I would tend to add to this position during periods of market stress if the discount to net asset value drifts out, but with the shares now trading at a modest premium I’m happy to sit on my hands.
In a similar vein to the managers of Monks, I have been concentrating on diversification.
The current portfolio is deliberately flat, with the largest weighting accounting for less than 3 per cent of the assets, as I want to have the flexibility to take advantage of future investment opportunities as and when they occur.
For investment trust followers, the portfolio typically features some household names but I also include more specialised trusts which might not readily fit into a conventional portfolio but offer alpha generating potential.
These often come with greater stock or sector specific risk, they may also be illiquid and in some cases will have a chequered history.
However, I am reasonably happy to take on that risk within the context of a widely diversified investment companies fund, as the compensation is usually an attractive discount at the point of entry.
A case in point is Riverstone Energy, where I established a position in March this year at a discount of around 20 per cent.
After two years of negative performance by the US S&P Oil & Gas E&P index in 2016-17 it was perhaps inevitable that a discount would open up on the shares, despite the fact that most commentators hold the management team in high regard.
The Trust invests exclusively in the global energy industry, with the majority of its investments in Permian, Eagle Ford and Western Canada basins.
The macro environment for Riverstone’s activities has improved significantly over the past two years with coordinated global growth and a significant recovery in the oil price.
Coincidently, productivity in the US shale oil industry has been soaring due to new extraction techniques. This much improved environment should enable the Trust to make attractive realisations over the coming years.
It is to be hoped that part of the proceeds of any realisations will be used to address the discount.
Peter Walls is fund manager of the Unicorn Mastertrust
