Seneca Global Income & Growth Trust’s (SIGT’s) manager, Seneca Investment Managers (Seneca IM), has continued to reduce the trust’s equity weighting, in advance of a global recession it expects in late 2020/ early 2021. Consistent with its view, the yield curve has all but inverted (as at 22 March, the gap between threemonth and 10-year US treasury bonds was just 3 basis points) and the manager says that in the past, on average, an economic recession has commenced 311 days later.
SIGT has recently outperformed its benchmark and global equity markets (see page 9). Its manager expects its multi-asset strategy to strongly outperform equities in the downturn, though during such a period the trust would struggle against its absolute-return-orientated benchmark.
Over a typical investment cycle, SIGT seeks to achieve a total return of at least the Consumer Price Index (CPI) plus 6% per annum, after costs, with low volatility and with the aim of growing aggregate annual dividends at least in line with inflation. To achieve this, SIGT invests in a multi-asset portfolio that includes both direct investments (mainly UK equities) and commitments to open-and-closed-end funds (overseas equities, fixed income and specialist assets). SIGT’s manager uses yield as the principal determinant of value when deciding on its tactical asset allocation and holding selection.