AVI Global Trust and the Slow Wait for Value

Here's the thing about AVI Global Trust: on paper it's a global investment trust, but in practice it behaves like a niche bet on being patient. The £1.2 billion trust looks for companies whose share prices sit below their estimated underlying net asset value, and it holds a fairly concentrated portfolio. At the end of September, its top ten holdings made up 50.6% of assets, spread across 45 positions in total.

That approach has been tested hard lately. Over the 12 months to the end of September, the trust's net asset value (NAV) per share rose just 1.7%. The MSCI ACWI index, which tracks both developed and emerging markets, returned 18.3% over the same period. Stretch the window to five years and the gap is still wide: 38.9% for the trust against 75.5% for the index. Absolute returns are positive, but they're trailing a broad benchmark by a distance that would test most investors' nerves.

Where the money sits

One reason AVI Global Trust is hard to categorise is that it isn't tied to a region or company size. Roughly half the portfolio is now in undervalued companies in Japan and Korea. Around 19% sits in closed-ended funds, meaning investment trusts and similar structures, and about 31% is in holding companies, which are often controlled by founding families.

Those segments haven't moved in step. Through to the end of September, the Japan and Korea positions rose 17% and 44% respectively. Other parts of the portfolio dragged. Investment trust Chrysalis and French media holding company Vivendi together took nearly 8% off overall performance.

Vivendi is the clearest example of how a value position can keep disappointing for a long time. Its shares have lost 43% over the past 12 months, closely tracking Universal Media Group, its key underlying asset. That asset has lost more than half its market value this year.

Asset Value Investors, the trust's management team led by Joe Bauernfreund, argues this is more cyclical than structural. The group's adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) have risen by more than two-thirds in three years, even though the shares have lost a third of their value over the same stretch. That gap between earnings and share price is exactly what a value manager is betting will close.

Governance added its own drama. Billionaire Vincent Bolloré owns 29.9% of Vivendi, just under a 30% threshold that would have required him to make a mandatory bid. The market had priced in a takeover. After an appeals court ruled that Bolloré had no effective control and no obligation to make an offer, the shares slumped 12% in a single day. For a value investor, that kind of event is a reminder that a discount can widen before it narrows, and sometimes it never narrows at all.

The trust's largest holding, D'Ieteren, at 6.6% of NAV, has also been a drag. Its shares have gone nowhere since the start of 2024. The management team's view is that the balance sheet tells a better story than the share price. D'Ieteren owns 50% of Belron, the vehicle-glass repair group, which is aiming for a €30 billion initial public offering (IPO) in Amsterdam. D'Ieteren is currently valued at just €9.7 billion, so a successful listing could unlock significant value for it. "Could" is doing a lot of work in that sentence, though. An IPO can be delayed, repriced or pulled, and the trust's upside depends on timing it doesn't control.

Why value investors keep the faith

The logic behind AVI Global Trust is straightforward. Buy assets at a deep discount to what they're worth, then wait for the market to notice. The problem is the waiting. Over the past three years, markets have rewarded companies tied to AI and growth, and value has been left behind. A discount that looks like a bargain in one year can look like a trap in the next.

Supporters argue that buying at a steep discount gives a wider margin of safety. If the underlying businesses are worth more than the share price implies, there's a cushion if things go wrong. That's a reasonable principle, but it isn't a guarantee. A margin of safety reduces the risk of overpaying; it doesn't stop a stock from falling further or a catalyst from arriving years late.

The trust also has a specific angle. It offers meaningful exposure to small and medium-sized businesses in Japan and Korea, two markets where governance reforms are creating value for shareholders. The management team says its experience in those markets gives it an edge. That edge is harder to judge from the outside. Smaller companies carry extra risks around liquidity, disclosure and currency, and concentrated country bets can swing sharply.

Context matters for the one-year numbers. Any fund can have a weak year, and a single 12-month return says more about the timing of the market than about a manager's skill. The five-year record is the more useful measure, and on that basis the trust has trailed the index. Value strategies as a group have faced the same headwinds, which helps explain the pattern but doesn't erase the underperformance.

Who this kind of trust suits, and who it doesn't

My read is that a fund like this is best understood as a long-term, high-conviction position rather than a core holding for everyone. It asks you to accept that a concentrated portfolio can stay out of step with the market for years. It also asks you to tolerate currency movements, governance surprises and the possibility that a discount to NAV narrows only slightly or not at all.

If you're prone to checking your portfolio daily, or you need your savings to be stable over the next few years, this kind of approach may be a poor fit. If you're comfortable with volatility and already hold a diversified mix of assets, it's worth asking how a value-focused trust would fit alongside the rest. Those are general trade-offs, not a recommendation, and everyone's situation differs.

The question that will matter most is whether the trust starts to outperform as enthusiasm for AI-linked growth cools. Watch for two things: whether the gap between Vivendi's underlying earnings and its share price begins to close, and whether the Belron listing moves from plan to reality. Those will tell you more about the trust's next chapter than any single year of returns.