43 years of consecutive annual dividend growth
The Brunner Investment Trust (LONDON:BUT)blends UK and international equities to provide what it describes as a ‘one stop’ investment solution for those seeking growth and income from a portfolio of shares. The managers select stocks on a bottom-up basis, making use of fund group Allianz (XETRA:ALVG) Global Investors’ large analyst team, GrassrootsSM and focus on fundamental research. While the BUT portfolio contains many household names, it is actively managed and differs markedly from the benchmark at the country, sector and stock level. BUT has recently declared its 43rd annual dividend increase in a row and currently yields 2.8% with dividends paid quarterly, although its discount remains wider than peers at c 16%.
Investment strategy: Active, global investment
BUT’s managers, Lucy Macdonald and Jeremy Thomas, draw on the extensive fundamental research resources of Allianz Global Investors (AllianzGI) to select a portfolio of 80-90 stocks from the UK and abroad. Its benchmark is 50% UK and 50% overseas, although the domestic weighting has eased down to c 43% and could fall further. Stocks are chosen for their quality and value characteristics, with the aim of producing growth in both capital and income over time.
Market outlook: Pick-up in volatility expected
The backdrop of extraordinary monetary policy measures is continuing, with the introduction of quantitative easing in the eurozone providing further easy liquidity conditions for investors. However, there is an increasing expectation of rate rises in the US and UK and the beginning of a divergence in policy could lead to greater market volatility within and between regions. Risks remain on the geopolitical side, with the outcome of the forthcoming general election a key concern for UK investors. Given the uncertain domestic backdrop, a more globally diversified approach could help to offset any difficulties in the near term.
Valuation: Discount wider but within long-term range
At 24 March BUT’s shares traded at a discount to cum-income net asset value (with debt at fair value) of 15.8%. This was wider than the average over one, three and five years, but remains within the long-term range of between 8% and 18%. The discount is wider than most peers in the Association of Investment Companies’ Global sector although recent weeks have seen a widening trend for investment trust discounts in general. With debt at par value, the discount is higher at 19.4%, because the relatively expensive structural gearing has a higher fair or market value as a result of the current low level of prevailing interest rates.