The board of the Aberdeen-managed £440 million Dunedin Income Growth Investment Trust said it has undertaken a “robust in-depth review” of the “investment philosophy and process” of the fund’s investment managers using an external consultant.
Board chair Howard Williams said: “The board is mindful of the impact of NAV (net asset value) underperformance and is continuing to monitor the investment manager for much needed signs of improvement.”
The fund is managed by Ben Ritchie and Rebecca Maclean.
The news of the investment review came as Dunedin Income Growth reported results for the six-month period ended July 31, 2026.
The fund’s NAV total return was 6.3% and the share price total return was 5.9%, reflecting a slight widening of the discount at which the shares trade to the NAV. These returns lagged the total return of 7.8% of the company’s benchmark, the FTSE All-Share Index.
“Recognising that performance has continued to be below the FTSE All-Share benchmark, the board has undertaken a robust in-depth review of the Investment Manager’s investment philosophy and process using an external consultant,” wrote Williams.
The fund’s objective is to achieve growth of income and capital from a portfolio invested “mainly in companies listed or quoted in the United Kingdom or companies having significant operations and/or exposure to the United Kingdom that meet the company’s sustainable and responsible investing approach.”
The fund’s biggest investments at July 31 included TotalEnergies, Standard Chartered, NatWest, RELX, Prudential, Haleon, London Stock Exchange, National Grid, Softcat, Tesco, Weir Group, Sage, Diageo, Experien, Diageo, AstraZeneca and Edenred.
The fund’s managers Ben Ritchie and Rebecca Maclean wrote that top contributors to performance were TotalEnergies, Edenred, Softcat and Standard Chartered, while detractors included Telecom Plus and Taylor Wimpey.
The managers wrote: “Portfolio activity was relatively high during the period as we continued to recycle capital from holdings where valuations had become less compelling into companies offering more attractive prospective total returns …
“We introduced three new holdings during the period: Coats, Rolls-Royce and Rio Tinto. Coats, the global leader in premium thread and structural footwear components, has strengthened its market position through the acquisition of OrthoLite, increasing exposure to higher-growth and higher-margin footwear markets.
“We believe the company offers attractive growth in revenues, margins, free cash flow and shareholder returns, while trading on a compelling valuation.
“Rolls-Royce offers strong operational momentum, improving profitability and cash generation, supported by structural growth in civil aerospace, robust order books and significant self-help opportunities. We believe the market continues to underestimate the scope for further margin expansion and cash flow growth.
“Following a review of the mining sector, we introduced Rio Tinto, a high-quality diversified miner with low-cost iron ore assets, attractive exposure to copper and aluminium, and a strong balance sheet. In our view, the valuation underappreciates both portfolio optimisation opportunities and the value of its asset base, while offering an attractive dividend yield.
“We also took advantage of market volatility to add to preferred holdings including RELX, Kainos, Softcat and Experian following AI-related weakness, and Standard Chartered after share price weakness linked to Middle Eastern concerns. Purchases were funded through reductions in Oxford Instruments, M&G, Hiscox, Games Workshop, Edenred, TotalEnergies, National Grid and ASML, where prospective returns appeared less attractive.
“We exited Mercedes-Benz, Volvo and Genus as conviction reduced or valuations became less compelling. Options written over selected holdings generated additional income and, in some cases, created opportunities to buy or sell shares at attractive prices …
“We believe the Company offers a compelling “triple discount”: the shares trade at a discount to NAV; the portfolio is attractively valued relative to the wider market despite its stronger balance sheets, profitability and growth characteristics; and UK equities remain inexpensive relative to both their own history and international peers.”