Brunner benefits from tech underweight as dividends rise for 51st year

Brunner Investment Trust’s underweight to the tech sector allowed it to steer clear of the many headwinds thrown at global equity markets in 2022.

For the year to 30 November, the trust posted total returns of 1.4%.

This mirrored its composite benchmark, covering the 70% FTSE World ex-UK and 30% FTSE All Share indexes, which also returned 1.4%.

On a net asset value (NAV) per ordinary share basis, the trust rose 3% in what lead portfolio manager Christian Schneider described as a “dramatic 12 months for global equity markets”.

He took over as lead portfolio manager following the exit of Matthew Tillett in July.

The trust also increased its dividend by 6.7% to mark the 51^st consecutive year of pay out rises, solidifying its status as a dividend hero.

Healthcare and tech positioning pays off

Schneider added: “Our relative underweight to the technology sector has been a sizeable boost to performance. Likewise, our overweight allocation to healthcare stocks– which have been a relative safe haven this year – has also contributed positively. On the other hand, the trust has not benefitted from its underweights in the consumer staples and energy sectors.”

He singled out US-based healthcare insurance firm Unitedhealth Group as the biggest contributor to returns as the firm benefited from a defensive sentiment among investors.

Meanwhile, Adidas was the biggest drag on performance as the sportswear giant’s sales in China plummeted as a result of the country’s zero-Covid policy. Overall, the holding accounted for a -1.9% impact on the trust’s performance.

Schneider continued: “Weakness in the portfolio has been similarly driven by a combination of macro headwinds and idiosyncratic stock performance. Some of the portfolio’s largest detractors are linked to consumer weakness, although not all of them fit neatly into the consumer discretionary sector. Similarly, our preference for financials stocks which generate returns through fees and recurring business, rather than net interest margins on deposits, has been a sizeable headwind in a year of rising base rates.”

The trust made a number of purchases over the year, introducing stakes in Adobe, Close Brothers and Haleon. Meanwhile, it exited healthcare firm Fresenius due to “a series of operational missteps and declining profitability”.

“We have initiated positions in several quality companies with extensive track records of growth, as well as long-term prospects, at very reasonable valuations. The continuing discount in UK names relative to international sector peers, has also afforded us some valuable entry points. On the other hand, we have taken advantage of some recoveries in stocks to exit lower quality holdings,” Schneider added.

Brunner Investment Trust holding entries and exits

See also: AllianzGI bolsters Brunner Investment Trust team with senior portfolio manager