Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Troy Income & Growth. 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
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Overview

Troy Income & Growth Trust (TIGT) invests predominantly in UK equities. Managed by Francis Brooke and Hugo Ure of Troy Asset Management, the trust reflects Troy’s emphasis on capital preservation over the cycle, and owns a highly liquid portfolio of between 35-50 stocks matching Troy’s preferred investment characteristics.

Whilst income generation is a goal of the trust, the managers of TIGT also seek to ensure this income is growing in real (inflation-adjusted) terms and is accompanied by capital growth as discussed in the ‘Dividend’ section. Revenue reserves could help support the dividend in the near future.

Within TIGT the focus is very much on bottom-up stock selection and seeking ‘quality’ companies, though they are cognisant of the wider market and economic dynamics. Whilst they prefer companies which exhibit non-cyclical characteristics with low capital intensity, they can be pragmatic in certain instances where only one of these criteria is met.

Net Asset Value (NAV) and share price volatility have typically been below that of the wider market. The latter is partially a function of the discount control mechanism (DCM) intended to improve liquidity and ensure the trust trades near to NAV with relatively low discount volatility detailed in the ‘Discount’ section. In recent years this has generally led to the trust issuing shares, helping to grow assets without diluting existing shareholders.

Troy recently celebrated the 10th anniversary of managing the trust, and over this period returns from TIGT have substantially outstripped those of the FTSE All Share Index. This has been achieved without the use of gearing. Recent returns have remained strong, with TIGT outperforming the index, having largely kept pace in rising markets whilst exhibiting lower drawdowns than the wider market.

Analyst's View

TIGT has outperformed the index over a number of years, with lower levels of volatility and retains a disciplined investment approach. A relatively concentrated portfolio and a preference for holding significant stock positions means investors are better able to benefit from the managers’ analysis of individual companies, and TIGT has generally demonstrated positive alpha under the current management. At c. £265m, the trust is at an attractive level of assets, with good liquidity in its shares, and could be considered an attractive core holding in UK equities for most investors. This is particularly true for investors seeking to generate income from their portfolio, with TIGT offering a reasonable yield made resilient through reserves, whilst the DCM has been effective at lowering discount volatility since introduction.

Meanwhile, the shared investment philosophy across Troy Asset Management means that the managers have recourse to significant analytical resources. Recent moves to reduce the utilities exposure have had the effect of reducing the sensitivity to interest rates, and therefore one of the risks to stocks with their preferred characteristics. However, a general rally in UK stock markets might be reasonably expected to see TIGT trail on a relative basis due to its defensive nature.

Bull Bear
Tends to offer superior downside protection relative to the market May lag on a relative basis if UK equity markets rally
Track record of growing dividends above inflation, which remain well covered Negative sensitivity to moves in GBP have been a tailwind, but could reverse
DCM keeps liquidity high and price volatility low
Fundamental independent research and access to a highly experienced team
Continue to Portfolio

Fund History

25 Mar 2022 Slides and Audio: Troy Income & Growth
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...
09 Feb 2022 The dividend dilemma
We examine the trade-off between earning a current high dividend yield and growing future dividends...
15 Dec 2021 Dividends in the time of corona
Investment trusts have proven their worth during the pandemic, delivering dividend growth despite the turmoil…
09 Nov 2021 Fund Analysis
TIGT’s managers’ commitment to quality remains unwavering in a changing UK market…
29 Sep 2021 Slings and arrows
Our analysts argue over whether it’s better to take arms against volatility in a portfolio, or to simply suffer it…
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
25 Nov 2020 Results analysis: Troy Income & Growth
We look at how TIGT has protected capital throughout the uncertainty of 2020, and how it can be a useful addition to income hungry investors’ portfolios…
24 Sep 2020 Fund Analysis
Seeking to identify and invest in a portfolio of high quality companies, TIGT seeks to generate sustainable dividends and income and capital growth...
06 Aug 2020 Recipe for disaster?
In this article, we assess whether the recent shift to concentrated portfolios has been beneficial or detrimental during corrections…
15 Jul 2020 Why stagflation is likely and how to protect your portfolio from it
Our analysis suggests a combination of cost-push inflation and economic hardship could lead to a short, but unpleasant, period of stagflation...
29 Apr 2020 On solid ground
Our analysis of discounts highlights trusts which are likely to offer significantly less discount downside from the current level…
15 Apr 2020 Hold fast
Investment trusts' revenue reserves could make them a vital stronghold for investors facing UK dividend cuts of as much as 47%....
07 Jan 2020 Fund Analysis
Seeking to identify and invest in a portfolio of high quality companies, TIGT seeks to generate sustainable dividends and income and capital growth...
06 Sep 2017 Fund Analysis
A concentrated UK income trust focused on delivering capital and dividend growth run via a conservative approach...
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