Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Edinburgh Investment Trust. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
EDIN looks leaner and meaner under its new manager and has outperformed since the takeover…
Overview

Edinburgh Investment Trust (EDIN) has become leaner and meaner under lead manager James de Uphaugh and deputy manager Chris Field of Majedie Asset Management, who took over in March 2020. As we discuss under Performance, they have generated significant outperformance already, having created a more balanced portfolio intended to generate sustainable dividend and capital growth as well as income.

The underlying dividend was reset in the last financial year to four equal quarterly payments of 6p, which if repeated this financial year would annualize to a yield of 3.8%. As we highlight under Dividend, the yield under the previous manager was arguably unsustainable, and the payout unlikely to be grown in excess of inflation over the long term. The new Portfolio has less pronounced value characteristics, with more exposure to growth potential. James and Chris aim to find mispriced companies which can grow their earnings faster than the market expects, leading to dividend growth potential.

In September, the trust will receive a boost when old expensive debt finally matures and is replaced with debt that will cost over 5 percentage points less to service, increasing future total return potential. Structural debt is just under 9% of net assets at present, and the beta to the FTSE All-Share tends to be quite high (see Performance). That said, James has allowed some cash to build up in recent months as he is wary of volatility surrounding rate hikes and quantitative tightening. However, in the medium term, the managers believe the UK continues to be under-valued versus developed market peers and are finding opportunities in various industries, taking a contrarian view on some companies, as they have already done successfully since taking over the portfolio.

Kepler View

Edinburgh Investment Trust (EDIN) looks well set up to be a core savings vehicle for an investor who wants to generate a healthy income but places high importance on dividend growth. This is likely to include those who want to reinvest their income to benefit from the magic of compounding as well as those who expect to be drawing down their income for many years and therefore require growth to keep up with inflation.

James and Chris do have a tilt to value over growth, as is inevitable with an equity income portfolio, but this is not pronounced, and most of their holdings are classified as core. This means the portfolio is unlikely to be massively exposed to future stylistic shifts in markets, reducing one source of volatility. While James has not committed to maintaining this style bias, we believe it is likely to remain roughly consistent due to the focus on dividend growth as well as income.

Early results from the new portfolio have been good. The success has been built largely on stock-picking rather than sector calls, although building a significant position in mining stocks immediately after taking over the trust was a major contributor. In this call, the benefits of a patient contrarian approach were visible. The decision to buy ‘reopening’ stocks before the announcement of a successful covid vaccine is another good example. Of course, like any active approach, it may not always work to investors' advantage.

bull bear
Managers have track record of long-term outperformance
Structural gearing can enhance losses in falling markets as well as gains in rising markets
Focus on dividend growth should lead to attractive long-term income generation
The UK market has little in some structural growth areas such as technology
Low OCF, so offers low-cost access to UK equities
Rebased dividend may not grow this year
Continue to Portfolio

Fund History

29 Apr 2022 Five trusts to diversify your portfolio income
Join us next week for one live webinar with a different manager every day of the week – including the chance to ask questions - focused on different solutions for those seeking a decent income…
23 Feb 2022 Fund Analysis
EDIN looks leaner and meaner under its new manager and has outperformed since the takeover…
08 Jul 2021 London Calling
UK equities represent a ‘once in a generation’ opportunity according to the managers who joined us at our event last week…
07 Jul 2021 Slides and Audio: Edinburgh Investment Trust
Download the presentation and listen to the audio from our 'Cool Britannia' Summer conference on 01 July...
07 Jul 2021 Slides and Audio: Roundtable - The outlook for UK plc
Download the presentation and listen to the audio from our first roundtable discussion with James Henderson, James de Uphaugh and Rory Bateman...
23 Jun 2021 Time to back Britain?
After a challenging period for the United Kingdom, we wonder if it could be the most exciting market on a five-year view…
09 Jun 2021 Cool Britannia?
Join the team at Kepler Trust Intelligence and six leading UK fund managers as we examine the prospects for UK equities with COVID in retreat and Brexit uncertainty finally behind us…
13 Apr 2021 Fund Analysis
EDIN’s new management team continue to identify individual stock opportunities in the UK..
10 Mar 2020 Kepler Spring Conference: presentations and audio
Audio and presentations from our spring conference at The May Fair Hotel last week…
08 Aug 2019 Mark Barnett: Q&A
Invesco's Head of UK Equities Mark Barnett talks through his outlook for the UK economy...
30 Jan 2019 The Income Portfolio
We reveal our investment trust picks for a mixture of income and capital growth...
16 Oct 2018 The Investment Trust Advantage
Our recent conference for discretionary fund managers saw some of the UK's leading fund managers discussing the outlook for the world's major regions and asset classes...
03 Oct 2018 We can be heroes
Our analysis has uncovered the trusts which have generated a solid income through thick and thin - without compromising other aspects of performance...
26 Jul 2018 Fund Analysis
A large UK focused investment trust with a strong long-term record trading on a deep discount thanks to an out-of-favour style...
26 Jul 2018 Mark Barnett: Finding opportunity in financials...
Mark Barnett highlights the UK’s alternative finance market, which has caused disruption to the traditional forms of credit since the Great Financial Crisis...
25 Jul 2018 The Endurance Growth Portfolio
The purpose of the Endurance Growth Portfolio is to generate long-term capital growth with a bias towards quality and defensive characteristics...
25 Jul 2018 The Bulletproof Income Portfolio
Our Bulletproof Income Portfolio was set up to illustrate the benefits of investment trusts in providing a stable income...
23 May 2018 Causing disruption: tobacco and the next generation
Mark Barnett explores the impact of next generation products on the tobacco industry...
11 Apr 2018 Mark Barnett: A stock-pickers approach to managing the macro
Invesco Perpetual's Head of UK Equities gives his upbeat view on Brexit, discusses the trajectory of interest rates, and outlines the investment ideas he sees in this environment...
22 Nov 2017 A stock picker’s approach to managing the macro
Mark Barnett, Head of UK Equities at Invesco Perpetual, discusses the risks and opportunities facing the UK Equity market
24 May 2017 Fund Analysis
22 Feb 2017 Fund Analysis
21 Feb 2017 Digging in
The Bulletproof Income Portfolio enters 2017 with increased dividend cover at a time when a defensive income seems more precious than ever...
20 Apr 2016 Mark Barnett: Two distinct routes to a sustainable income
Contrasting portfolio construction of The Edinburgh Investment Trust plc and Perpetual Income and Growth Investment Trust plc offers choice to income-seeking investors
26 Jan 2016 Top picks from four leading brokers for 2016
We examine the key recommendations for individual trusts from our panel of the City’s leading analysts.
26 Jan 2016 Dodging bullets
The Bulletproof Income Portfolio performed well in a turbulent 2015, the perfect year to test its strengths...
01 Dec 2015 Model Portfolio update: Empiric, Edinburgh and RIT Cap...
The latest insight into developments across our three model portfolios...
05 Jun 2015 Fund Analysis
05 Jun 2015 The Bulletproof Income Portfolio
Six investment trusts with income credentials to die for.
View all

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