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Global investment trust looks re-energised with plenty of investment ideas
Thursday 01 Mar 2018 Author: Steven Frazer


As income statistics go, this one is pretty impressive. Brunner Investment Trust (BUT) has increased its annual dividend for the 46th year in a row (subject to shareholder approval, although we wouldn’t expect any trouble there). The 16.5p payout, for the year to 30 November 2017, represents a 4.4% increase on 2016.

There are other investment trusts with similar 40-year plus runs of rising income, but it’s a fairly exclusive club. Peers include City of London Investment Trust (CLIG), Bankers Investment Trust (BNKR) and Alliance Trust (ATST).

Despite this incredible dividend track record many investors have shied away from Brunner in the past because of a couple of poison pills. It’s had expensive debt in the form of fixed-term debentures and a major shareholder that didn’t seem to want to be there anymore.

Investors were spooked by 18.75% shareholder Aviva’s decision to sell the trusts held for many years in the Friends Life portfolio it acquired in 2015. The market expected Aviva to sell its large investment in Brunner, something that’s weighed on sentiment towards the investment trust.

A busy spell of talks seem ready to bear fruit, with a partial solution to the debentures and Aviva apparently happy to stay, releasing shares in an orderly fashion as demand dictates. That could actually boost liquidity in the shares.

Brunner had two long-term debenture which were taken out years ago when interest rates were much higher. The first debenture matured in January this year and has been redeemed by Brunner using its cash reserves.

The second debenture doesn’t mature until 2023. However, the board has looked at various options to repay or refinance this loan.

‘There would be an upfront cost in doing so, but the company would benefit over the long term from a much reduced interest cost and improved earnings profile,’ it said in the recent results statement on 15 February.

‘The board believes that these benefits outweigh the costs and therefore intends to progress this matter further over the coming months.’



Brunner, run by experienced manager Lucy Macdonald of Allianz Global Investors, operates a truly global strategy in its chase for capital and income investments.

Backed by a team of around 80 analysts on the ground, numbers are crunched in just about every corner of the world, with typically around 70% of assets in overseas-listed stocks and the rest in UK companies.

Copper-bottoming the trust’s own dividend stream remains a priority. This explains the presence of typically reliable high-yielding income payers like GlaxoSmithKline (GSK), banks and oil producers. Royal Dutch Shell (RDSB) is currently the trust’s largest single holding worth 3.1% of assets.

Yet Macdonald is increasingly looking for more interesting opportunities beyond the obvious. This includes high cash generative businesses like Microsoft and AbbVie, the US drugs company, which may only yield 2% to 3% but whose own payouts are growing fast (13% forecast in AbbVie’s case).


Traditional industrial companies in the teeth of embracing the needs of a digital future are also attracting Macdonald and her team at Brunner.

Sweden’s industrial tools manufacturer Atlas Copco stands out, as does Adidas. The global sportswear firm is following its chief rival Nike in selling direct to consumers rather than solely relying on retail chains.

Macdonald admits business cost savings implied by Blockchain payments and cloud computing are other areas piquing her interest. Online accounting firm and QuickBooks-owner Intuit is one she admits to liking.

Online gaming is another theme she talks positively about, flagging Call of Duty developer Activision and Tencent, the Chinese social media and gaming giant.



The change of tack is paying off in the trust’s performance and in that of its share price. Net asset value (NAV) rallied 19.4% to 862p last year, beating its benchmark’s 15.1% performance. The benchmark, the FTSE Composite, is built 70% of the FTSE World Ex-UK index and 30% the FTSE All-Share.

More relevant to potential investors is the fact that Brunner’s share price rallied close on 34% over the same period as the discount to NAV narrowed significantly, although the recent stock market correction has since knocked the stock back a bit.

The discount now stands at 11.3% but had been as wide as 20% as those aforementioned share overhang and debt pressures dragged on valuation.


It’s no wonder Macdonald is now trying to actively encourage retail investor interest.

She may have more luck appealing to younger investors, those with many years of working life still ahead of them for the income compounding effects to really play out. They may prove more relaxed about some of the lower yield stocks in the portfolio because they are on faster growth trajectories.

This younger investor demographic may also chime with Brunner’s forward-thinking attitude of embracing of environmental, ethical and socially responsible policy.

‘ESG is firmly integrated into all of our investment processes,’ Macdonald says of the environmental, social and governance thinking that is increasingly becoming a standard in the investment industry.

Competitive ongoing charges of 0.79% and no performance related management fees add to the Brunner Investment Trust’s transparency appeal.

Want to know more about Brunner?

Come to Shares’ investment trust event in London on 15 March where fund manager Lucy Macdonald will be giving a presentation.

Register for free tickets:

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