Brunner (BUT) has promised to protect shareholders’ capital from excessive AI speculation after underperforming the “extraordinarily narrow” market rally in its last financial year.
Annual results show the £635m global equities investment trust, whose quality growth stock portfolio is managed by Julian Bishop and James Ashworth at Allianz Global Investors, made a total underlying return of 9% in the 12 months to 30 November. That trailed the 15.8% return from its composite benchmark comprising 70% of the FTSE World ex UK index and 30% of the FTSE All-Share.
Nevertheless, it remains the top performer in its Global sector over five years with a total shareholder return of 85.4%. The shares stand on a 9% discount to net asset value.
Chair Carolan Dobson acknowledged the challenge Brunner faced in a market led by a handful of mega-cap US technology stocks as investors poured capital into companies seen as winners in the artificial intelligence (AI) revolution.
While Brunner has some AI exposure through Microsoft, Google-owner Alphabet, chip foundry makers and designers TSMC and ASML and data centre connector Amphenol, Dobson said: “Your board remains focused on protecting your capital through a diversified approach that avoids excessive concentration in any single theme or style.”
Its factsheet shows the portfolio has 24.7% in IT stocks but also 24.3% in financials and 21.1% in industrials as part of a balanced approach that allocates just over 40% to North America, 24% in Europe, 22% in the UK, 9.8% in Asia and 3.4% in Japan.
Dobson believed this would stand Brunner in good stead when the obsession with AI subsides. “This concentration of returns in a narrow set of stocks creates material risk for investors. While such rallies can be powerful in the near term, history suggests they are typically followed by periods of mean reversion and volatility.”
A proposed final dividend of 6.25p per share takes Brunner’s total pay-out for the year to 25p per share, up 5.3% on the previous year’s 23.75p and the 54th consecutive year the AIC “dividend hero” has raised its distribution. The pay-out was covered by earnings per share of 27.9p, up 1.8%. Revenue reserves supporting the dividend will remain strong at 35.6p per share, up from 33p, after the final dividend is paid.
The trust gets its name from the Brunner family who rolled their stake in chemical giant ICI into the formation of the investment trust in 1927. They still own around 28% of the shares.
Our view
James Carthew, head of investment company research at QuotedData, said: “While Brunner’s returns for the 12 months ended 30 November were a long way behind the 14.2% sterling return delivered by the MSCI All Countries World index, things do seem to be picking up. It is encouraging that it now ranks as the best-performing global trust over three and six months. This reflects the gyrations in the share prices of the AI mega caps and the marked underperformance of US stocks over that period.”
