The chair of the Independent Investment Trust has grumbled about it being relegated to the UK All Companies sector even though that is where it currently invests 83% of its portfolio.
The £302.9m investment trust was one of 90 closed-ended funds that changed sectors as part of the Association of Investment Companies’ shake-up of its categorisation system.
Former Baillie Gifford partner Douglas McDougall said in the half-year report, published on Monday: “Previously we were listed as a global trust, but we are now classified as a UK trust. It is true that most of our money has been invested in UK equities in recent years, but we have always had – and intend to retain – the freedom to invest in quoted equities wherever they are listed.
“We regret the fact that our new classification may mislead potential investors into believing that it is a permanent part of our formal investment policy to have a high UK stake.”
McDougall said the AIC’s shake up of categories had been unilateral.
However, AIC communications director Annabel Brodie Smith said it undertook a year-long review in consultation with member companies to ensure the revised sectors were “as helpful as possible to investors”. The independent statistics committee oversaw the review and consisted of brokers, research analysts and data providers.
‘This trust doesn’t neatly fit into a box’
Tilney managing director Jason Hollands pointed out Morningstar goes a step further than the AIC and categorises the trust as a UK Small-Cap Equity investment.
The largest weightings in the trust are Fevertree, Redrow, Ashtead and the Herald Investment Trust, according to the AIC. It has 83% in the UK and 2% each in Australia, Ireland and the US with the remainder in cash.
“This trust doesn’t neatly fit into a box,” said Hollands. “The stated objective is to invest ‘the great majority of its assets in UK and international quoted securities’ and both the FTSE All Share Index and FTSE World Index are used in its reporting as performance comparisons.”
However, he said with little exposure to overseas exchanges the trust “looks infinitely more like a UK equity portfolio than a global one”.
Kepler fund research from July 2018 highlighted the Independent Investment Trust was “effectively a UK equity portfolio” even though it then sat in the AIC Global sector, stating its heavy UK exposure had contributed to underperformance following the Brexit vote. However, from 2017, the trust had delivered “handsome” returns, the note said.
