Volkswagen might not be a stock you would expect to see in the portfolio of the UK Social Stock Exchange’s only investment trust. In June, however, Menhaden Capital, founded in July 2015 by chief executive Ben Goldsmith, initiated a position in the troubled carmaker.
Goldsmith argues it is about buying into trajectory as Volkswagen focuses on becoming the world’s largest electric car manufacturer. He says: “We think Volkswagen on its current price to earnings is a better way to play that trend than some of the newbies.”
Goldsmith says Volkswagen has the infrastructure in place to make it a more “sensible” investment, in contrast with “listed venture play” Tesla. Volkswagen accounts for 3.6 per cent of the trust’s total assets and was one of its top performers in July.
The fund’s net asset value currently sits at 83.3p, but it trades at a 29.2 per cent discount with a share price of 59p. Goldsmith attributes this to an investor who needed to sell in a hurry in the second quarter into an illiquid market. Team members, board members and advisory board members have bought shares at the discounted price “without exception”, he says. “The consideration about whether we should buy back stock is starting to enter some of our discussions with our board.”
Goldsmith says of the trust’s first year: “The last six months have been great, the first six months were terrible.”
Oil peaked around the time the fund launched in July before “more or less halving” over the next six months, he explains. “Then there were some very large calamities in corporate renewable energy, most notably SunEdison.”
Overwhelming debt saw the US company’s stock tumble from $33.44 in July 2015 to 34 cents when it filed for bankruptcy in April 2016.
So far the £66m investment trust has allocated 79.3 per cent of its capital, ultimately aiming for a third each in listed equities, private deals, and yield investments – assets with fixed income qualities, such as infrastructure, bonds, private credit and yield cos.
“We’ve got an asset mix that is similar to a family office,” says Goldsmith, who is also chairman of his own family office. The fund invests in sustainability themes, including efficient energy, transport, and waste and energy management.
Goldsmith is joined on the investment committee by former RIT Capital Partners chairman Graham Thomas and Alexander Vavaldis, who previously worked in the family office of the founders of Gap. Menhaden Capital’s chairman is Ian Cheshire, chairman of the Prince of Wales Corporate Leaders Group on Climate Change, as well as the advisory board for the Cambridge Institute for Sustainability Leadership.
The investment trust’s largest holding, at 14 per cent, is solar panel manufacturer X-Elio, a co-investment with private equity giant KKR. The company, previously known as Gestamp Solar, is headquartered in Spain, but its business is international, with around 300 mega watts capacity in markets including Japan, South Africa, Italy, Mexico and the US.
“This is essentially the solar platform for KKR’s infrastructure team,” Goldsmith says. He points out Japan and Mexico are leading markets for renewable energy, with the former seeking new alternatives following the 2011 Fukushima nuclear disaster.
The fund is also invested in private equity funds, such as a 9.8 per cent position in the WHEB Ventures Private Equity fund 2 LP, and a 4.8 per cent position in the Alpina Partners fund LP. Both were spun out of WHEB Group, which Goldsmith co-founded in 2002 with chairman Dr Rob Wylie, and which split into its private equity and asset management arms earlier this year.
In yield investments, yield cos take up the bulk of the current investment, with Terraform Power one of its largest holdings at 6.8 per cent of assets, alongside Terraform Global at 2.9 per cent and Atlantica Yield at 3.4 per cent.