In an analyst note sent out today, Canaccord Genuity’s Alan Brierley said the trust’s focus on yield had proved a drag on its performance since the spring in what have been relatively buoyant markets.
Back in March the company proposed seeking shareholder approval to amend its investment policy: changing it from passive to active; giving it a focus on providing investors with an above average dividend income and long-term capital growth; and changing the name from Edinburgh US Tracker Trust to North American Income Trust.
Responsibility for the company lies with Paul Atkinson, Aberdeen’s head of North American Equities and his Philadelphia-based team.
“The historical performance of Aberdeen’s US equity team has been indifferent although there has been no specific income mandate.
Given that US large cap equities are arguably the most comprehensively researched in the world, we have reservations about the portability of the investment style,” said Brierley.
The yield target for the trust is 3.5% and with effect from next year the dividends will be paid quarterly. While the S&P 500 is the key focus, the manager will be able to invest up to 20% of gross assets in fixed income and may also invest in small- and mid-cap US stocks as well as Canadian firms.
“Aberdeen looks to make long-term investments in quality companies on attractive valuations with extensive research forming a key part of the stock selection process. Arguably this has work3ed most successfully in Asia and we note the recent announcement of a potential C share issue for the Aberdeen Asian Income Fund.
“However, we believe the Asian research team is much stronger than its US counterpart while they are operating in markets that are not as efficiently researched and this represents a significant competitive advantage,” concluded Brierley.
