Citywire printed articles sponsored by:
View the article online at http://citywire.co.uk/wealth-manager/article/a629323
Wealth managers unveil their top income trust picks
by Danielle Levy on Nov 07, 2012 at 13:55
The UK Growth & Income investment trust sector offers attractive yields for income-seeking clients, the prospect of capital growth and access to some of the most established managers in the business. But trading on an average premium of 2%, is the sector now looking too expensive?
James Maltin of Rathbones believes the sector is starting to look richly priced. ‘We have made money on a number of these trusts and we are not selling out, but I would caution people not to buy at these levels,’ he said.
He still views UK income-oriented investment trusts as attractive in comparison to their open-ended counterparts and is happy to remain in holdings, but is in no rush to increase exposure. He highlights Temple Bar , which is yielding 3.7% and trading on a premium of 2.2%, alongside Troy Income & Growth , trading on a 1.6% premium with a 3.6% yield, as top picks.
John Newlands (pictured), head of investment company research at Brewin Dolphin, is more sanguine, saying that even though discounts are now looking tighter and a number of trusts are trading at a premium, he is ‘staggered at the range of quality in the sector’.
‘In today’s investment climate, it is very hard to get a useful return on fixed income markets, gilts don’t look rewarding, so I still see a place for [income investment trusts],’ he explained.
He currently views Neil Woodford’s Edinburgh Investment trust as ‘far too expensive’. It has an attractive 4.3% yield, but trades on a 2.7% premium. However, Newlands says the manager has delivered even though the trust has an awkward capital structure.
Mark Barnett’s Perpetual Income & Growth remains his ‘absolute favourite’ in the sector, yielding 3.8% and sitting on a slightly smaller 1.2% premium, while he is also positive on Finsbury Growth & Income and Standard Life Equity Income .
Mick Gilligan, head of research at Killik & Co, views Nick McLeod-Clarke’s BlackRock Income & Growth as a potential buy, on a 6.2% discount and a 3.7% yield, pointing to his track record of achieving dividend growth.
‘Since the start of the year the performance in the sector has been up 17%, and they are up 13%, but I think they have done a reasonable job over time, so on a 6% discount it looks attractive to me,’ Gilligan said.
He also views Standard Life Equity Income on a 4% discount as potentially attractive, and is backing Perpetual Income & Growth over Edinburgh.
News sponsored by:
Citywire 10k run: the 28 teams & 173 runners set to do battle
We reveal the teams and runners who have committed to take part in our annual fundraiser at Regent's Park later this month.
Today's top headlines
More about this:
Look up the funds
Look up the shares
Look up the investment trusts
- Temple Bar (Ordinary Share)
- Troy Income & Growth (Ordinary Share)
- Finsbury Growth & Income (Ordinary Share)
- Standard Life Equity Income (Ordinary Share)
- BlackRock Income and Growth (Ordinary Share)
- Lowland (Ordinary Share)
- Schroder Income Growth (Ordinary Share)
Look up the fund managers
Aberdeen Live supplement: Fundamentals point to ongoing flows and solid returns from EMD
After a record year for inflows and market-leading performance in 2012, emerging market debt has taken a large step towards the mainstream. Our recent debate covers the outlook for the asset class this year and where opportunities can be found.
On the road
J.P. Morgan Elect on investment growth, income and cash. More information on J.P. Morgan investment trusts.