This week we had the chance to catch up with Richard Brown, CEO of Castelnau Group [LON:CGL], about the listed investment company's strategy and also received an update on some of its existing portfolio assets. London-listed Castelnau was short-listed for this year's Online Money Awards in the category for Best Investment Trust (Growth).
In many respects Castelnau stands as a cogent argument for why investment trusts have an important role to play in the investment landscape, as its strategy would be nigh impossible for an Exchange Traded Fund to replicate. The company buys struggling businesses where it sees that real value could be achieved.
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A restructuring process is often needed and by leveraging a controlling interest, Castelnau can bring in the expertise required to turn a company around and ultimately make it more valuable. This is the strategy it has employed with both Dignity and Hornby, companies which were originally listed but where investors were not seeing the intrinsic value of the business.
Dignity, the UK funeral services business, has been a star performer for the fund and has been a major contributor to Castelnau's NAV performance. The trick for the portfolio management team is to balance the cash-consumptive side of the portfolio (earlier stage, unprofitable assets) with the cash-generative ones. A potential sale or listing of Dignity could provide Castelnau with a significant cash event.
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