Investment manager finds little value in ‘the most difficult year’

Investment manager Seneca has struggled during “the most difficult year” with its investment strategy proving to be a poor fit for the conditions created by the pandemic.

The Liverpool-based company generated total returns that were nearly 30 percentage points behind the benchmark return.

“This is one of the most complex and challenging periods we have witnessed in our lifetimes,” said chairman Richard Ramsay.

Seneca chairman Richard Ramsay

“When so many lives and livelihoods are being ruined by COVID-19, it might seem rather trivial to be worrying about investment performance. But that is, of course, the board and manager’s primary responsibility and a key concern for shareholders.”

Seneca generated a net asset value (NAV) total return per share for the year of -22.7%, which compared with the benchmark return of 6.8%.

The stock market-listed company adopts a value investing style, believing it “offers the prospect of superior long term returns and avoidance of permanent loss of capital”.

However in its report to investors today Seneca acknowledged that the value investing style “has been underperforming for a number of years”.

It said the spread in valuations between “value” and “growth” was exceptionally wide prior to the crisis, which worsened because growth areas including healthcare, technology and consumer staples were the sectors that were largely able to remain open for business during the lockdown.

It highlighted figures which showed value stocks in the UK declined 25.8% over the year, whereas growth stocks retreated 2.4% – a gap that was repeated in the United States and Europe.

However Seneca remains committed to this investment philosophy and “believes that returns are better judged over longer periods than just one 12 month period”.

Ramsay added: “In their headlong rush to apparent safety and investments consistent with the growth investing style, many investors have eschewed value investing leading to extremes of valuation. The health crises will pass. The economy will recover. Value investing will prove its worth.”

Seneca will pay a fourth interim dividend, taking the total dividend to 6.72p, slightly above the 6.6p paid last year.

It also confirmed that Anne Gilding has joined the board today as a non-executive director, adding her experience in global communications, branding and marketing solutions from a number of positions with investment and finance groups.