- James de Uphaugh is an experienced investor and leads the Liontrust Global Fundamental team
- The trust has performed well since de Uphaugh took over as lead manager in March 2020
- The focus is on providing a balance between longer-term income and capital growth
How it fits in a portfolio
Edinburgh Investment Trust invests mainly in larger UK companies with an aim to provide a balance of long-term income and capital growth. The trust has a twin objective of increasing Net Asset Value (NAV) more than the FTSE All Share index and growing dividends per share faster than the rate of UK inflation. It could therefore fit as part of an income-focused investment portfolio or add exposure to larger UK companies in a broader, diversified portfolio.
Investors in closed-ended funds should be aware the trust can trade at a discount or premium to NAV.
Manager
The trust is managed by James de Uphaugh. de Uphaugh, who was previously Chairman and Chief Investment Officer at Majedie after co-founding the business in 2002, now heads up the Liontrust Global Fundamental Team. Before co-founding Majedie he was a Managing Director at Mercury Asset Management (subsequently acquired by Merrill Lynch and now BlackRock), having joined Mercury Asset Management in 1988.
de Uphaugh is supported by deputy fund manager Chris Field. Field was previously Executive Director at Majedie, and like de Uphaugh, is now a member of the Liontrust Global Fundamental team. Before co-founding Majedie he was a Director at Mercury Asset Management. He joined Rowan Investment Managers (a predecessor firm to Mercury Asset Management) in 1980.
The managers benefit from the support of a wider investment team of fund managers, analysts and responsible investment specialists. As with any investment trust the board oversee the management of the company for its shareholders. With six members it has a broad range of financial and investment experience which should ensure it’s able to hold the trust managers to account.
Process
Edinburgh Investment Trust mainly invests in larger UK companies with a small allocation to overseas companies. The objective is for returns to come from a balance of long-term capital and income growth. This approach limits the reliance on either income or capital to drive returns which could result in a smoother ride. The trust tends to be concentrated with around 40-50 holdings, which means each investment could have a big impact on performance and increases risk.
de Uphaugh is not wedded to a single investment style. He looks for good quality companies with sustainable business models and quality management teams whose shares are attractively valued and can be bought for less than the company’s true worth. He can invest in companies growing strongly, or in those going through a restructuring or recovery. He considers the state of the economy, geopolitical developments, as well as company specific characteristics when making investments. He’s patient and aims to invest for the long term, which means he doesn’t buy and sell companies frequently. de Uphaugh invests a relatively small portion of the trust’s assets overseas and at its financial year end in March, this figure stood at 7.7%.
In the year to the end of March 2023, de Uphaugh made a number of changes to the portfolio. This included an investment in BP with the manager optimistic about the improving prospects for investor returns over the medium term. The manager sold the trust’s investments in beverage manufacturer Diageo and consumer goods business Reckitt Benckiser, feeling that the share prices fully captured the opportunity ahead of those companies.
The trust can borrow money to invest with the intention of increasing returns (known as gearing), but this could magnify losses in a falling market and increases risk. The manager can also use derivatives, which if used adds risk. The level of gearing as of the end of March (the end of the trust’s financial year) was 4.7%, up 0.3% from a year earlier. In addition, there may be some investment in smaller companies which, by their nature, can be higher risk and illiquid investments.
Culture
Liontrust gives managers the freedom to manage their funds according to their own investment and market views. The company simply asks managers not to deviate from their investment processes. Each manager's portfolios are regularly checked by other senior managers at Liontrust to ensure they're staying true to their investment processes.
We like that all Liontrust fund managers invest a significant amount of their own money into the portfolios they run, and their incentivisation is tied to the performance of the funds they manage. We think these factors help to align their interests with those of investors. The team produces regular insight articles which are available via the Liontrust website.
ESG Integration
The manager thinks that ESG (Environmental, Social and Governance) factors have financial implications for the trust’s investments so incorporates them into company analysis. de Uphaugh prioritises and engages with companies on material ESG issues and the outcomes from these engagements inform ongoing conviction and investment decisions.
The quality of ESG integration varies across Liontrust because the firm gives fund managers the freedom to run their portfolios according to their own investment and market views. All they ask is for managers to stick to their investment processes. Some managers have chosen to fully integrate ESG, while others are still developing their approach.
Liontrust publicly disclose all voting decisions on a quarterly basis. They also communicate their voting intentions to companies and engage with them on issues of contention to encourage change.
Cost
The annual ongoing charge to March 2023 was 0.53%. Investors should refer to the latest annual reports and accounts, and Key Investor Information Document for details of the risks and charging structure.
If held in a SIPP or ISA the HL platform fee of 0.45% per annum (capped at £200 per annum for a SIPP and £45 for an ISA) also applies. Our platform fee doesn’t apply if held in a Fund and Share Account. Part or all of the annual charge is taken from capital rather than income generated, increasing the potential for your investment’s capital value to be eroded.
Performance
The trust has performed well since de Uphaugh took over as lead manager in March 2020, albeit this is a relatively short period of time to assess performance over. From 4 March 2020 to the end of May 2023, Edinburgh Investment Trust has delivered a return of 37.62% to investors, which compares favourably with the FTSE All Share return of 19.44%. de Uphaugh also has a good longer-term record as a manager of other funds, although this shouldn’t be used as an indication for future returns and past performance is not a guide to the future.
Over the 12 months to the end of March 2023, the trust’s NAV rose 7.9%, while its share price rose 8.4%. This compares with a return of 2.9% for the FTSE All Share index. The difference between the trust’s share price return and the NAV return is explained by a small narrowing of the trust’s discount. Over this period, the main contributors to the trust’s performance were aerospace and defence company BAE Systems, bank NatWest and energy business, Centrica. The largest negative contributors to performance came from mining companies Anglo American and Newmont.
The board has proposed a total dividend for the year to the end of March 2023 of 26.20p per share. This is a 5.6% increase on the previous year, excluding special dividends. As was the case last year, a small amount of this year’s dividend payment is partially funded by using some of the trust’s revenue reserves. This method of boosting the income paid to investors is used by investment trusts during tougher times, using reserves that have been accumulated during the good times.
At the time of writing, the trust trades on a discount of 7.52% and has a dividend yield of 3.98%. Please remember that dividends are variable and not guaranteed.
Annual percentage growth
| May 18 – May 19 | May 19 – May 20 | May 20 – May 21 | May 21 – May 22 | May 22 – May 23 | |
| Edinburgh Investment Trust | -10.23% | -18.82% | 47.05% | 5.89% | 4.34% |
| FTSE All Share | -3.17% | -11.16% | 23.13% | 8.27% | 0.44% |
Past performance is not a guide to the future. Source: Lipper IM to 31/05/2023.
FIND OUT MORE ABOUT EDINBURGH INVESTMENT TRUST INCLUDING CHARGES
VIEW EDINBURGH INVESTMENT TRUST KEY INFORMATION DOCUMENT
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