The Brunner Investment Trust (BUT) invests in a concentrated global equity portfolio aiming to generate long-term growth in capital and income. Over time the number of stocks has been reduced, resulting in 70 high-conviction holdings selected for their strong fundamentals and attractive valuations. Since June 2016, BUT has been solely managed by Lucy Macdonald. Dividends are paid quarterly; BUT has a progressive policy and annual dividends have increased for the last 44 consecutive years. The current dividend yield of 2.7% compares favourably with sector peers.
Manager Lucy Macdonald is able to draw on the wide resources of Allianz Global Investors (AllianzGI) to select a portfolio of high-quality global stocks aiming to outperform a benchmark that is weighted 50:50 between the UK and overseas. Exposure to the UK has been reduced in recent years as the manager seeks to diversify geographically in search of better capital returns and income growth. The current UK weighting is 33.5%, a 9pp reduction versus a year ago. Favoured sectors for investment include technology as well as industrials, which offer a broad diversity of end-markets and where the manager can find companies with aboveaverage growth trading at attractive valuations.
Global stock markets have been volatile in 2016 and have rallied strongly since the sell-off following the result of the UK’s EU referendum. With valuations towards the high end of the 10-year range, modest economic growth and near-term uncertainties around the US election and the timing of US interest rate rises, global stocks could be approaching a period of consolidation. In this environment, a concentrated portfolio of high-conviction holdings may hold appeal for investors.
BUT’s shares are currently trading at a 18.0% discount to cum-income net asset value. This is wider than the 14.2% average of the last 12 months (range of 7.9% to 20.8%) and is also wider than the averages over the last three, five and 10 years of 13.2%, 12.9% and 12.8% respectively. BUT tends to have a wider discount than its peers, perhaps due to its relatively expensive fixed gearing. The first tranche of debt is due to mature in early January 2018, which may lead to a narrowing of the discount as this date approaches.