This was, according to chairman Hugh Twiss, testament to portfolio manager Alex Crooke, “ably assisted” by David Smith, who was recognised by his promotion to co-manager at the start of the year.
In their stock exchange annoucement, Twiss said while the duo had benefited from gearing and from the 'hunt for yield' that favoured the companies in which the trust was largely invested, he said they had avoided many “bear traps” along the way and warned that despite the strong performance over one, three and five years, there was no opportunity for complacency.
NAV per ordinary share was up 23.6% over the year, from 137.32p to 169.72p and while the quarterly dividend was increased in October to 2.125p per share, ambition remained to continue this growth trajectory.
Media and housebuilders look positive
Co-managers Crooke and Smith actively used their gearing facility last year on the £1.75bn trust, increasing at the start of the year to invest in well-valued equities.
They added to media companies, initiating positions in Reed Elsevier and BSkyB, praised for large market shares, strong balance sheets, good cash flow and attractive, growing dividends.
Housebuilder Persimmon was also added to the portfolio where the outlook for the sector looked promising amid government initiatives.
Conversely, the pair sold out of Sainsbury and RSA Insurance.
Keen competition
The former due to declining prospects due to heightened competition from discount supermarkets
Aldi and Lidl and RSA for its “disappointing” dividend cut, to a level they felt was “not attractive enough to compensate for the deteriorating outlook for the company.”
In the fixed income portfolio, new holdings included Arqiva, the UK's national provider of television and radio broadcast infrastructure, and building society Nationwide.
Approximately 25% of the fixed income portfolio is issued in currencies other than sterling, however this exposure is partly offset by borrowings in Euros and US dollars.
On emerging markets, the co-managers heeded caution that currency weaknesses did not escalate to disrupt the global economic recovery and maintained their broadly bullish view on equities over bonds.
Despite two years of strong performance, they believed the asset class had further to rise.