And now for something completely different

Earlier this year, BlackRock American Income (BRAI) announced a radical shake up. It asked shareholders to approve a new investment objective and policy, announced a new enhanced dividend policy, cut management fees drastically, and offered shareholders a 20% tender at a 2% discount to NAV (after costs).

The proposals were welcomed by investors, with more than 99% of those voting giving their approval. The tender offer was undersubscribed, with just 16.15% of BRAI’s shares validly tendered.

In its new form, the trust is following an investment approach distinct from any other investment company listed in the UK – investing using a systematic active equity approach devised by BlackRock (which uses data-driven insights to identify and take advantage of mispriced stocks). This note seeks to explain BRAI’s new approach and the corporate structure that supports that. Whilst we have included some historical performance data for reference in the charts on this page, further analysis of it feels redundant. Instead, we have focused on BRAI’s returns since the strategy change.

The portfolio continues to focus on income and capital growth from US value stocks, offering diversification for investors mainly exposed to large US tech stocks. There has been a major change in how investments are chosen, detailed further below.

Attractive income and growth from US value stocks, using a systematic active equity approach

BRAI aims to provide long-term capital growth, whilst paying an attractive level of income (1.5% of NAV per quarter, around 6% of NAV per annum). BRAI follows a systematic active equity approach that aims to provide consistent outperformance of the Russell 1000 Value Index (the benchmark).

At a glance

Share price and discount

Over the 12 months to 31 October 2025, BRAI’s shares traded at a discount to NAV ranging from 11.9% to 1.0%, averaging 6.3%. As of 26 November 2025, the discount stood at 5.4%.

The discount increased during 2023 as markets were led by the Magnificent Seven and value stocks lagged. BRAI’s rating started to recover in October, helped by the expected tender offer, and is now at a more reasonable level. The board hopes investors will support the new strategy and help the trust grow again.

Time period 31 October 2020 to 25 November 2025

Source: Bloomberg, Marten & Co

Performance over five years

As mentioned earlier, we do not consider BRAI’s returns before the strategy change relevant, however the graph here shows BRAI’s share price and NAV performance compared to its benchmark over the past five years. Figure 7 on page 9 illustrates BRAI’s strong start, regularly outperforming its objective. The S&P 500’s gains have been driven by a few large AI-related companies, while BRAI’s benchmark is more diversified. Notably, BRAI has delivered solid returns over the past six months without heavily relying on the mega-cap AI trend.

Time period 31 October 2020 to 31 October 2025

Source: Bloomberg, Marten & Co

More information is available on the trust’s website

How does new BRAI differ from old BRAI?

• The portfolio continues to focus on income and capital growth from US value stocks, offering diversification for investors mainly exposed to large US tech stocks. There has been a major change in how investments are chosen, detailed further below.

• The largest holding in any single stock is now capped at 1.5%. The number of stocks has increased from around 60 to 232 as of September 2025, reducing risk from individual companies.

• Previously, the investment policy excluded some stocks for ESG reasons, but the new approach allows for a broader range of investments.

• Costs have been significantly reduced, with the base management fee halved and a new tiered structure introduced (see page 11). Dividends have also increased to 1.5% per quarter, or about 6% a year (see page 9).

• Regular exit opportunities linked to performance have been introduced, and investors will also have an exit option if the trust does not grow (see page 10).

What is systematic active equity?

Data-derived insights to spot mispriced stocks

BlackRock’s Systematic Active Equity (SAE) team uses data-driven insights to identify and take advantage of mispriced stocks. By September 2025, BlackRock managed over $313bn with this strategy across a range of global and regional portfolios, including long-only, partial short, hedge funds, and a London-listed investment company – the first of its kind. The SAE team has over 100 investment professionals in San Francisco and London, drawing on more than 40 years of experience in active investment management. While BRAI’s investment universe is no longer limited by ESG criteria, ESG analysis remains part of the research process.

BRAI’s universe is no longer constrained by ESG criteria

Continuous innovation

The SAE team is constantly innovating to improve results for investors. While quant-driven strategies have existed for years, managers now have access to much more data. Their role is to decide which information is useful, when to use it, how different datasets work together or during specific economic periods, and how much weight to give each insight when making investment decisions.

Few asset managers have the scale to succeed in this area

The SAE team was an early adopter of AI and machine learning

Processing this information requires significant computing power, which only a few asset managers can access at scale. The managers note that while early fundamental value data was structured and easy to analyse, most current datasets are unstructured text. The SAE team adopted AI and machine learning early to interpret this data effectively.

Beyond traditional company analysis, the SAE team uses hundreds of independent data sets, such as analyst reports, news articles, online search trends, transaction volumes, footfall, and app usage. On average, they assess 10 new data sets each month. Macroeconomic indicators are also included, using “now-casting” to gauge the economy’s current state.

Insights are thoroughly tested for their ability to predict company fundamentals and returns, with tools that can run a five-year back test in under two seconds. Managers retain final decision-making, and may delay trades during major market shocks.

The SAE approach leads to higher portfolio turnover (about 100%–200% per year), but trading costs are considered in every decision. Many trades are matched within BlackRock, helping to keep transaction costs down.

The output

The analysis covers:

• Company fundamentals, including profitability, growth, financial strength, valuation, and management quality.

• Market sentiment, considering analyst and investor views, management outlook, and investment flows. It also looks at whether the wider market environment and similar businesses support the stock.

• Macroeconomic themes across industries, countries, and investment styles.

• ESG risks, including how a business is exposed and what steps it is taking to manage them, how companies treat their staff, customers, and suppliers, and whether they face risks from the move to a carbon-neutral world.

• The managers use a set of signals to score each stock, blending these scores to form an overall view. Stocks with higher scores are expected to deliver better returns, guiding the portfolio’s construction to balance risk and return after costs.

• The portfolio usually holds 150 to 250 large- and mid-cap stocks. While BRAI can invest up to 20% of assets outside the US, it is now likely to be fully invested in US equities.

The macroeconomic backdrop

Markets have recovered from the selloff associated with Liberation Day

President Trump’s policy agenda, especially his tariff policy, has had a major impact on global markets. After quickly imposing tariffs on imports from Canada and Mexico, the key moment came on “Liberation Day” (2 April 2025) when tariffs were announced on almost all imports. Markets reacted negatively, prompting a temporary reduction of most tariffs to 10%. This led to a market recovery, helped by announcements of various trade deals, though not all are finalised, which encouraged a return to risk-taking.

The AI investment boom, which started in March 2023 with ChatGPT-4, faced its first major challenge in January 2025 when DeepSeek claimed to have developed a new large language model at much lower cost than US rivals. This caused a sharp sell-off in the Magnificent Seven tech stocks, with money moving into other US stocks and overseas markets. These large US tech companies were also affected by the Liberation Day market falls. Despite this, investment in AI infrastructure continued strongly, helping to restore confidence.

Today, US mega-cap tech stocks once again lead the S&P 500. For investors who want US exposure but prefer not to concentrate too heavily on these giants, BRAI offers useful diversification.

BRAI offers a way of diversifying US exposure away from the Mag 7

Figure 1: S&P 500 Index over 12 months to end October 2025

Source: Bloomberg

The US president has pushed for lower interest rates, but the Federal Reserve has resisted, citing worries about inflation from tariffs. Threats to dismiss Fed board members and its chair could hurt confidence in US bonds. US inflation has been rising anyway.

Debt investors are also worried about the long-term impact of the One Big Beautiful Bill (OBBB), which is expected to add trillions to the US deficit. If government borrowing costs also rise, this could cause further issues.

These concerns have likely weakened the US dollar, which has dropped sharply from its February peak on a trade-weighted basis. The decline could continue if investors move more money out of US assets.

Figure 4: Value versus growth in US market

Source: Bloomberg (based on MSCI US value and growth total retu

For BRAI, the key issue is how value stocks perform compared to growth stocks. As Figure 4 shows, value stocks have lagged behind growth stocks over the past 20 years, mainly due to the long period of low US interest rates after the 2008 financial crisis.

In late 2021, expectations of rising interest rates sparked a rally in value stocks, but this peaked at the end of 2022. Since then, growth stocks have outperformed again, driven largely by the success of AI. Another potential value rally was cut short by Liberation Day.

The managers note that unpredictable US policy changes make their job more challenging but also create unusual investor behaviour, leading to more mispriced stocks.

The portfolio

New portfolio in place from 22 April 2025

The portfolio was fully realigned to the new strategy by 22 April 2025, with no cost to ongoing shareholders due to the manager’s contribution to expenses and the NAV uplift from the tender offer. Previously, almost 10% of BRAI’s portfolio was in non-US stocks, but it is now entirely invested in US stocks.

Marked shifts in sector and stock exposures

Figure 5 shows the portfolio breakdown by industry sector as at 30 September 2025, compared to the end of the last financial year (31 October 2024). There have been significant changes, with much higher exposure to financials and industrials, and lower exposure to healthcare and information technology. The net effect is that, on a sector basis, the portfolio now closely matches the benchmark, so most of the added value comes from choosing the right stocks.

Figure 5: BRAI asset allocation by sector as at 30 September 2025 (and as at 31 October 2024)

Source: BRAI

There is very little overlap between BRAI’s 10 largest holdings at the end of its last financial year (31 October 2024), before the new investment approach, and the top positions in the portfolio at the end of September 2025.

Performance

Building a track record of outperformance

As mentioned earlier, we do not consider BRAI’s returns before the strategy change relevant here. Figure 7 shows BRAI’s share price and NAV performance compared to its benchmark and the S&P 500 Index.

The data indicate that BRAI has made a strong start, regularly outperforming its objective. The S&P 500’s gains have been driven by a few large AI-related companies, while BRAI’s benchmark is more diversified. Notably, BRAI has delivered solid returns over the past six months without heavily relying on the mega-cap AI trend.

It is still too soon to assess the volatility of these returns, but we will cover this in future reports.

Figure 7: Total return performance data for periods to end October 2025

Dividends

New enhanced dividend policy roughly 6% of NAV each year

From 17 April 2025, BRAI began paying a quarterly dividend equal to 1.5% of its NAV, or about 6% per year. The chart’s x-axis shows past ex-dividend dates, and future payments are planned for April, July, October, and January.

Figure 8 highlights BRAI’s dividend history over five years, with the final column showing the impact of the higher dividend policy.

To support these higher dividends and potential share buybacks, BRAI had £105.7m in distributable reserves at the end of April 2025. Paying dividends above net revenue is not new for BRAI, as its dividends have not been covered by earnings since FY 2017. This approach allows BRAI to invest flexibly across the US market, aiming to maximise total returns without needing to focus on high-yielding stocks.

Figure 8: BRAI five-year dividend history for financial years ending in October

Source: BRAI, Marten & Co

Premium/(discount)

Over the 12 months to 31 October 2025, BRAI’s shares traded at a discount to NAV ranging from 11.9% to 1.0%, averaging 6.3%. As of 26 November 2025, the discount stood at 5.4%.

The discount increased during 2023 as markets were led by the Magnificent Seven and value stocks lagged. BRAI’s rating started to recover in October, helped by the expected tender offer, and is now at a more reasonable level. The board hopes investors will support the new strategy and help the trust grow again.

Conditional tender offers

If BRAI does not outperform its benchmark by at least 0.5% a year after fees over three-year periods (the first ending 30 April 2028), it will offer shareholders a 100% tender at a 2% discount to NAV after costs. This tender offer will also be made if the company’s net assets fall below £125m at the end of any of these periods.

Figure 9: BRAI’s premium/(discount) over the five years ended 31 October 2025

Source: Bloomberg, Marten & Co

Structure

Capital structure

BRAI has 95,361,305 ordinary shares, with 38,949,167 held in treasury, leaving 56,412,138 shares with voting rights. Its financial year ends on 31 October, with AGMs usually in March. The board plans to announce the next annual accounts in January 2026. Shareholders approved the company’s continuation at this year’s AGM, with the next vote set for 2028 and every three years after that.

Fees and costs

From 17 April 2025, BRAI’s management fee is tiered: 0.35% on the first £350m of NAV and 0.30% on any amount above that. There is no performance fee.

The ongoing charges ratio for the year ended 31 October 2024 was 1.06%, based on the previous 0.70% management fee. With the reduced fee, this ratio should be significantly lower in this and future years. The board has estimated that over a full 12-month period under the new fee, the ongoing charges ratio is expected to decrease to around 0.70%–0.80%.

The managers

BRAI’s alternative investment fund manager is BlackRock Fund Managers Limited, while BlackRock Investment Management (UK) Limited serves as its investment manager and company secretary. The lead managers for BRAI are Travis Cooke and Muzo Kayacan.

Travis Cooke

Travis leads the US portfolio management group in BlackRock’s systematic active equity team, overseeing US long-only, partial long-short, and long-short equity strategies. He joined Barclays Global Investors in 1999, which merged with BlackRock in 2009, and was previously a portfolio manager for developed market strategies in the alpha strategies group. Travis holds a BA in Business Economics from the University of California, Santa Barbara (1998), an MSc in Finance from London Business School (2008), and has been a CFA charterholder since 2001.

Muzo Kayacan

Muzo is a portfolio manager and head of EMEA product strategy in the SAE division. He manages US, global, and European funds, and leads the EMEA product strategy team, which connects investment teams and clients.

Before joining BlackRock in 2010, Muzo was a senior associate portfolio manager at AllianceBernstein, where he implemented investment decisions for global equity portfolios and managed currency hedging strategies. From 2005 to 2007, he completed a graduate training scheme at M&G and then worked in product development. Earlier, he was a futures trader.

The board

BRAI has four non-executive directors, all independent of the manager. Alice Ryder stepped down as chair and director after the last AGM, with David Barron taking over as chair. Gaynor Coley is the newest director and now chairs the audit committee, replacing David Barron.

Figure 10: Directors’ length of service, fees, and shareholding

Source: Marten & Co

David Barron

David has 25 years’ experience in investment management. He was chief executive of Miton Group Plc until November 2019, after six years with the company. Before that, he spent over 10 years as head of investment trusts at JPMorgan Asset Management, joining Robert Fleming in 1995. He is now chairman of Baillie Gifford European Growth Trust Plc and, until its planned merger, a non-executive director of Fidelity Japan Trust Plc.

Gaynor Coley

Gaynor Coley is a chartered accountant with over 30 years’ experience in private and public sector finance, focusing on governance, compliance, and risk management. She is a non-executive director and audit committee chair at Foresight Enterprise VCT Plc and Lowland Investment Co Plc, and also chairs the grants committee and serves as a trustee for the Duchy Health Charity.

Solomon Soquar

Solomon Soquar has over 30 years’ experience in investment banking, capital markets and wealth management. He has held senior roles at major firms such as Goldman Sachs, Bankers Trust, Merrill Lynch, Citi and Barclays, most recently serving as CEO of Barclays Investments Solutions Limited. In recent years, he has taken on a range of roles, including non-executive director at Ruffer Investment Company Limited, chair of the Africa Research Excellence Fund, and business fellow at Oxford University’s Smith School of Economics and Enterprise.

Melanie Roberts

Melanie Roberts is a partner at Sarasin & Partners LLP with 29 years of investment experience. She joined the firm in 2011 and became head of charities in January 2023, focusing on strategy, stewardship, and client service for charity portfolios. Before this, she spent 16 years at Newton Investment Management managing charity, private client, and pension fund portfolios.

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