This week I am going to look at Caledonia Investments, an investment trust which invests in listed and private businesses from around the globe.
Caledonia was acquired by the Cayzer family in 1951 as a holding company, before changing into a quoted investment company in 1987. Since then the trust has grown significantly and is now around £1.6bn in size and a constituent of the FTSE 250.
The manager and CEO, Will Wyatt, invests with a value style for the long-term and splits the portfolio into four buckets; Quoted, Income, Unquoted and Funds.
The Quoted and Income pools (22% and 13% of invested assets respectively) invest in listed global equities, but what differentiates Caledonia from many other global investment trusts are the Unquoted and Funds pools (37% and 28% respectively). The Unquoted pool focuses on established businesses, which operate in the UK and are between £25m and £100m in size. This is where Will and his team believe they have the most expertise and the strongest network. Examples of businesses in this pool include Seven Investment Management and Buzz Bingo (previously Gala Bingo). The Funds pool invests in externally managed funds which themselves invest in private and listed markets, with a specific focus on Asia and North America.
Due to this quite large exposure to private equity investments and the ownership structure (48.5% owned by the Cayzer family) the trust’s discount tends to be wider than its peers, presently sitting close to its 12 month average of 19%. Returns can also be quite volatile given the nature of these private investments and their size. However, this patient approach to investment and exposure to unlisted companies has produced strong long-term returns for investors, gaining 181% over the last 10 years and increases in the dividend for the last 51 years.