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Troy reaches for global yield with income fund for Harries

Troy reaches for global yield with income fund for Harries

Troy Asset Management, the company behind Citywire AAA-rated Francis Brooke's top-performing Trojan Income fund, has launched a global income fund for investors.

The Trojan Global Income fund will be managed by James Harries (pictured), who previously ran Newton Global Income since launch in 2005 but announced his departure last December to join Troy.

The new fund will be run in a similar vein to Harries' former fund, which over the five years to the end of November 2015 returned 60%, compared to 49.6% by the average fund in the global equity income sector.

Trojan Global Income will hold between 30 and 50 stocks with Harries focusing on companies that generate high returns on capital, although he will aim to buy them when they are trading at attractive valuations. 

Harries will also target companies that pay attractive dividend yields and 2hile the group has not set a formal yield target, they expect the portfolio to yield around 3%.

'It is worth remembering that in fixed income markets high yield equates to high risk but in equities that isn't necessarily the case. It may be that we are being offered the chance to secure an attractive future income stream funded by a high quality business for a number of reasons,' Harries explained.

For example, share price weakness could be down to a temporary problem with the business that is mistakenly seen as permanent, a high profile issue that is ultimately immaterial or simply that the long-term attractions of a company have been undervalued.

Even in a world of low interest rates and the so-called 'reach for yield', Harries believes there are income opportunities for investors who are patient and disciplined. Troy has identified around 200 global companies that fit with its criteria, which underpin Francis Brooke's investment approach with the Trojan Income and Troy Income & Growth trust (TIGT). Over the past three years, Trojan Income is up 38.4% versus 24.2% by the sector average. Over the same period, Troy Income & Growth has returned 40.8% in share price terms, compared to 16.4% by the sector average.

Fund manager's process

Harries expects the portfolio to have four key attributes, in line with stocks held across other Troy funds. Firstly, exposure to high quality businesses that can compound both income and capital over the long-term. Secondly, as the group expects inflation to stay low, they will invest in companies that can benefit from a low interest rate environment.

The third characteristic is to hold companies that are out of favour, where they believe a known problem has taken the valuation down to a level where further downside is likely to be limited.

Finally, Harries plans to avoid emerging markets and related sectors and currencies.

'As returns on capital in these economies fall and capital begins to leave, they have to tighten monetary policy at a time not of their choosing and a bust unfolds. Recent action in emerging market debt markets suggest that this dynamic is now set in train,' he explained.

Outside of  income investing, Troy Asset Management has also made a name for itself in the world of absolute return investing with its stellar track record managing the Personal Assets Trust (PNL) under Sebastian Lyon. Over the three years, the trust's share price is up 30.9%, compared to 19.2% by the sector average. The asset manager was named after thoroughbred horse Troy, who was co-owned by General Electric Company's Lord Weinstock and is best known for winning the 200th Epsom Derby under jockey Willie Carson.

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