Trojan Global Income Fund

The fund lagged the benchmark as the share prices of technology hardware, energy, utilities, materials and industrial companies continued to benefit from the artificial intelligence (AI) capital expenditure cycle. Meanwhile, our software and consumer staples companies were left behind owing to fears of AI disruption and rising oil prices respectively. On balance we believe that AI capital expenditure will have to moderate at some point owing to the lack of apparent returns on the capital spent. It also seems likely that the oil price will decline either owing to peace breaking out in Iran or via an economic slowdown. As such we see both of these phenomena as impactful but ultimately unsustainable trends in the long term.

We established a new investment in CTS Eventim in the month. The company is Europe’s dominant and the world’s second largest ticketing platform after Live Nation Entertainment in the US. It operates a vertically integrated business model across 25 countries covering ticketing, promoting events and owning and operating venues. The ticketing segment sells tickets for concerts, sports events, and theatres through robust online platforms and proprietary software, creating a deeply embedded technology infrastructure.

Network effects are powerful: more venues and promoters want the platform with the most buyers, and more buyers go where the inventory is. Further, accumulated proprietary data enables targeted marketing, increasing the likelihood of strong ticket sales for artists and venues. These represent powerful competitive advantages.

Revenue has grown strongly over several years (excluding during the pandemic) with attractive margins and exceptional returns on capital. The ticketing business requires limited capital to operate underscoring the attractions of the business model.

The enduring human need to be entertained and for shared live experiences is a powerful secular driver of demand which has proved remarkably resilient post-COVID and is demonstrated by the shift in consumer spending towards the experience economy.

A combination of disappointing results, some less than optimal management communication and misplaced fears surrounding both competitive pressures and AI disruption has allowed us to initiate a position at a very attractive valuation.