UK News EDINBURGH INVESTMENT TRUST: Flexibility is key
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Investment trust Edinburgh has had its downs in recent years, most notably when it was run by Mark Barnett at Invesco. A long streak of under-performance led to the manager finally being sacked in late 2019 and replaced by Majedie Asset Management.
Although Majedie has since been absorbed into investment house Liontrust, James de Uphaugh, who took over the reins from Barnett, remains the trust's manager.
Now head of Liontrust's 'Global Fundamental' team, Uphaugh says it remains business as usual with the objective being to run an 'all-weather' investment trust which delivers investors a mix of capital and income growth in excess of the FTSE All-Share Index.
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The £1billion trust, listed on the London Stock Exchange, is invested in 52 stocks, mostly UK. The big holdings are familiar names – the likes of Shell, HSBC and NatWest. 'My goal,' says Uphaugh, 'is to establish this fund as a core holding for investors, one with a long history [going back to 1889], low charges and a good track record'. It's a challenge. The portfolio has been over-hauled while the new team had to deal with the sharp market correction in early 2020 as a lockdown in the UK was enforced.
Although the performance numbers are beginning to look a little better – it has just about outperformed the FTSE All-Share Index over the past three years – challenges lie around every corner. While dividend growth is part of Edinburgh's objective, this was put on hold in the financial year to April 2021 with annual income remaining at 28.65pence per share.
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Uphaugh says it will be the board's decision as to whether the annual income for the year to the start of this month is notched up. The first two quarterly payments of 6 pence a share were the same as the year before.
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The trust is managed flexibly with no pre-conceived investment agenda – it's neither a growth or value-orientated fund. 'We pursue multiple investment themes,' he says. These include 'Darwinism' and 'ESG rehabilitation' – ESG standing for environmental, social and governance.
Food retailer Greggs is an example of survival-of-the-fittest Darwinism – that is, a company that has cemented its position as the country's leading baker through lockdown, expanding its property portfolio and market presence.
Uphaugh says Shell, its biggest holding, is desperately trying to improve its ESG standing by promising to become a net-zero emissions business by 2050 at the latest.
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Shareholdings that the company has tickled up in recent months include defence firms BAE Systems and Thales Group (listed in France) and healthcare giants GlaxoSmithKline and Novartis.
Uphaugh is keen that the trust's shares reflect the value of the underlying assets. Currently, they trade at a near 7 per cent discount, meaning the underlying assets are worth more than the price you pay to invest in them via the trust. But he says Liontrust's willingness to market the fund augurs well – it has launched a dedicated website at edinburghinvestmenttrust.com.
One big positive is that come the end of September, it will be able to cut the cost of £100million of borrowings as a result of a refinancing deal. The interest charges will fall from 7.75 per cent to 2.4 per cent.
Over the past five years, Edinburgh has delivered an overall investor return of 11 per cent, compared to 26 per cent from the FTSE All-Share Index. Its annual charges are a reasonable 0.5 per cent and its annual income is around 3.8 per cent. Its stock market identification code is 0305233 and its market ticker is EDIN.
Ethical vs traditional funds - which have the performance edge? .
'Genuine' consumer demand, the fund industry's embrace of responsible investing and regulatory changes will drive the popularity of this sector in future, says Laith Khalaf of AJ Bell.UK and global funds with 'environment, social and governance' goals have underperformed recently because growth stocks have floundered and rising energy prices have boosted oil and gas stocks, he explains.