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New manager for Securities Trust of Scotland

Securities Trust of Scotland reports that, for the year ended 31 March 2016, its net asset value was flat and the share price was down 2.2%, both on a total return basis for the period. This compares to a 4.4% rise in the benchmark. The board has declared a fourth dividend of 1.45p, bringing the total annual dividend to 5.8p, a rise of 18% on the previous year. The payment of this dividend requires a fairly hefty transfer from revenue reserves as revenue per share fell by 7.4% to 4.73p.

Mark Whitehead takes over as portfolio manager on 11 May 2016. Mark was recently appointed Head of Equity Income at Martin Currie and leads the new income team. The board report that income is one of the three central pillars of Martin Currie’s investment proposition and the board wholeheartedly welcomes this commitment and the formation, and subsequent strengthening, of this specialist team. Mark is described as a highly respected global equity income portfolio manager with over 17 years’ experience and his track record ranks him highly amongst his peers for producing real dividend growth with less volatility than the relevant benchmark. His focus will remain on investing in undervalued, high quality and growing companies to deliver the company’s investment objective. Mark aims to fully utilise the investment instruments available to help improve future returns and he will introduce the use of options, in a limited and carefully controlled manner, in the new financial year. The board believes that this will enhance the total return potential for shareholders.

The board believes that the current objective is in line with shareholders’ needs but would like the portfolio manager to be able to select stocks on a truly unconstrained basis. Consequently, the current benchmark, the MSCI World High Dividend Yield index, will be dropped, effective from end May 2016.

The company’s investment performance (on a total return basis) will be measured against the median of all relevant open and closed-ended peers (sourced from the Lipper Global Equity Income Sector and AIC Global Equity Income Sector) on a rolling three-year basis. In addition, and to ensure that the investment objective is met, the manager will aim to grow both the revenue earnings and the cum income NAV in real terms over a rolling five year period. They believe this real growth target, in income and capital, is critical to the fund’s long term success and they will measure this objective against global developed market inflation.

To achieve this end, the manager will operate a focused portfolio of 35-55 stocks which will be benchmark agnostic and unconstrained by geography, sector and market weighting. This creates a wider opportunity set and the board believes that this updated investment approach is more likely to deliver the returns that can fulfil the investment objective and satisfy shareholders who are looking for an increase in the value of their income and capital.

STS : New manager for Securities Trust of Scotland

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