Troy Trojan Global Income: June 2020 fund update

Jonathon Curtis | Tue 30 June 2020

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• James Harries is one of the most experienced global income managers in the UK
• His focus on high-quality companies has earned him one of the strongest track records in the sector
• We think his straightforward and patient approach makes him a good match with Troy
• This fund has been added to the Wealth Shortlist of funds chosen by our analysts for their long-term potential

How it fits in a portfolio

This fund is focused on delivering growth in both income and capital over the long term. It’s aimed at investors more concerned with growing their income sustainably over time rather than seeking higher but potentially unreliable yields. The manager’s emphasis on high-quality businesses means the fund could work well alongside ‘value’ funds investing in unloved companies. Its global reach could also make it a good option for adding international diversification to a portfolio.

Manager

James Harries has managed this fund since it launched in November 2016. He’s one of the most experienced global income investors around, having run global income funds since 2005 at Newton Investment Management. He left Newton to join Troy Asset Management in 2016, and we think he’s a very good cultural fit at the business. This is the only fund he runs, which we like, as he can totally focus on managing this portfolio.

Harries is supported by Tomasz Boniek, who’s the fund’s assistant manager. He joined Troy in 2017 and helps Harries with the analysis and selection of global companies. While we don’t doubt Boniek’s skill, our conviction lies with Harries. We think he’s got one of the strongest track records in the sector, and we like his simple, disciplined and patient investment style.

Process

James Harries’ approach has all the hallmarks of a Troy fund – a focus on large, financially robust companies, whose products and services are generally always in demand. He can look anywhere in the world to find them, but rarely looks among higher-risk emerging markets. A little under half the portfolio is invested in US companies, which is a lot less than the broader global benchmark. The remainder is invested in the UK and Europe.

The portfolio is currently composed of just over 30 names. This relatively small number means each stock has the potential to make a big impact on returns, but it’s a higher-risk approach. Around 40% is currently invested in companies making everyday consumer goods, but Harries is planning to bring this portion down. He’s also found a lot of opportunities in the healthcare and technology sectors.

Harries prefers to invest in companies for the long term. That means he usually owns them for many years, and doesn’t tend to buy or sell much. During the recent market volatility though, he took the opportunity to invest in two companies he thinks are high quality and were available at attractive prices – international hotel operator Intercontinental Hotels Group, and CME Group, which is the world’s largest financial exchange.

Although an income fund, Harries is more focused on the fund’s total return rather than income alone. The yield is currently higher than the broader global benchmark at 2.9% (variable and not guaranteed), but Harries would sacrifice yield if he thought it would improve long-term returns. Having said that, charges are taken from capital, which can increase the yield but reduces the potential for capital growth. The fund can use derivatives, which if used increases risk.

Culture

Troy Asset Management is an independent ‘boutique’ investment company. The majority of the business is owned by the managers and fund managers. We view this positively, as it means both the business and the funds are run with a very long-term view and managers’ interests are aligned with investors.

Protecting investors’ wealth has always been the most important thing at Troy. The managers believe that’s the best starting point for growing wealth over the long term. All Troy funds are run along the same lines – disciplined and patiently investing in a small number of high-quality holdings. Managers of different Troy funds all contribute to the thorough research of around 200 companies deemed suitable for Troy portfolios, creating a collegiate environment.

Cost

The fund is available for an annual ongoing charge of 0.95%. We think this is on the high side when compared with other global income funds, and means Harries has a bigger hurdle to deliver positive returns. We recognise, however, the value he’s added above these charges since the fund began. Our platform charge of up to 0.45% per annum also applies.

Performance

The fund has performed strongly since Harries launched it in November 2016. He’s delivered a 32.6%* gain, making it one of the best performers in the IA Global Equity Income sector, although it hasn’t quite beaten the FTSE World index. Remember past performance isn’t a guide to the future.

Harries’ record goes back much further than that though. Looking at it from the end of 2005, our analysis suggests his performance has been driven mainly by investing in the right areas at the right time rather than his stock-picking, which has nonetheless been positive. Given his fairly conservative approach, Harries’ best performance has been during falling markets, as his funds have usually held up much better, but they’ve normally lagged rising markets.

That’s been the case recently as well. The fund’s been one of the least volatile in the sector, and again among the sector’s top performers since the start of what’s so far been a very volatile year. We’d expect Harries to continue delivering good performance, particularly during market wobbles, although there are no guarantees.

All investments can fall as well as rise in value, so you could get back less than you invest.

Past performance is not a guide to the future. N/A Full year past performance prior to 2017 is unavailable. Source: Lipper IM to *31/05/2020

More on Troy Trojan Global Income, including charges

Troy Trojan Global Income Key Investor Information