It is still early days for the new team running UK investment trust Edinburgh, but slowly and surely they are stamping their mark on the £786million fund and steadying its performance.
Since Majedie Asset Management took over in March, the trust’s share price and value of its assets have risen. No mean feat given its previously wretched performance and the extensive overhaul required to put the fund back on an even keel.
Three quarters of the fund’s holdings prior to Majedie taking over have been dumped with only six stakes kept. Four tiny unwanted positions, accounting for one per cent of the fund, are still waiting to be offloaded.
London-based Majedie won the contract to run the UK equity income trust after Mark Barnett, at the time working for asset manager Invesco, was sacked by the board after sustained underperformance. Barnett has since also left Invesco. ‘We’ve reshaped the portfolio,’ says James de Uphaugh, the trust’s named manager, diplomatically. ‘We are trying to produce an attractive total return for shareholders – income and capital – while investing in a responsible way.’
The result is a portfolio comprising 48 stocks, with a strong bent towards FTSE100 shares and companies embracing good Environmental, Social and Governance (ESG) practice.
‘ESG investing has been part of Majedie’s investment approach since the business was started in 2002,’ says de Uphaugh. ‘The new stocks we have purchased represent attractive investments with strong ESG signatures.’ Tobacco stocks previously held by Barnett for their dividend-friendliness have been jettisoned.
New additions to the portfolio include engineer Weir and home furnishings retailer Dunelm. ‘Weir produces a lot of the equipment used in mining,’ says de Uphaugh. ‘It’s a market leader. We bought the shares in March and it has since agreed to sell its oil and gas division to American equipment giant Caterpillar. This will help pay down some of its debt.’ Since the sale was announced, Weir’s shares have risen by more than 30 per cent.
For shareholders, Majedie’s appointment has not just resulted in a change in investment emphasis. It has also reduced the trust’s annual charges, with Majedie waiving its fee for the first three months while it restructured the portfolio – and then agreeing a new two-tier charge.
This means an annual 0.48 per cent fee on the first £500million of the trust’s market value – and 0.465 per cent on any surplus. At the trust’s market value, this results in an annual charge of 0.47 per cent, compared to the 0.55 per cent levied by Invesco.
A few days ago, Edinburgh’s board announced it would keep the dividend payments for the financial year ending March 31, 2021 at 28.65 pence, the same level as in the previous year.
This breaks the trust’s record of 15 years of unbroken dividend growth. The first quarterly payment of six pence will be made later this month, with the shares going ‘ex-dividend’ on Thursday. The board says maintaining the dividend at last financial year’s level is the ‘appropriate approach’. The move has been welcomed by analysts at Investec who believe the trust now represents a ‘buy’.
A recent report on the UK equity income trust sector by analysts at Stifel identified Edinburgh as a ‘recovery play’. Other favoured trusts were BlackRock Throgmorton, Fidelity Special Values and Mercantile.
Stock market ID codes: BlackRock Throgmorton: 0891055; Edinburgh: 0305233; Fidelity Special Values: BWXC7Y9; Mercantile: BF4JDH5.