The Law Debenture Corp (LON:LWDB) is unusual among investment trusts in that it runs a long-established independent professional services (IPS) business alongside its investment portfolio of global equities. With the corporate entity having refreshed its management team, growth in the IPS business has been strong in H118, and income from the businesses (which include corporate trusts, pension services, corporate services and whistleblowing) provided 30% of LWDB’s net revenue per share, in spite of accounting for only 13.5% of fair value NAV. Meanwhile, the investment trust portfolio has produced strong long-term NAV total return performance versus its FTSE All-Share benchmark, and managers James Henderson and Laura Foll continue to find attractively valued opportunities in the UK, which remains severely out of favor among professional investors.
Investment strategy: Structure gives income flexibility
LWDB’s investment portfolio is diversified across c 130–140 stocks, with a bias to the UK (typically 70–75% within an allocation range of 55–80%). The managers invest across the market capitalization spectrum in stocks where valuations do not reflect the long-term prospects for the business, and their ability to look across the globe allows them to access attractive business areas that may be under-represented in the UK market. Asia Pacific (ex-Japan) investments are typically made through collective funds. The significant income contribution from the IPS business gives the managers greater flexibility in stock selection than would typically be the case for a fund with a focus on steadily increasing dividends.
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