Many investors like to go it alone and use their own judgement to invest in individual shares. But if you only have £2,000 to invest it’s hard to diversify across several stocks because the execution costs will eat into your funds. There are usually dealing charges, taxes and bid/offer spreads to consider, for example.
A neat solution
One neat solution is to invest in managed funds, and I reckon Apax Global Alpha (LSE: APAX) is a decent-looking candidate right now. It’s a Guernsey-registered closed-ended collective investment scheme that listed on the London Stock Exchange in June 2015.
The fund aims to invest equally between private equity and derived investments and specialises in the sectors of technology, telecoms, healthcare and consumer. Straight away, I think that adds up to decent diversification for your £2k investment. Indeed, the fund carries investments in several companies and debt instruments across those sectors.
There are no investments in the firm’s portfolio in sectors such as automotive, industrials or commodities because the company believes they are vulnerable to higher geopolitical risks. I like that approach. If you want to cover those sectors as well in your own portfolio you could look for other collective vehicles with your next investment. Personally, I wouldn’t bother though because I see sectors like those as unattractive now at what seems to me to be a late stage in their trading cycles.
Meanwhile, the dividend yield on offer with Apax Global Alpha is running near 5.6% and with the share price close to 155p, there’s a discount to net asset value of around 12%. That’s good, but I wouldn’t expect the fund to trade at a premium to asset value because of the unknowns. Indeed, we as shareholders don’t really know what’s going on in the underlying investee companies, so having a cautious valuation makes sense.
But one big advantage of investing in a fund like this is that it taps into the insights and expertise of a team of experienced investment professionals. I think that can be a useful advantage for time-strapped private investors, although rogue outcomes such as that delivered by Woodford Investment Management recently do challenge that theory, I admit!
However, I find today’s half-year report from Apax to be encouraging. The net asset value of the fund grew by just over 11% compared to six months previously. And adjusted earnings per share shot up 130% compared to the equivalent period the year before. The directors aim to pay 5% of the net asset value as a dividend each year and declared an interim dividend of 4.86p, which builds on last year’s final dividend of 4.12p.
Looking ahead, the company acknowledges the uncertain macro-economic picture across the world and believes eventual outcomes are “more dependent on political decision-making than ever before.” Meanwhile, the firm thinks it is likely that public-to-private deals and corporate “carve-outs” will feature more “prominently” in sourcing deals in the firm’s Private Equity portfolio.
My guess is that Apax will navigate the difficult environment in the years ahead to produce a pleasing outcome for shareholders. I see the stock as attractive.
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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019