Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

Mark Barnett set for cheaper debt boost

Mark Barnett set for cheaper debt boost

The £1.4 billion Edinburgh Investment Trust, managed by Citywire AAA-rated Mark Barnett, will soon begin to benefit from far lower borrowing costs.

Edinburgh is currently geared through two debentures, one for £100 million at 7.75% dated 2022 and another for the same amount at a rate of 11.5%.

This more expensive debenture matures in June, and the trust’s chair Jim Pettigrew has now confirmed a cheaper £100 million credit line has been negotiated with the Bank of New York Mellon.

‘The new facility will be available for the debenture’s redemption date of 30 June 2014, and will represent a material saving in interest costs for the company,’ stated Pettigrew.

In both of the past two years ended 31 March, Edinburgh has paid out £19.5 million in borrowing costs – more than it has in management fees, which were £11.8 million this year and £17.5 million in 2013. The interest also represented a substantial proportion of the trust’s total income this year of £55.4 million.

Barnett (pictured) added that ‘the overall cost of borrowing will be significantly reduced’ by the new debenture, and confirmed that he would ‘continue to use the gearing facility to seek enhanced returns’.

Over the past three years Edinburgh has returned 49% on a net asset value basis, compared with 31% from the FTSE All Share index.

The trust is also seeking to change its gearing policy from a fixed absolute cap of £200 million to a relative one set at 25% of net assets. The portfolio is currently 15% geared.

‘I can assure shareholders that it is not the current intention of the manager to increase gearing to 25%, but to provide more flexibility,’ explained Pettigrew.

Barnett took responsibility for Edinburgh from Neil Woodford in January, with the board also securing from Invesco Perpetual a reduction in the annual fee from 0.6% to 0.55% and the dropping of the performance fee, as well as a cut of £7.5 million to the performance fee payable for the year ended 31 March 2014.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
CIO Tapes 2: two warnings and a lot of optimism

CIO Tapes 2: two warnings and a lot of optimism

Our group of leading asset management CIOs see a lot of opportunities – and overseas investors are buying UK too

Play Wealth Manager Retreat 2017: size isn't everything

Wealth Manager Retreat 2017: size isn't everything

We asked our delegates at the Wealth Manager Retreat what they think about the recent wave of consolidation in the industry.

1 Comment Play CIO Tapes - part 3: 'passive funds are anti-capitalist'

CIO Tapes - part 3: 'passive funds are anti-capitalist'

Citywire recently gathered three of the UK's leading fund investment heads to discuss their hopes, fears and the issues that their jobs throw at them daily.

Read More
Your Business: Cover Star Club

Profile: Thomas Miller explains its post-restructure plans

Profile: Thomas Miller explains its post-restructure plans

Thomas Miller Investment’s (TMI) head of wealth Matt Phillips has strong opinions about many things

Wealth Manager on Twitter
Managing risk, unearthing returns
  • A-rated Beagles sells down Brewin Dolphin
  • Electoral Commission reopens Vote Leave probe
  • City grandee says HBOS crisis 'worst moment' of his career
  • Ex-OMGI duo enters model portfolio market with new boutique
  • Abolish stamp duty: six wealth managers' Budget wish lists
  • James Carthew: is the Japanese glass half full, empty, or illusory?
  • The Expert View: William Hill, Mitie and Xaar
  • Overnight Markets: Tech shares buoy Wall Street
  • Tuesday Papers: May told to exploit Merkel crisis to reduce Brexit bill
  • Investors brush off German government worries
  • Buy-to-let crackdown? Charles Stanley's 5 Budget calls
  • Brewin Dolphin's south west assets hit £1bn
  • Wealth Manager Top 100 2017: seven hidden fund talents to watch
  • Read More