The chairman of Aberdeen Standard Equity Income Trust plc described its annual performance for the year to September 30 as a “very poor result” and highlighted “several serious disasters” in terms of stock selection.

Nonetheless, the £200 million fund’s total dividend for the year will be 20.5p, a 6.8% increase.

“After a performance in 2018 which I described as ‘solid’, our results this year have come as a considerable disappointment,” said the fund’s chairman Richard Burns.

“The Net Asset Value total return for the year was -10.8% against the FTSE All-Share Index positive result of 2.7%, an underperformance of 13.5%.

“Unsurprisingly our discount widened from 2.5% to 7.4% and our share price total return was -15.1%.

“This is a very poor result and there is no point in pretending otherwise.

“It is true that the market background over the year has been unhelpful to the manager’s investment style.

“The performance of the index has been largely driven by large capitalization stocks whose profits predominantly arise outside the United Kingdom and whose shares have appeared to us too highly rated – names such as Diageo, Unilever and RELX.

“The index-agnostic investment process of our manager seeks to find undervalued companies where positive changes are underway which have not yet been recognised by the market.

“This has produced a domestically-orientated portfolio with an overweighting in mid and small capitalisation stocks.

“This has been quite the wrong positioning relative to the index over the last year.

“This unrewarding investment stance has not been mitigated, as might have been hoped, by successful stock picking; indeed the reverse is very much the case.

“Attribution analysis reveals a significant negative contribution from stock selection, largely the result of several serious disasters, such as Kier Group and Staffline, which are discussed in greater detail in the manager’s report.

“Sadly, these were not offset to any significant degree by big successes.

“These results mean that our long-term performance numbers, which have for several years been running ahead of our benchmark, are now lagging significantly.”

Over 10 years the Net Asset Value total return for the fund is 120.1%, and the share price total return 128.7% — versus the FTSE All-Share total return of 121%.

Thomas Moore, manager of Aberdeen Standard Equity Income Trust, said: “The portfolio’s disappointing performance in the financial year has not shaken our conviction in the merits of our investment process.

“We continue to believe that the best way to deliver for shareholders in the long term is to identify stocks whose potential for improvement is not priced into their valuations.

“The prolonged period of intense investor pessimism we have experienced has led to a polarised stock market in which stocks perceived as low risk are trading at very high valuations while stocks regarded as higher risk are trading at very low valuations.

“This valuation divergence is the most extreme it has been for more than 10 years and we therefore see it as an opportunity to build positions in robust businesses that will ultimately deliver strong performance as risk aversion subsides …”