BlackRock Income Strategies says the six months to 31 March proved to be a challenging period for it and its resulting investment performance has been disappointing. The NAV fell by 0.9% over the period under review and the share price fell by 4.8%. Since the period end, the Company’s cum income NAV (with debt at fair value) per share has fallen by 0.8% and the share price has fallen by 2.1% as at close of business on 10 June 2016. Total dividends for the six months ending 31 March 2016 thus total 3.27 pence per share, a 3.2% increase on the prior year.
BlackRock Income Strategies is supposed to be maintaining a zero discount policy. As at the end of March, the discount to NAV was 3% and the Company’s shares were trading at a discount of 4.3% as at close of business on 10 June 2016 (based on the cum income NAV with debt at fair value).
The manager says that although their generally cautious views about the global economy, and emerging markets in particular, have proven to be correct, they were wrong in our view that this would have limited impact on markets near-term given the ongoing support from central banks and, as such, they started 2016 with too much equity exposure.
They have been cautious about the outlook for emerging markets for some time, but expected reasonably robust economic data from the US and improvements in Europe to provide the necessary support for developed market equities and credit. Whilst their view on emerging markets turned out to be correct, and weakness in China weighed heavily on the majority of emerging market bond and
equity markets in 2015, developed market exposures did hurt performance. In 2016, European stocks have experienced double-digit losses due to slowing growth and a weak banking sector. In the UK, stock selection from Mark Wharrier has been robust; the biggest contributor to performance came from the holding in car insurance specialist Admiral, which reported record profits and produced a dividend increase of 16%. John Laing, the infrastructure developer and investor, reported a strong set of full year 2015 results which included a significant increase in their asset value, continuing the strong growth track record seen before its IPO.
Their gold exposure has been a key contributor to returns and a diversifier of risk in 2016.
BIST : BlackRock Income Strategies performance disappointing, discount widens