It’s a new start for Perpetual Income & Growth and Edinburgh Investment Trust
Thursday 26 Nov 2020 Author: Daniel Coatsworth

Six months since the departure of Mark Barnett from asset manager Invesco, two investment trusts previously run by the once-star fund manager have finally settled into their new homes. Investors are rightfully expecting better performance under the new managers, but what’s in store for them?

Perpetual Income & Growth Trust last week completed its merger with Murray Income Trust (MUT), with shareholders now owning stock in the latter company managed by Aberdeen Standard Investments. They’ve already benefitted from a narrowing of the discount to net asset value ahead of the merger, and now they’re getting lower charges and more of a quality focus (versus the former          value style).

In March the management of Edinburgh Investment Trust (EDIN) switched from Invesco to Majedie, which has just published the trust’s first financial results under its stewardship. For the six months to 30 September, Edinburgh Investment Trust outperformed the market with 7.8% increase in net asset value versus 7% from the FTSE All-Share.


Barnett was considered by many to have taken wild bets on the wrong stocks and deviated from the investment style which created his original success, exactly like Neil Woodford with whom he used to work at Invesco.

He had already been served notice as manager of Edinburgh Investment Trust in December 2019 and Majedie took over four months later. Perpetual Income & Growth sacked Barnett in April which then led to a merger with Murray rather than a straightforward manager change.

Barnett also ran the Invesco UK Equity Income (BJ04HX6) and Invesco UK Equity High Income (BJ04HQ9) funds, as they are now known, which suffered from large outflows as investors took their money elsewhere due to poor performance. In the end, Invesco parted ways with Barnett in May.


‘We are diversified by sector and income,’ says Murray manager Charles Luke, the man responsible for delivering better returns to shareholders who have moved over from Perpetual Income & Growth.

‘The focus is on high quality companies and resilient income. We benefit from having a 16-strong team providing full coverage of FTSE 350 constituents, so we have lots of research and corporate access. We have a patient buy and hold approach.’

The top positions include AstraZeneca (AZN), Unilever (ULVR) and Diageo (DGE). One third of the portfolio is mid cap stocks such as Close Brothers (CBG) and Inchcape (INCH).

Only 10 holdings from Perpetual Income & Growth’s old portfolio feature in Murray’s, including SSE (SSE), Roche, Rio Tinto (RIO) and National Grid (NG.)

Luke says Murray should see greater liquidity in its shares which, combined with lower charges and a higher profile with the trust now worth approximately £1 billion, should help to reduce its discount to net asset value. The latter has already happened in recent days with the shares trading at a 2% premium as at 20 November versus a 12-month average discount of 4.2% according to Winterflood data.

Just prior to the merger, Luke says Murray was yielding 4.7% with 0.7% of that figure coming from options writing. ‘4% yield longer term is very sustainable,’ he comments, adding that on a calendar year basis Murray has only seen a 15% drop in income from its portfolio holdings versus a 45% drop across the market as companies temporarily pause or reset dividends.


Edinburgh Investment Trust continues to have a value tilt under the new management of Majedie, yet it is not taking any big bets on certain stocks or sectors like Barnett did.

The trust’s performance is likely to be less volatile under new manager James de Uphaugh, who says part of his pitch to the board for winning the management mandate was the fact he had a track record of more than a decade outperforming the market by 2.6% a year on average.

One could view him as a ‘Steady Eddie’ type of investor and one trying to achieve a mixture of income and capital growth.

Only six stocks from Barnett’s former portfolio are staying in Edinburgh Investment Trust as core holdings, including BAE Systems (BA.), Legal & General (LGEN) and Tesco (TSCO). All the tobacco investments loved by Barnett are gone, and more recently de Uphaugh decreased positions in real estate and financials and increased exposure to mining and healthcare.

Overseas-listed stocks account for 7% of the portfolio. De Uphaugh indicates this figure would have probably been higher had sterling not been so weak earlier this year. ‘We felt sterling was undervalued,’ he says.

Edinburgh Investment Trust’s goal is to achieve greater net asset value growth than the FTSE All-Share and achieve dividend growth above the rate of UK inflation. It is currently yielding 5.6% based on guidance for 28.65p worth of dividends in the year to March 2021 and a share price of 515.25p.

The dividend will be reset to 24p thereafter, so that Edinburgh Investment Trust has a chance of achieving annual dividend growth in an environment where so many companies have decided to be less generous with their own dividends going forward. That implies a forward yield of 4.7% which is still a much greater return that you’d typically find on cash and even many corporate bonds in the current environment.

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