VT Chelsea Managed Fund Range — The importance of patience for performance, March 2025

Launched on 5 June 2017 by Chelsea Financial Services, the four VT Chelsea Managed Funds are celebrating their eighth anniversary this year. Each of the four portfolios has a different client profile (Cautious, Balanced, Aggressive and Monthly Income) and they invest in different markets and assets via funds and investment trusts.

Please remember that the value of investments will fluctuate and returns may be less than the amount originally invested. Tax treatment depends on your individual circumstances and tax rules can change. Chelsea does not offer advice and so if you are unsure of anything please contact an expert adviser.

We caught up with Chelsea’s head of investments, James Yardley, who has been watching the markets even more closely than normal:

“Investing is a funny old game. You can do all the research and homework but you sometimes have to wait months or years to see if you're right.

“Over the past 18 months we have been steadily building positions in alternative investment trusts, which we believe are significantly undervalued. Following the sharp rise in interest rates and inflation, many investment trusts, which previously traded at 20%-30% premiums to their stated net asset values are now languishing at discounts of 30%, 40% or even 50%.”

The team’s approach is straightforward, the lower the price and the bigger the discount, the higher the yield – and the better risk-reward. While this strategy can be risky with certain types of equities, they are generally confident in the relatively “boring” infrastructure assets that the funds focus on. As James says:

“Take Assura (AGR), for example. It owns GP surgeries and counts the NHS as its largest tenant—about as boring and dependable as it gets. Not long ago, it traded at 85p with a 3.5% yield. Despite steadily growing its cash profits and locking in much of its debt at rock-bottom interest rates (around 1%) until the 2030s, the share price plunged to 36p, pushing the yield to 9.5%. An extraordinary fall for a boring business which has been consistently increasing its cash profits.

“As prices fell, the more we bought. For the past year, the market has been suggesting we were wrong. Prices drifted lower, often due to technical selling and investor panic across the investment trust space.”

“But as Benjamin Graham once said, ‘In the short run, the market is a voting machine; in the long run, it’s a weighing machine.’ The beauty of investing is that if your analysis is sound the value will eventually shine through.”

Assura (AGR) is held in all four VT Chelsea Managed funds and is now the biggest position in the Monthly Income fund.

Then came last week

On Monday (March 10th), as US markets were in freefall, private equity giants KKR and StonePeak made a bid for Assura at a substantial premium to the share price. Months of pain and underperformance were wiped out in a single day. Then on Tuesday another position, Care REIT (previously Impact Healthcare), held in the Cautious, Balanced, and Monthly Income portfolios received a takeover offer, sending its share price soaring over 30%. Private equity is clearly waking up to the deep value in this sector.

The key lesson is that discipline and patience can be rewarded. The team know why they own these companies and stick to their strategy.

Whilst we do not generally look at short-term performance, it is interesting that, since the 5th February, the Monthly Income fund has beaten its peer group by 4.23%*.

Managing director, Darius McDermott, added: “Great news for the funds this week. As US markets tumbled, we had two major bids — first for Assura, our biggest holding in the Monthly Income fund, then for Care REIT. After 18 months of building positions in unloved investment trusts, the value is finally starting to be realised. We still have plenty of unloved ideas in the portfolio and have already redeployed the Care REIT proceeds into our top picks. We’re optimistic about more activity ahead.”

Fund Performance

We’ve managed to deliver strong performance in what has been a tumultuous period for markets. We’ve had Brexit, Covid, high inflation, interest rate rises and the Russo-Ukranian war but each of the funds has delivered top-quartile performance in their respective sectors since launch.

This consistent performance has been noticed by the industry, with the range winning the ‘Best Mixed Asset Small Fund Family Group Over Three Years’ in the Refinitiv Lipper Fund Awards in 2021 and 2022. We are also pleased that the Monthly Income fund has recently been nominated for the 2025 Professional Advisor Awards.

*Source: FE Analytics, total returns in pounds sterling, from 5 February 2025 to 13 March 2025
**Source: FE Analytics, figures in pounds sterling, figures from 5 June 2017 to 11 March 2025