£1.3bn Edinburgh Investment Trust beats index

James de Uphaugh, Edinburgh Investment Trust

The £1.3 billion Edinburgh Investment Trust plc announced its Net Asset Value (NAV) per share on a total return basis increased 7.9% in the year to March 31, 2023, exceeding the 2.9% return on the FTSE All-Share Index.

The fund’s share price total return was 8.4%.

The trust invests primarily in a portfolio of UK listed shares and its manager James de Uphaugh said the better recent returns from the UK equity market “strike us as the early stages of a recovery in the market.”

The top three contributors to the trust’s performance were BAE Systems, NatWest and Centrica, followed by Greggs, Standard Chartered and Weir among others.

The fund’s other major investments include Shell, Unilever, Tesco, AstraZeneca, Ashtead, Anglo American and HSBC.

Liontrust Fund Partners LLP became the AIFM of the Edinburgh Investment Trust on April 1, 2022.

Since de Uphaugh became manager of the fund in March 2020, the cumulative NAV return of +65.9% and the share price return of +75.5% have outperformed the FTSE All-Share return of +47.4% (all in total return terms).

Founded over 130 years ago, The Edinburgh Investment Trust is a member of the FTSE 250 index.

The twin investment objectives of the fund for the long term are to outperform the FTSE All-Share Index on a Net Asset Value (NAV) basis and to produce dividend growth in excess of the rate of UK inflation.

On dividends, the trust said: “We have announced three interim dividends so far this year, totalling 19.5 pence per share.

“For the final dividend, the board is proposing a payment of 6.7p per share, taking the total to 26.2p per share. This final figure is a 5.6% increase on last year.

“When divided by the year end share price of 660p, it results in a dividend yield of 4.0%. This compares with the dividend yield on the FTSE All-Share Index of 3.5% on average.

“The dividend increase of 5.6% is behind the level of UK inflation over the same period …

“Looking forward, with expectations for inflation coming down and noting our confidence in the ability of our portfolio companies to grow their distributions, we anticipate a return to the dividend rising above normalised inflation.”

The fund’s manager de Uphaugh said: “It is now just over three years since we became the manager of the company.

“We took over in the midst of the market sell-off in March 2020, as the full implications of the COVID pandemic began to dawn.

“Since then, our investment approach has helped us deal with an at times rapidly changing economic and market backdrop.

“As it turns out, we became stewards of your portfolio towards the lowest levels of the market. Absolute returns have been strong since then.

“In terms of the main stock contributors over the last year, the top three were BAE Systems, NatWest and Centrica.

“These stocks encapsulate the diversified nature of the portfolio. Other contributions came from Greggs, Standard Chartered and Weir.

“The better recent returns from the UK equity market strike us as the early stages of a recovery in the market.

“This recovery is rooted in the undervaluation of UK equities that has built up over time and we remain optimistic about the specific prospects for the company’s holdings.

“Overall, 2023 could see lower inflation, peaking interest rates and perhaps a slightly better tenor from the consumer.

“A balanced, diversified portfolio is as important as ever.”