Bankers Investment Trust: July 2023 update

• Alex Crooke is an experienced investor supported by a highly resourced team
• The trust’s dividend increased for the 56th successive year
• Long-term returns have been attractive though the trust hasn’t performed as well as the benchmark more recently

How it fits in a portfolio

Bankers Investment Trust aims to grow income and capital over the longer term by investing in companies from around the globe. The trust’s focus on cash generation means it typically invests in more established companies from developed regions like the US, Europe and Japan. It also has some exposure to emerging markets, as well as smaller companies, both of which are higher risk.

The trust is invested quite differently from the benchmark, so performance can also be different, while it could offer diversification against other globally focused investments. Blending both value and growth companies, the trust could work alongside other investments which have a more distinct style, or simply provide global diversification to a broader investment portfolio.

Manager

Alex Crooke has managed the trust since June 2003. A graduate of Manchester University, Crooke started his career in 1990 as a US equities analyst for Equitable Life Assurance Society. He joined Henderson (now Janus Henderson) in 1994 and is currently Head of Equities – Europe, Middle East, Africa and Asia Pacific.

He has plenty of resource at his disposal and delegates the stock picking to six individual managers at Janus Henderson. Each has a different area of expertise which Crooke carefully blends to create a diversified portfolio.

The Board of Directors also play an important role in monitoring the trust’s operational performance. Simon Miller became Chair of the Board from 24 February 2022 following Sue Inglis’ retirement. Simon brings with him a wealth of experience from previous positions including as Chairman of Brewin Dolphin and several other investment trusts.

Process

The trust is split into six regional sleeves: UK, Europe (excluding UK), North America, Japan, Asia Pacific (excluding Japan) and China. Each sleeve has its own dedicated manager who is given autonomy to invest where they see fit. While each manager implements their own investment style, what unites them is a focus on companies with strong cash flows.

Crooke is responsible for selecting the underlying managers and choosing how much to invest with each one. He does this based on his view of the economic situation in each area, and which regions he believes can provide sustainable dividend growth. He tends to look at the world with a three to five-year view, so the managers don’t change too often. He’s flexible though and will react quickly in response to major economic events such as Brexit or Covid-19.

Asset allocation has changed dramatically since Crooke took charge in 2003. Back then over 50% of the trust’s assets were allocated to the UK. That figure is now closer to 17%. The trust’s benchmark changed in 2017 from the FTSE All Share to the FTSE World to reflect the change in geographical diversification, although the investment philosophy and process didn’t change.

North America is the largest sleeve with around 38% invested here, though this is less than the benchmark and it only accounts for around 18% of the income generated. The aim is that it also contributes to growth though. In contrast, companies from Europe and the UK generate around 45% of the income, whilst only making up around 34% of the trust.

Financials, industrials and technology are the largest sectors in the trust. Exposure to consumer discretionary has recently reduced to around 12% of the trust compared with 17% in 2021.

Crooke recently decided to change the manager for the North America sleeve of the portfolio. Jeremiah Buckley was appointed in mid-December 2022. Crooke believes that over the coming years a more blended approach is likely to perform better. Gordon Mackay who previously managed the North America sleeve was a more growth-orientated manager.

Each of the underlying managers have been active over the past year. In Europe, the weak economic environment gave an opportunity to add to quality companies at a weaker share price, James Ross therefore initiated a trade in Airbus, a global leader in aircraft manufacturing. Deutsche Boerse, the German financial exchange was also added due to the increase in trades from market volatility. In the UK manager David Smith added Spectris to the portfolio. Spectris are a supplier of precision instrumentation and controls, they have a strong franchise in a niche market and, after selling off the weaker performing parts of the business, they have been left with a better quality business with higher margins.

There were a number of companies sold in the Japanese portfolio, Otsuka Corp and Softbank Group were sold after their original investment case became invalid and Nomura Research Institute was also sold as it met its price target. In the Pacific ex Japan and China portfolio there was also a number of changes. The managers lowered their exposure to the semi-conductor industry by selling MediaTek and reducing their position in TSMC. Their view is that there will be weaker demand for computing and smartphone products.

Crooke has flexibility to use derivatives and gearing (borrowing to invest) which, if used, adds risk. Gearing at the end of May 2023 stood at 7%.

Culture

Bankers Investment Trust was established in 1888 and is a constituent of the FTSE 250 Index. It’s managed by Janus Henderson Investors, a large investment firm with offices all over the world. The firm was formed in 2017 from the merger of two long-established groups – US-based Janus Capital Group and Henderson Global Investors. 

They value experience, and so fund managers at the group have on average over two decades of investment experience. Sharing knowledge and ideas between investment teams is an important part of the culture. Managers have the flexibility to tap into the wider group’s resources for ideas and insights, but also have the freedom to do their own research and form their own views without having a ‘house view’ placed on them.

ESG Integration

Janus Henderson aims to be a responsible steward of investors’ money, and ESG is an important part of this. All fund managers have access to ESG scoring models and customised ESG research, but the firm believes ESG considerations should go beyond examining numbers. Company site visits, speaking to workers and questioning company management are just some of the ways fund managers are expected to actively assess a company’s ESG credentials.

Investment teams across Janus Henderson actively engage with the companies they invest in, and the firm’s longstanding Governance & Stewardship team provides centralised support on voting and engagement. The ESG Investment Research team carries out ESG analysis with a consistent methodology across markets with a focus on financial materiality.

When it comes to voting, Janus Henderson has a Proxy Voting Committee, which is responsible for establishing the firm’s position on major voting issues and creating guidelines overseeing the voting process. The Committee is comprised of representatives from various business areas, including portfolio management, corporate governance, accounting and compliance. The firm’s full proxy voting history is published annually, although no rationale is provided. There is more detail on voting and engagement, including case studies, in the firm’s annual ESG Company Engagement & Voting Review report and the ESG Quarterly Review – a summary of the firm’s ESG related activities.

Cost

The ongoing annual charge over the trust’s financial year to 31 October 2022 was 0.50% compared with 0.48% for the previous financial year. Investors should refer to the latest annual reports and accounts, and Key Information Document for details of the risks and charging structure.

If held in a SIPP or ISA the HL platform charge of 0.45% (capped at £200 for a SIPP and £45 for an ISA) per annum also applies. The platform charge doesn’t apply if the trust is held in a Fund and Share Account.

Investment trusts trade like shares, both a buy and sell instruction will be subject to the HL share dealing charges where applicable.

Performance

Alex Crooke has delivered strong returns since becoming the trust’s manager in 2003. Over this period, the trust’s share price has grown by 561.74%* versus 535.66% of the AIC Global peer group. Performance is marginally behind the FTSE World benchmark, which has returned 587.00% although this hasn’t always been the Trust’s benchmark. Its net asset value (NAV) has also grown by 159.03% over the last 10 years. Remember all investments will rise and fall in value, so you could get back less than you invest. Past performance isn’t a guide to the future.

Over the trust’s last financial year to the end of October 2022, its NAV fell 11.3% versus a fall of 2.8% for the benchmark. The share price fell 13.4% over the same period.

Country allocation detracted over this period and all six sleeves underperformed their regional benchmarks. The China portfolio was the largest detractor and underperformed the Chinese benchmark by 6.1%. Within that consumer staples, consumer discretionary and industrials were the largest detractors. The North America portfolio which was still run by Mackay at the time was also a large detractor. The portfolio underperformed the North America benchmark by 6%. Cosmetic company Estée Lauder and software company Intuit were among the detractors, having been strong performers in prior years.

Europe was the best performing region for the Trust despite underperforming the regional benchmark. With interest rates and inflation expectations rising sharply across Europe the best performing companies were in the financial sector. UniCredit, Bawag, Munich Re and Sampo performed strongly from higher interest rates. The high oil price also benefited French energy and petroleum company TotalEnergies.

The trust’s dividend per share for 2022 (to the end of October) was 2.328p, 7% higher than the previous year. The trust currently yields 2.35% and trades at a discount of 11.64%. Please note yields are variable and not a guide to the income you’ll receive in future.

Annual percentage growth

Past performance isn't a guide to the future. Source: *Lipper IM to 30/06/2023.

Find out more about Bankers Investment Trust including charges

Bankers Investment Trust Key Investor Information

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