BMO Global Asset Management's Peter Hewitt will use its remaining holding in Mark Barnett's Perpetual Income & Growth "as a source of cash" for the BMO Managed Portfolio trust, as he admitted to having learnt lessons from backing Woodford Patient Capital from IPO.
Hewitt said he had been reducing his holding in Perpetual, which used to be a top five holding in both the Income and Growth portfolios, but is now only a small position in the former.
The manager said he had concerns over the amount of money Barnett was running, particularly with outflows from his two open-ended funds, the £4.6bn Invesco High Income and £2.1bn Invesco Income funds.
Hewitt told Investment Week that while "it has not missed a beat on dividends, which is good, I am concerned… I think Barnett is running too much. The next move is just probably to sell it,".
"It might be at a bottom, but if you look at what he owns - big oil and tobacco companies - they will have periods when they have a real run but I am not a believer."
Hewitt drew comparisons between Barnett and Alexander Darwall, whose European Opportunities trust is still a big position in Hewitt's Growth portfolio.
Darwall quit Jupiter Asset Management last year to set up his own boutique, Devon Capital Management, and took his £1bn European Opportunities trust with him.
Hewitt noted Darwall had already given up his responsibilities on Jupiter's then £7.7bn European OEICs to solely focus on the closed-end fund, which was a positive.
"[Darwall] does not like marketing, he likes investing."
Hewitt said he was keen to follow Darwall to Devon, noting the fact he has around £30m invested in the trust as another positive.
"I think he is a very talented stockpicker," he explained.
"He also took his number two, Luca Emo, with him and the manager who ran the investment trust department at Jupiter, Richard Pavry, and he employed someone in operations.
"I was supportive. I needed to just be sure, less about him, but more about the back office. They have actually staffed up quite well and he is only running the trust as well as a couple of segregated mandates at the moment.
"It is not really about growing it massively because the trust is already £1bn. I visited him last month and he was really upbeat, which I do not think he has been for a long time."
Barnett was kicked off Edinburgh Investment trust in December and replaced by Majedie Asset Management's UK equities team, led by James de Uphaugh. It was a decision that surprised many, including Hewitt, who had sold out of Majedie Investments last summer.
Hewitt said he was "gobsmacked" that Majedie was awarded Edinburgh, as the performance figures for its open-ended offerings had been "underwhelming".
On Majedie Investments, which Hewitt had owned for around five years, he drew comparisons with Lindsell Train investment trust. Both vehicles have sizeable positions in their privately-owned parent asset management companies, with Majedie then investing into other Majedie funds.
The asset management company has seen funds under management reverse, Hewitt said, while Aviva, one of the trust's main shareholders, is looking to sell its 14% holding but has ruled out offloading at a discount, which it is currently trading on.
As a result, "the discount is going to struggle to come in, the underlying is not performing and the story about the fund management company, which is effectively paying the dividend, is going into reverse".
Hewitt bought into Woodford Patient Capital, meanwhile, at IPO in 2015 at 100p and had topped up his holding periodically through the intervening five years. The trust, now named Schroder UK Public Private Trust, currently trades at around 21p and represents 0.6% of Hewitt's Growth portfolio.
The manager admitted to feeling "massively disappointed" with events that unfolded at Woodford Investment Management, claiming he did not realise the magnitude of the open-ended fund's issues when he visited the firm's Oxfordshire base in May 2019.
"In listening to [management of Syncona, another holding in Hewitt's Growth portfolio], you realise that Woodford did not [understand biotech companies].
"He was financially supportive and very enthusiastic about everything, but I do not think understood the risks and the valuations.
"It was a lesson learned. The only thing I got right about it was I never made a big holding. When you look at what was going on [at WIM], it was appalling, so [I have] very little sympathy."
Hewitt said he still believed there were some "very interesting" holdings in the portfolio, with Oxford Nanopore backed by Baillie Gifford and Autolus and Immunocore by Syncona.
That said, Hewitt said he would wait until the LF Equity Income fund had offloaded its unlisted positions before deciding when to sell.
"It is great Schroders are incentivised to get it over 77p. I suspect I wouldn't own it at that stage."
Hewitt said he had done "next to nothing" so far this year, having bought a few UK trusts immediately after the December General Election win for the Conservatives.
Those trusts were generally value-focused with a bias towards mid caps, including Mercantile IT and topping up Temple Bar. On the growth side, he added to Baillie Gifford UK Growth and Merian Chrysalis.
"[That was] just a function of saying the uncertainty of Brexit is going to wane and there are some really attractive valuations," Hewitt said.
"[Domestic companies] is where the extreme value [in the UK market is]. Some of them have done okay but have been completely ignored. I wanted to be exposed to that area."
BMO Managed Portfolio Trust's Growth Shares, which won Investment Week's Investment Company of the Year award in the Flexible Investment category, returned 17% in the five years to 17 March, compared to the FTSE All-Share's 4.9% loss, according to FE fundinfo.
The Income shares, meanwhile, have returned 6.2% in the same period.