Promising early signs from rebooted investment trust
The first set of results to include a full 12 months’ trading since the merger of BlackRock Income Strategies Trust and Aberdeen UK Tracker make for positive reading at Aberdeen Diversified Income and Growth (ADIG).
The trust was launched in its current format in February 2017 and the latest results show 8% total return to shareholders for the year to 31 March 2018.
It aims to deliver a return of Libor +5.5% after fees over rolling five year periods. The latest result is clearly in line with its stated objective as libor plus 5.5% net of fees over the last 12 months is equivalent to a return of 6% according to the trust’s chairman James Long.
Investors should be happy with the performance for two reasons. First, it compares favourably to the various benchmarks the trust tracks due to its variety of assets.
Global equities, represented by the MSCI All Country World Index, returned 1.8%; UK equities reflected by the FTSE All Share Index returned 1.3%; while UK bonds shown by the FTA UK Conventional Gilts All Stocks Index made 0.5%.
Second, it vindicates the decision in 2016 to sack BlackRock as the manager after a year and a half in charge and bring in Aberdeen. BlackRock had been hired to revive the product originally known as British Assets Trust but failed to deliver a decent performance.
It is worth noting the 8% total return over the past 12 months was helped by a narrowing of the discount to net asset value (NAV). NAV on its own rose by 4.5% on a total return basis so there is still some work to do in order to hit the performance goal.
The investment trust is led by two veteran managers, Mike Brooks and Tony Foster, who have a lot of experience across a broad range of asset classes.
The use of a variety of asset types is a well-established method of keeping volatility down in the fund and was a key part of the portfolio reorganisation when the new management took over.
The switch to Aberdeen saw the dividend cut by 20% to an annual rate of at least 5.2p per share, which equates to a dividend yield of 4.3% based on the current share price of 122p. At the half year stage, it had declared 2.62p in dividends.
In February, investment trust analyst Innes Urquhart at financial services group Winterflood said Aberdeen Diversified Income and Growth was a ‘considerably more attractive proposition than it was in its previous guise’.
The analyst said it was too early to judge the performance and that the real test would be in more difficult market conditions.
Want to know more about Aberdeen Diversified Income and Growth?
Come to Shares’ investment trust event in London on 3 July where fund manager Tony Foster will be giving a presentation and taking part in a panel discussion.
Register for free tickets: www.sharesmagazine.co.uk/events