Low volatility returns from Seneca Global Income & Growth – the company reported its full year results to 30 April 2018. The NAV of Seneca Global Income & Growth Trust (SIGT) returned +5.7% on a total return basis, with an annualised volatility of 5.7%. The volatility the UK’s FTSE All-Share Index was 9.2%.
The share price also returned +5.7% on the same basis. By comparison, the company’s benchmark, which changed during the period under review and adjusted accordingly, rose by 7.7%.
Investment objective and benchmark
At the AGM held on 6 July 2017 Shareholders approved a change to the a change to the company’s investment objective, and therefore its benchmark. the objective now reads:
“Over a typical investment cycle, the company will seek to achieve a total return of at least CPI plus 6% per annum after costs with low volatility, and with the aim of growing the aggregate annual dividends at least in line with inflation, through the application of a Multi-Asset Investment Policy.”
Prior to 6 July 2017, the benchmark was 3-month LIBOR plus 3%.
Therefore, Seneca has sliced together or ‘chain-linked’ the benchmarks together to give shareholders a clear view of combined return for year (and over longer periods).
Performance
Asset allocation made a modest contribution to the company’s relative performance and contributed 0.4%. The company’s UK equity portfolio detracted from performance which was was largely due to the underperformance of mid-cap stocks. The overseas equity portfolio returned 9.5% (TR), compared with 7.8% for the FTSE All-World ex-UK index. In fixed income, positive contribution from selection came from corporate bonds and emerging market debt, where the company’s holdings outperformed their underlying indices. Performance also benefited from its positions in specialist assets.
The investment manager of the company states in the report that, as the performance horizon is over an investment cycle, rather than the short term and with lower volatility than equity markets, the performance is respectable.
Outlook – Richard Ramsay, chairman
“This time last year, a (snap) General Election was imminent making my ‘Outlook’ even more difficult than usual. Its result was unexpected by most and has caused concern and uncertainty for many. Brexit looms inexorably closer though its form remains unclear, causing yet more concern and uncertainty. An old proverb goes ‘it is difficult to make predictions, especially about the future’! In most environments, and perhaps especially the current one, we believe the Company’s Multi-Asset Value Investing Investment Policy is attractive. It provides transparent and straightforward exposure to a range of assets, which should provide reasonable, relatively low volatility (i.e. lower risk) returns over the medium to long term.”
SIGT : Low volatility returns from Seneca Global Income & Growth