Global generalist with 47 years of dividend growth
The Bankers Investment Trust (LONDON:BNKR) invests in global equities with the objective of beating the FTSE All-Share capital return and increasing its dividend annually ahead of RPI inflation. Managed by Alex Crooke at Henderson Global Investors, it has a relatively high weighting (c 40%) in the UK, although this is expected to fall gently in the coming years. BNKR has one of the highest yields in the AIC Global sector (2.5% at 8 December), which may have helped propel it to a premium to NAV in late 2013/early 2014, and has raised its dividend for 47 successive years. It has fallen to a slight discount in the recent spell of market volatility, which may represent a more attractive entry point for long-term investors.
Investment strategy: Growth at a reasonable price
Lead manager Alex Crooke sets BNKR’s asset allocation in conjunction with the trust’s board, and works with regional specialists drawn from Henderson’s large team of fund managers to construct a global portfolio of stocks. While there is an overall focus on buying undervalued stocks with good share price and dividend growth prospects, the approach is flexible and takes into account the differing attributes of regional equity markets. The trust has a long-term approach, with low annual turnover averaging c 23% over the past five years. Over the long term the FTSE All-Share index, against which performance is measured, has been quite highly correlated (c 0.92 over 10 years) with the FTSE World index, making it a more relevant yardstick for a global fund than might at first appear.
Market outlook: Mixed messages
Global equity markets have largely bounced back from a sharp sell-off in mid-October, with investors seeming to have taken the end of the US quantitative easing programme in their stride, buoyed by new stimulus measures in the euro area and Japan. Valuations are neither particularly cheap nor expensive relative to history in most regions, although continued geopolitical tensions in Eastern Europe, the Middle East and more recently Hong Kong could spark further bouts of risk-aversion in the coming weeks and months.
Valuation: Discount widens on market volatility
At 8 December BNKR’s shares were trading at a 3.8% discount to cum-income net asset value. This is wider than the 1.9% average for the past 12 months, a period in which it often traded at a premium to NAV, leading to the issuance of 850,000 shares. The global equity market sell-off in mid-October saw the discount spike briefly to 6.3%, a 12-month high, and wider than the three-year average discount of 4.6%. With the valuation likely to be supported in the medium term by BNKR’s above-average yield, the current discount may present a more attractive entry point for investors, although near-term fluctuations are possible.
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