Fund Profile

BlackRock Sustainable American Income 15 December 2021

Disclaimer

This is a non-independent marketing communication commissioned by BlackRock. 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
BRSA’s new sustainable approach to US value investing represents a highly distinct strategy…
Overview

BlackRock Sustainable American Income Trust (BRSA) provides its investors with a portfolio of value-orientated US equities, with the dual objective of growth in capital and provision of income. BRSA, having altered its investment mandate in July 2021, also incorporates explicit ESG objectives, whereby the team aim to minimise the ESG risks against its benchmark, the Russell 1000 value. As a result, BRSA’s investment process, and its holdings, have evolved over the past months in order to comply with its new requirements.

BRSA ultimately remains a US value strategy though, with its risk/return profile likely to remain broadly in line with its prior approach. The team believe that the incorporation of explicit ESG targets will act as a tailwind for the trust, given its ability to improve return profiles, e.g. through lower cost of capital for companies which score more highly on these considerations. While it is still early days for the new strategy, the adjustments have already shown benefits, with BRSA having outperformed its benchmark and peers over the last five months, though the trust still trades on a 5.6% discount.

BRSA has seen minor adjustments made to its income potential, thanks to the loss of its ability to write call options to enhance its revenue. The team believe that this will have a minimal impact however, believing BRSA will, at a minimum, have a portfolio yield in line with that of its reference index. The loss of the option overlay will potentially enhance its capital return however as will the implementation of 5% neutral level of net gearing and a more concentrated portfolio that now has the ability to invest in mid-caps.

Analyst's View

BRSA’s new investment process is, in our belief, a reflection of the world’s ongoing move towards a more sustainable society. In BRSA’s case, we believe it is somewhat ahead of the pack, being an active sustainable strategy within the US income and value space, something which has so far seldom been seen. We believe that BRSA has only become a more attractive investment strategy as a result, thanks to the additional alpha potential that its increased ESG integration will provide. The loss of some ‘deep value’ stocks with poor ESG scores may not materially impact the long-term performance of the trust, as we believe such companies may anyway be unpalatable to many long-term investors due to the increased awareness of their risks.

Regardless of the improvements BRSA’s ESG incorporation will provide, we also believe that value stocks may be primed to do well, thanks to the powerful combination of rising inflation and economic activity. We believe such an environment will be conducive to BRSA’s outperformance, given its lower valuation risks and sensitivity to interest rates. In fact, BRSA’s large weight to financials may be a form of an inflation hedge, as the sector thrives during rising interest rate environments. If BRSA does see a continued improvement in its relative Performance, as we have begun to see over the last five months, then its Discount may provide an attractive entry point.

bull bear
ESG tailwinds may enhance future performance
Loss of options overlay may impact income
Current inflationary environment may be conducive to value investing
May require specific stylistic tailwinds for underperformance to reverse
Discount offers potentially attractive entry point
Implementation of gearing can enhance losses on the downside
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2022 Kepler Income & Growth Rated Fund

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Fund History

13 May 2022 Time to reappraise the ‘value’ approach?
After a tough decade, the environment for the value approach is improving, says Lisa Yang, Co-Manager of the BlackRock Sustainable American Income Trust plc. Is it time for investors to take note?
27 Apr 2022 Finding value in a haystack
Non-income value strategies are becoming increasingly scarce, but the holdouts represent attractive near-term opportunities…
25 Mar 2022 Slides and Audio: BlackRock Sustainable American Income
Download the presentation and listen to the audio from our 'Ideas for your ISA' virtual Spring event on 15 March...
23 Mar 2022 Fifteen ideas for your ISA
Slides and audio from our event last week, featuring fund managers running money in every major market in the world...
23 Feb 2022 Regime change
Ahead of our spring conference, we ask whether investors need to junk their portfolios and start again…
17 Feb 2022 Results analysis: BlackRock Sustainable American Income
Reporting results for the year ending 31 October 2021, BRSA has succeeded in combining sustainable investing with an outperforming value-stock bias…
15 Dec 2021 Fund Analysis
BRSA’s new sustainable approach to US value investing represents a highly distinct strategy…
08 Dec 2021 We are the (ESG) champions
Investment trusts tend to be amongst the best-performing ESG strategies in the combined open- and closed-ended universe…
24 Nov 2021 Holding back the tears
While the final text of COP26 fell short of what many had hoped for, the writing is on the wall for fossil fuels and, from an investment perspective, the age of sustainability has only just begun…
17 Nov 2021 How Do You Like Them Apples
Judging whether the US market is expensive is not as easy as many make it out to be…
03 Nov 2021 Don't fear the reaper
With market direction hard to call, we consider the case for taking a long-term view in the investment trust sector…
20 Oct 2021 Board games
Investment trust boards talk a good game about championing shareholders interests - but do they really deliver?
28 Jul 2021 How are the mighty fallen
Dividend culture as we knew it is dead, according to Kepler's David Johnson, but investment trusts offer a solution...
20 Jul 2021 Fund Analysis
Proposed shifts in BRNA’s strategy towards sustainable investing may improve its return profile and be the catalyst for a narrowing discount….
22 Apr 2021 FAANGs for the memories
The massive outperformance of mega-cap tech last year could become a thing of the past if anti-trust legislation and negative sentiment starts to bite...
12 Feb 2021 Results analysis: BlackRock North American Income
With a strong start to the year, BRNA has a number of catalysts to drive performance in 2021 and an attractive yield of 4.7%...
07 Jan 2021 Fund Analysis
BRNA offers a disciplined US value opportunity with superior income attributes…
19 Nov 2020 Hope springs eternal
The US election has given long-suffering value investors new hope of a 'great rotation' in their favour, but that light at the end of the tunnel could in fact be a train…
01 Oct 2020 Alternatives for Income Investors
Slides and audio from our event focused on alternative routes to a reliable income…
30 Sep 2020 Slides and Audio: BlackRock North American Income
View the presentation and listen to the audio from our 'Alternatives for Income Investors' event on 29 September...
20 Aug 2020 Alternatives for income investors
In a world where dividend are under unprecedented pressure, our income focused online event in September should provide serious food for thought…
09 Jul 2020 Fund Analysis
BRNA offers a 5% yield from a portfolio of high quality US companies…
18 Jun 2020 Gimme shelter
As income investors brace for impact we ask which regions and trusts are less likely to cut their dividends in 2020…
27 Apr 2020 What does defensive investing mean today?
As investors reflect on the damage inflicted by the coronavirus outbreak on their portfolios in recent weeks, they may be looking for a way to build in greater resilience. However, traditional defensive investment strategies may not be the answer...
13 Feb 2020 Choose your own adventure
Predicting the future is impossible, but identifying which trends have coincided in the past can give us clues about what may be to come...
31 Dec 2019 Fund Analysis
Since a management change in 2014, BRNA has been one of the great turnaround stories...
12 Dec 2019 Regime change: how manager changes impact performance
Does a change in manager result in improved trust performance?
25 Sep 2019 Where next for the US stock market?
12 Jun 2019 Fund Analysis
In the current volatile environment, this trust appears a stand out candidate for more cautious investors...
31 Oct 2018 Fund Analysis
A diversified portfolio comprised mainly of US equities, BRNA produced almost double the return in NAV terms of the Russell 1000 Value index in 2017, and has comfortably outperformed the benchmark so far in 2018...
31 Oct 2018 The Trump effect
Two years after the shock election of Donald Trump, we take a look at what the Trump administration has really meant for US markets and the trusts that invest in them...
26 Apr 2018 Fund Analysis
A large cap portfolio, focused on high quality companies, positioned for an inflationary environment with significant exposure to banks
26 Apr 2018 The $23.9 trillion dollar question*
Are US equities, which have hit record highs on 71 occasions in the last 12 months, overpriced or are they actually trading at a price worth paying?
16 Jan 2018 Fund Analysis
A large cap US equity portfolio offering a stronger yield than most of its peers, positioned for an inflationary environment...
28 Jun 2017 What does the future hold for US markets?
As the 45th president of the United States settles into the role, BlackRock North American Income Trust co-manager Tony DeSpirito talks about the future for the North American markets in the wake of a new political and economic environment.
27 Jun 2017 What's driving frontier markets?
Can political and economic reforms make a difference when it comes to looking for growth?
15 Jun 2017 Signs of continental shift
BlackRock's Stefan Gries explains what's driving opportunities in Greater Europe...
13 Jun 2017 Fund Analysis
An income-orientated US equity trust with a decent track record of outperformance since its change in strategy...
12 Jun 2017 Right place, right time
BlackRock's David Zhao and Franco Tapia explain how 2016 was a year of two halves for the US stock markets as the prospect of a return to growth improved the fortunes for certain market sectors.
08 Jun 2017 The long game
Highlights from BlackRock Income & Growth's annual general meeting...
05 Jun 2017 Emerging Opportunities
BlackRock's Chris Colunga discusses the advantages of emerging European countries...
View all

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