From MoneyWeek · · 1m 30s
Caledonia Investments must close its discount
The wealthy Cayzer family's investment trust delivers returns but trades at a stubborn 35% discount to net asset value.
In brief
The wealthy Cayzer family's investment trust delivers returns but trades at a stubborn 35% discount to net asset value. Caledonia Investments has met its long-term performance targets but trades at a 35% discount, requiring more aggressive action to unlock shareholder value. Originally reported by MoneyWeek.
A family fortune vehicle
Caledonia Investments is a £3.1 billion trust founded by the Cayzer family, which once owned a major shipping empire. The family still owns 51% of the fund.
Solid returns, terrible discount
The trust aims to beat inflation by 3% to 6% and has hit that target over ten years. But its share price trades at a 35% discount to net asset value.
Three equal investment pools
Caledonia splits its portfolio roughly equally: quoted equity at 32%, private equity funds at 32%, and direct private capital holdings at 25%.
Direct ownership advantage
The private capital pool owns ten UK mid-market businesses outright. This gives Caledonia control without third-party fees, unlike most wealth protection trusts.
AIR-serv drives returns
The largest holding is AIR-serv Europe, which makes forecourt equipment. Acquired in 2023 for £143 million, it's now worth £215 million and paid a £24.5 million dividend.
Buybacks haven't worked
Management has spent £30.6 million buying back shares at a 37% average discount since April. This boosted NAV by 3.5p per share, but the discount remains wide.
“More work is needed here.”
Built for the next crash
Caledonia's diversification means it will lag in rising markets. The real test comes in the next crash, when it should outperform AI-focused investors.
“The test will come in the next crash, when we see if it outperforms investors who increasingly seem besotted with the AI bubble.”
The main idea
Caledonia Investments has met its long-term performance targets but trades at a 35% discount, requiring more aggressive action to unlock shareholder value.
