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Castelnau will help names like Hornby to embrace the internet and hopefully generate at least 20% annual returns for investors
Thursday 30 Sep 2021 Author: Daniel Coatsworth

Phoenix Asset Management’s new investment trust Castelnau is targeting a minimum 20% annual return by helping to modernise a group of old-fashioned businesses. Direct Line (DLG) and Esure founder Peter Wood will be a cornerstone investor and will work with Castelnau to jointly invest in new opportunities.

Joining the stock market on 18 October, Castelnau’s initial portfolio will include stakes in toy train seller Hornby (HRN:AIM), funerals group Dignity (DTY), stamp dealer Stanley Gibbons (SGI:AIM) and wedding gifts group WLS, which are being transferred from other Phoenix funds. The portfolio will also feature stakes in digital agency Rawnet and data analytics group Ocula Technologies.

WLS and Ocula are likely to float on a stock market, potentially in 2022, but Castlenau will retain a stake in both companies post-listing. Phoenix chief exeutive Gary Channon says that Castelnau’s model is to never sell out of holdings completely, making it different to most other funds and investment trusts which invest when a company is cheap and exit when it hits fair value.

Phoenix has a reputation for undertaking deep research and working closely with management teams to improve financial and operational strength.

Its investment in WLS has become a blueprint for how Castelnau might work with its other investee companies. ‘WLS was an old-fashioned business. It didn’t really use the internet, so we rolled out online services and used data science to improve sales and marketing. It has now surpassed Amazon and John Lewis for wedding gifts and sales are running at nearly than twice the peak 2019 level.’

Only one tenth of Hornby’s sales are currently direct to consumer and Channon believes it can reach more hobbyists using technology. For example, Hornby has a version of Airfix models which can be pieced together like Lego without the need for gluing or painting, sold under the Quickbuild brand. ‘People don’t know these products exist,’ says the Phoenix boss. ‘We can help Hornby find people digitally and sell the products anywhere in the world.’

Stanley Gibbons is in the process of digitising its library of stamps and coins and the company sees opportunities with fractional ownership, where collectors buy a piece of a stamp or coin digitally. This might even attract a new audience for Stanley Gibbons, namely people who want to trade digital assets such as cryptocurrencies and artworks via non-fungible tokens.

Castelnau will join the specialist fund segment of the London Stock Exchange where there are restrictions on trading for retail investors. This part of the market is aimed at more sophisticated investors and anyone seeking to buy the shares once listed may have to fill out a questionnaire with their investment platform provider before being allowed to trade.

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