This week (Wednesday March 23 to be precise) marked two years since the first lockdown was put in place in the UK in response to the COVID-19 pandemic. It’s like it was a long time ago but also like it was yesterday. Our perception of time is one of the many things the pandemic has – for lack of a better word – messed up.
But alas, it has indeed been two full years, and in that time life has gone on, albeit slowly, and so have economies and their respective markets.
Despite the first hit to business and investment in March 2020, which continued throughout the year for many, 2021 has been somewhat of a recovery year for most as the rollout of vaccines has started to take effect. There has been a lot of uncertainty over the past couple of years, along with a myriad of predictions about what life after the pandemic might look like. With the passing of the two-year anniversary, we thought it would be a good time to take stock of where we are, taking a look at some of the big moves over the past two years.
In its annual results released yesterday for the year to December 31, 2021, Public Partnerships International noted that the effects of COVID-19 are finally fading. Meanwhile, trusts in various mandates such as Herald, JPMorgan US Smaller Companies and CC Japan Income & Growth outperformed after initially tough times.
This is not surprising given that almost all sectors have rallied strongly over the two years to March 23, 2022 in both NAV and the conditions for the return of the prizes. Commodities and natural resources are up 114% in terms of net asset value and 247% in terms of stock prices over the period, although this is likely due in large part to movements and events since the start of this period. year.
Even the UK has recovered – and more – during this time, despite being unloved for many years before the pandemic (you can hear how that perception is finally changing by watching our UK Round webinar the World UK here). The UK All Companies sector is up 73% in terms of net asset value, followed by UK Smaller Companies (+70%) and UK Equity Income (+66%).
The only sectors not to have generated a positive return since March 23, and therefore not to have recovered, are real estate – rest of the world (-17.7%) and leasing (-26.8% ). The first suffered from the situation of each of its members. For example, Aseana Properties and Dolphin Capital Investors have been long laggards (Dolphin being the more disappointing of the two, over the past decade, by a margin) while Macau Property Opportunities is in liquidation mode – although the pandemic has caused it to struggle to sell some of its holdings. Ceiba owns Cuban assets, including a good chunk of quality international hotels that have still not recovered from COVID-19. Meanwhile, leasing funds have been hit particularly hard by the global travel ban. Unsurprisingly, Doric Nimrod Air Three, was one of the worst performing trusts in terms of net asset value, down 27%.
In terms of discounts, while most sectors continue to trade at an average discount, these have improved significantly since the first UK lockdown. Debt – finance” data-explanation=” see securitised debt
see securitised debt” class=”glossary_term”>structured finance at the top of the list, with its 40% discount on March 23, 2020 shrinking to 5% today. The improvement was likely boosted by the recent merger announcement between TwentyFour Income and UK Mortgages.
Next come the sectors of real estate, British logistics (going from a 25% discount to 9% premium), UK Commercial (41% discount at 9% discount) and UK Healthcare (28% discount at 0.1% premium).
Property is an area that has seen a bifurcation of results during the pandemic. With most populations advised to stay at home for more than three months in 2020 and then intermittently since, this has inevitably led to a sharp decline in commercial real estate – particularly in the hospitality sector – but since then (and as evidenced by recent numbers) there is still strong demand within the industry. In its annual UK property outlook, CBRE said 2022 could be a year of recovery for the commercial property market with renewed optimism and a growing economy. At the other extreme, real estate assets focused on the new normal, for example logistics assets, which have benefited from the pandemic which has accelerated the trend of online shopping.
Sectors that saw their average discount widen over the two years include flexible investing, royalties, financials, infrastructure stocks, environment and real estate – rest of the world, although first two have since shrunk again.
In terms of individual trusts, Geiger Counter has been the best performer since the UK went into lockdown, having achieved an impressive 550% in net asset value and 586% in share price (a combination of a market in short supply, a growing realization that nuclear needs to be a bigger part of the mix if we are to decarbonize our energy supplies and the situation in Ukraine amplifies the importance of nuclear in helping the West to achieve energy security). It is joined by other commodities and natural resources trusts CQS Natural Resources, BlackRock World Mining and BlackRock Energy and Resources Income. You can read more about how the sector has changed in our QD view – feel resourceful, which was published earlier this month.
The worst performer during the period was JPMorgan Russian Securities, which fell 91% in terms of net asset value and 80% in terms of share price, but again this is more than likely the result of recent events rather than the impact that the pandemic has had on this.
World events aside, maybe it’s the idea that the worst of COVID-19 is – apparently – in the past now or maybe it’s the glorious weather we’ve had this week, but optimism is certainly in order at the moment. These figures show that most sectors have not only recovered, but also performed exceptionally well at a time that threatened most markets around the world. To me, that sounds like the good news we all needed.