This article was published earlier today in the Telegraph’s Questor column. It has been corrected to clarify Glenview Capital’s stake and board room representation in CVS Health.

The pre-Budget scare over capital gains tax continues to weigh on some investment trusts. Majedie Investments (MAJE ), a diversified global fund offering an alternative to artificial intelligence obsessed markets, trades on a 16% discount after being sold by worried investors before the chancellor’s debut Budget in October.

At £125m, Majedie is a smaller version of £2.9bn rival RIT Capital Partners (RCP ), the Rothschild-backed fund whose shares have risen 12% since we recommended the shares in April after a unusual period of poor performance saw them trail 28% below the value of its investments.

Like RIT Capital Partners, Majedie is backed by a dynasty. The Barlow family, who originally made their money in Malaysian rubber plantations, owns over half the shares. Launched in 1910, the company was named after a plantation. After gradually switching to financial assets, it became an investment trust in 1985.

Similarly, where RIT Capital Partners owns its fund manager J Rothschild Capital Management, Majedie has a 7.5% stake in Marylebone Partners, which was appointed to run its investments two years ago.

Reflecting their shared interest in preserving generational wealth, both companies measure their performance against inflation. RIT Capital seeks to beat the consumer price index by 3% a year, Majedie by 4% a year over rolling five-year periods.

The significance of these benchmarks is not that the funds will consistently deliver 3%-4% over the cost of living. It’s more they seek to hold a wide range of investments that when combined should, over time and regardless of stock market conditions, produce a positive real return.

Consequently, both use networks of contacts to find esoteric investments in funds and companies that are inaccessible to ordinary investors. 

Where Majedie differs is by sticking to public stock markets and avoiding the unquoted investments that make up a third of RIT Capital and which alarmed some of its investors last year.

Dan Higgins, chief investment officer of Marylebone, describes the firm’s approach as ‘liquid endowment’, modelled on US university pension funds which pioneered the use of long-term, high return investments. 

However, Marylebone, which Higgins founded in 2013, eschews real estate and private equity, saying they can be hard to sell and value when markets are troubled. Instead, Marylebone shifted the portfolio into three main buckets after taking Majedie on in January last year.

The largest, accounting for 58% of assets, goes to external niche fund managers. For example, it has 6% in Contrarian Emerging Markets Fund whose US-based credit team scours the world for opportunities in corporate debt.

Helikon, a top-performing hedge fund that invests ‘long’ in companies it likes and ‘short sells’ those it does not, makes up another 5.6%. Its manager Federico Riggio recently bought a 3% stake in BA-owner International Consolidated Airlines.

The second bucket of 21% goes to direct investments in undervalued but profitable companies such as Heineken, US engineer KBR and UK valve manufacturer Weir Group (WEIR). Alongside these is an exchange-traded fund investing in copper miners held as part of a 10% thematic play on a recovery in China.

Lastly, accounting for 14% of assets, are special situations where 20% annual returns are believed possible over three years. These are often in partnership with activist investors such as Glenview Capital which has lifted its stake to under 1% in New York listed CVS Health. Last month it gained a seat on the board, enabling it to push for change and revive shares that have halved since March 2022.

The point of all this activity, says Higgins, is to find investments that can work in an era of higher interest rates. However, it isn’t cheap and the large allocation to fund managers, whilst reducing as special investments are raised to 20%, lifts annual charges to a high 2%.

Both RIT and Majedie were suspended from Fidelity UK’s investment platform this year because of their expenses, but later reinstated. In Majedie’s case, the repayment of a £20m debenture, or loan, in March could save the company £1.5m a year and help defray some of its costs.

Meanwhile, performance after expenses has been good in the short term under Marylebone. In the year to 30 September, Majedie’s investments rose 21.8% and the shares 24.2%. It’s early days for this old fund under a new manager. Investors could wait for more information in annual results this month but with the shares recovering back to their September levels, but still on a wide discount, this could be a good time to buy.

Wednesday closing price: 239p

Key facts

Market value: £125m
Year of listing: 1910
Discount: 16%
Average one-year discount: 12%
Yield: 3.4%
Most recent year’s dividend: 8p
Gearing: 6%
Annual charge: 2%