and deliver record levels of new business in all but two quarters. Biotech funding is now showing signs of inflecting and in their most recent results Medpace said they were confident that after a relatively pedestrian 2024 (15% revenue growth, 20% EBITDA margins), 2025 should see revenue growth accelerate as the industry recovers. The shares rose 36% in the month on the back of the strong results. The third largest contributor was UK investment manager, Tatton Asset Management, which rose in absence if any specific news.

Two of the largest three detractors during the month were from short positions. The largest was a short in a UK listed semiconductor company which continued to rise following better than expected results in January, plus a rising tide of AI related euphoria. The second detractor was a short in a UK listed support services company. The company received a bid for one division from Private Equity which simultaneously resolved the balance sheet issues and provided a valuation underpin for the group. The third largest detractor was XP Power, who make power supply units for various industrial applications including semi-conductor capital equipment. The company had seen weak order trends through 2023, but we were hopeful they would turn as we entered 2024. Unfortunately, de-stocking has continued for longer than expected, resulting in weak performance in Q1 and material downgrades to earnings. We do not believe that this changes the medium-term earnings power of the company, but it certainly pushes recovery out from 2024 and into 2025.

February was a positive month from a relative perspective, as we continue to try and navigate this “holding pattern” that UK small and medium size companies have found themselves in. We still retain a strong view that as inflation falls and fears of recession recede, the market will broaden out and the small & mid-cap market will witness a period of strong returns. This scenario could be very additive to performance. Despite the continued headwind of small and mid-cap underperformance year-to-date, we remain encouraged by the increasing role of stock specifics and the fact that the underlying strength in trading from our holdings is now being better reflected in share prices. The net of the portfolio remains around 109% while the gross is around 115%.

We thank shareholders for your ongoing support.

Sources:
¹ Datastream and London Stock Exchange as at 29 February 2024.

Any opinions or forecasts represent an assessment of the market environment at a specific time and are not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research, investment advice or a recommendation.

Risk: Reference to the names of each company mentioned in this communication is merely for explaining the investment strategy and should not be construed as investment advice or investment recommendation of those companies.

Portfolio manager biography

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Daniel Whitestone, Managing Director, is Head of the Emerging Companies team, within the Fundamental Equity Division of BlackRock's Active Equity business. He is the lead Portfolio Manager for BlackRock Throgmorton Trust plc, BlackRock UK Emerging Companies Hedge Fund and BlackRock UK Emerging Companies Absolute Return Fund.

Dan's service with the firm dates back to 2013. Prior to joining BlackRock, Dan worked for UBS, where he was the head of the UK small and mid-cap sales desk and ranked the number one salesperson in the Extel Small/Mid-Cap sales ratings in 2011 and 2012. Prior to working at UBS, Dan joined Noble and Co in 2006 as a UK small and mid-cap salesman. He began his career at Accenture, in 2003 as a strategy consultant.

Dan earned a BA Hons degree in Combined Studies from the University of Newcastle-Upon-Tyne.

Board of directors

All the Directors are non-executive, independent of the Investment Manager and members of the Audit Committee, Management Engagement Committee and the Nomination Committee.

Christopher Samuel (Chairman) was appointed to the Board in June 2016. He was Chief Executive of Ignis Asset Management from 2009 until its sale to Standard Life Investments in 2014. He was previously Chief Operating Officer at Gartmore and Hill Samuel Asset Management and was a partner at Cambridge Place Investment Management. He is a Non-Executive Director of Quilter plc (including subsidiaries Quilter Financial Planning Limited, Quilter Investment Platform Limited and Quilter Life & Pensions Limited). Mr Samuel was formerly Chairman and a Non-Executive Director of JP Morgan Japanese Investment Trust plc and a non-Executive Director of the Alliance Trust plc, UIL Limited and its subsidiary UIL Finance Limited. He graduated from Oxford with an MA in Philosophy, Politics and Economics. He qualified as a Chartered Accountant with KPMG.

Angela Lane was appointed to the Board in June 2020. She had previously spent 18 years working in private equity at 3i, becoming a partner in 3i's Growth Capital business managing the UK portfolio. Since 2007, Angela has held several non-executive and advisory roles for small and medium capitalised companies across a range of industries including business services, healthcare, travel, media, consumer goods and infrastructure. She is currently the Audit Chair and Non-Executive Director of Pacific Horizon Investment Trust plc, Dunedin Enterprise Investment Trust plc and Seraphim Space Investment Trust plc.

Louise Nash was a UK Small and Mid-Cap Fund Manager, firstly at Cazenove Capital and latterly at M&G Investments which she left in 2015. She now works for family wine business Höpler. She also acts as a consultant to JLC Investor Relations. Louise holds an MA in German and Politics from the University of Edinburgh and the IMRO Investment Management Certificate.

Nigel Burton was appointed to the Board in December 2020. He has spent over 14 years as an investment banker at leading City institutions including UBS Warburg and Deutsche Bank, including as the Managing Director responsible for the energy and utilities industries. Nigel has also spent 15 years as Chief Financial Officer or Chief Executive Officer of a number of private and public companies. He is currently a Non-Executive Director of AIM listed companies DeepVerge plc, Microsaic Systems plc, eEnergy Group plc and Location Sciences Group plc. He was formerly a Non-Executive Director of Digitalbox plc, Corcel plc, Modern Water plc, Alexander Mining plc, Mobile Streams plc and Chairman of Remote Monitored Systems plc.

Merryn Somerset Webb was appointed to the Board in March 2021. She has significant experience of financial matters through her role as a senior columnist for Bloomberg Opinion and writes extensively on this subject across radio and television. She is also a former Editor-in-Chief of MoneyWeek, the UK personal finance magazine. Merryn brings valuable investment trust specific experience. She is a former Non-Executive Director of Murray Income Investment Trust plc, Baillie Gifford Shin Nippon Public Limited Company and Netwealth Investments Limited.

Glen Suarez was appointed to the Board on 9 January 2023. He is an experienced director, having held both executive and non-executive roles. He is currently a non-executive director of Impax Environmental Markets plc and chairman of the board of Knight Vinke Asset Management. He is a senior adviser to FMAP Limited, a consultancy founded by Lord Maude which advises governments on the implementation of public sector reform. Glen was chairman of The Edinburgh Investment Trust plc until July 2022 and was a committee member and co-chair of the Capital Markets Advisory Committee, an independent body advising the IASB on accounting issues and standards between 2014 and 2020. Before this, he was a Partner in Soditic Limited and prior to that he was head of European energy, infrastructure and utilities investment banking business at Morgan Stanley. He is a Fellow of the Institute of Chartered Accountants in England and Wales and a member of the Royal Society of Arts.

Our approach to ESG

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Environmental, Social and Governance (ESG) investing is often conflated or used interchangeably with the term “sustainable investing.” BlackRock has identified sustainable investing as being the overall framework and ESG as a data toolkit for identifying and informing our solutions. BlackRock has defined ESG Integration as the practice of incorporating material ESG information and consideration of sustainability risks into investment decisions in order to enhance risk-adjusted returns. BlackRock recognises the relevance of material ESG information across all asset classes and styles of portfolio management. The Investment Manager may incorporate sustainability considerations in its investment processes across all investment platforms. ESG information and sustainability risks are included as a consideration in investment research, portfolio construction, portfolio review, and investment stewardship processes.

The Investment Manager considers ESG insights and data, including sustainability risks, within the total set of information in its research process and makes a determination as to the materiality of such information in its investment process. ESG insights are not the sole consideration when making investment decisions and the extent to which ESG insights are considered during investment decision making will also be determined by the characteristics or objectives of the Company. The Investment Manager’s evaluation of ESG data may be subjective and could change over time in light of emerging sustainability risks or changing market conditions. This approach is consistent with the Investment Manager’s regulatory duty to manage the Company in accordance with its investment objective and policy and in the best interests of the Company’s investors. The Investment Manager’s Risk and Quantitative Analysis group will review portfolios, in partnership with the portfolio managers, to ensure that sustainability risks are considered regularly alongside traditional financial risks, that investment decisions are taken in light of relevant sustainability risks and that decisions exposing portfolios to sustainability risks are deliberate, and the risks diversified and scaled according to the investment objectives of the Company.

BlackRock’s approach to ESG integration is to broaden the total amount of information the Investment Manager considers with the aim of improving investment analysis and understanding the likely impact of sustainability risks on the Company’s investments. The Investment Manager assesses a variety of economic and financial indicators, which may include ESG data and insights, to make investment decisions appropriate for the Company objectives. This can include relevant third-party insights or data, internal research or engagement commentary and input from BlackRock Investment Stewardship.

Sustainability risks are identified at various steps of the investment process, where relevant, from research, allocation, selection, portfolio construction decisions, or management engagement, and are considered relative to the Company’s risk and return objectives. Assessment of these risks is done relative to their materiality (i.e. likeliness of impacting returns of the investment) and in tandem with other risk assessments (e.g. liquidity, valuation, etc.).

ESG integration does not change the Company’s investment objective or constrain the Investment Manager’s investable universe, and does not mean that an ESG investment strategy or exclusionary screens has been or will be adopted by the Company. Similarly, ESG integration does not determine the extent to which the Company may be impacted by sustainability risks.