Dunedin Income Growth (DIG) “has undertaken a robust in-depth review” with an external consultant of fund manager Aberdeen’s investment philosophy and process following another half year of underperformance. “The board is mindful of the impact of NAV [net asset value] underperformance and is continuing to monitor the investment manager for much needed signs of improvement,” said chair Howard Williams. Interim results showed the £360m UK equity income trust made a 6.3% total investment return in the six months to 31 July that lagged the FTSE All-Share’s 7.8%. A slight widening in the share price discount, currently 7%, meant shareholders received 5.9%. The period was marked by volatility from the war in Iran, although high oil prices benefited its biggest holding in TotalEnergies, and a sell-off in software stocks which hit the company’s stakes in RELX, Kainos, Softcat and Experian. Following a relaxation in the trust’s sustainability criteria, fund managers Ben Ritchie and Rebecca Maclean added defence contractor Rolls-Royce and mining giant Rio Tinto to the £442m portfolio. DIG currently ranks third from bottom in the 17-strong AIC UK Equity Income sector with a 23.6% total shareholder return over five years.
Richard Williams, QuotedData senior analyst, said: “DIG’s continued lag behind the FTSE All-Share has clearly become a concern for the board, which has commissioned an external review of the manager’s investment approach. At the same time, the portfolio is evolving. Relaxed sustainability restrictions have opened up areas including defence and natural resources, while the enhanced 6% dividend policy gives the managers greater freedom to prioritise total returns over current income. That has contributed to the sharp fall in revenue earnings, but has also allowed new investments including Rolls-Royce and Rio Tinto. The changes broaden the opportunity set considerably. What DIG now needs is for that greater flexibility to translate into improved relative performance.”
Primary Health Properties (PHP) continued to see an improving rental growth outlook in the third quarter to 30 September, with an extra £5.8m of income in the first nine months of the year from 480 completed reviews. This represents a 6.1% increase over the previous rent of £96m, equivalent to 3.1% on an annualised basis. “All parts of the enlarged portfolio are performing very well with Primary Care UK +2.8%, Private Hospitals +3.7% and Ireland +3.7%.”
Activist hedge fund Saba Capita has lifted its position in recovering student accommodation provider Unite Group (UTG) from 5.1% to 7%.
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