Take advantage of the potential in funds that concentrate on private assets

Tom Treanor and Charlotte Cuthbertson of the Migo Opportunities Trust list three funds that they would invest in

Finding deals in the investment-trust industry has always been the main goal of the Migo Opportunities Trust strategy, but Migo 2.0 now adds more activism, engagement, and focus on top of this. Consolidation of wealth managers, higher interest rates, and inadequate cost disclosure regulations have all combined to make this the most fertile hunting ground in a generation. We plan to take advantage of this chance by identifying the industry's best-value opportunities and releasing that value for shareholders.

Activism is viewed as a dirty word by some. At its best, though, it frequently revolves around discussions with shareholders in an effort to reach an agreement. This enables boards to be engaged to create value with a more focused and cohesive message. The majority of our work is done in private. We think the most exciting opportunities are found in private-asset vehicles, but evaluating them requires thorough and in-depth research. These three portfolio investments are examples.

Funds that concentrate on private property.

The well-established venture-capital firm Chrysalis Investments (LSE: CHRY) owns stakes in a number of the largest European fintech companies, including Klarna and Starling. The net asset value (NAV) of CHRY has experienced significant volatility in recent years. It peaked at 251p in July 2021 during the post-Covid bubble and then dropped to 130p in March 2023 as its investee companies raised new capital at significantly lower valuations.

The discount to NAV widened significantly as a result of skepticism about even these lower valuations. Despite using funds from recent portfolio holding realizations to repurchase shares, CHRY is still trading at a 27 percent discount today. We think a listing will be revived later this year, which would provide additional liquidity for ongoing buybacks or a tender offer, even though tariff-induced volatility in the US stock market put Klarna's planned flotation on hold.

Due to a combination of decreased wholesale power price volatility and the National Grids system's decision to exclude battery storage, battery-storage funds saw a slump in 2024. This resulted in a significant decrease in revenue generation, the suspension of dividends for certain trusts, and worries about gearing levels.

With Gresham House Energy Storage (LSE: GRID) implementing tolling agreements that offer a stable floor for revenue generation, this year has been a completely different story for these funds. The potential of the GRID portfolio was demonstrated by the recent bids from Drax and Foresight for Harmony Energy Income Trust, another battery storage trust. The attraction of portfolios of battery-storage assets to private buyers is further highlighted by the fact that there were two bidders.

Wind-down trusts have the potential to be extremely lucrative investments. In order to make sure that returns are still appealing even in the "worst case" scenario, this entails modeling out timeframes and sales prices. We have benefited from the disposals that have already been completed at Aberdeen European Logistics (LSE: ASLI), but we also think there is potential for growth.

Throughout continental Europe, ASLI makes investments in "big box" logistic hubs and urban list-mile warehouses. Following a prolonged period of trading at a persistent discount, ASLI entered a managed run-off in May 2024 despite having an alluring collection of assets. Since then, the company has been selling off the portfolio and returning cash to shareholders. The quality of the portfolio is demonstrated by the pricing attained thus far in the realization process.