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Manager Alasdair McKinnon is a well-known contrarian investor but his style has failed to keep up in the current value rally
Thursday 10 Jun 2021 Author: Mark Gardner

Value-focused investment trust Scottish Investment Trust (SCIN) is looking at options to replace manager Alasdair McKinnon after its board of directors lost patience with poor returns.

This comes as the trust has significantly lagged its peers over a five-year period and, more damagingly, in the current value rally which should favour its investment approach.

In 2015 the trust appointed McKinnon as it adopted a high conviction, global contrarian investment approach with the view at least five years would be needed to evaluate returns under this mandate.

The trust doesn’t have a formal benchmark but in a statement announcing a ‘review of investment management arrangements’, it compared the net asset value total return to the MSCI All Country World Index over five years.

The trust has significantly underperformed the index in that timeframe, returning 59.21% according to FE Analytics, compared to a 92.35% return from the index. The trust also trades at a 10.4% discount to net asset value.

It has underperformed all other value-focused trusts, funds and exchange-traded funds since the value rally began, with its 18% return since 1 November hugely underwhelming when compared for example to the Chelverton UK Dividend Trust (SDV), which has returned over 100% in that timeframe.

The trust’s board says it’s looking for proposals to take over the trust from established fund management groups with the experience of managing listed closed-ended funds, ‘designed to deliver, over the longer term, above index returns through a diversified global portfolio of attractively valued companies with good earnings prospects and sustainable dividend growth.’

Though they’re also keen to stress proposals will be considered alongside the current management, given its robust short-term performance with the trust up 13.9% compared to 8.8% for the MSCI AC World index over the last six months.


Analysts say the trust is likely to be ‘overwhelmed with suitors’ given its large following.

Winterflood analyst Simon Elliott says the big decision for the board is likely to be whether they persevere with a value style or appoint a manager with a broader starting point, and wonders if they’ll consider a merger with another investment trust.

He adds: ‘There have been several instances of this in recent years, and there are advantages in providing greater scale, including a lower cost base, as well as offering greater liquidity in the secondary market.’

Numis analysts comment: ‘The manager has had some success marketing to retail through the press, but it remains off the radar of many investors and has lived up to its ugly-duckling pitch in its marketing materials.’

They don’t think there will be ‘anything that radical’ out of the trust’s review, but also point out it is ‘difficult to predict the result of a beauty parade’.

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