At a glance

Share price and premium/(discount)

BRAI’s share price discount to net asset value (NAV) widened in 2023 as the Magnificent 7 dominated markets and value stocks underperformed. Its rating began improving in October 2024, initially ahead of an anticipated tender offer. The new strategy’s success appears to have encouraged investors, with growing buying interest helping shares reach a premium to NAV this year. This has enabled BRAI to reissue shares.

Performance since strategy change

BRAI has delivered consistent outperformance of its benchmark for many months now. As we discuss later in this note, BRAI benefitted from exposure to some of the stocks that have soared in the wake of the AI capital expenditure boom while avoiding some of the software stocks that are threatened by the advance of AI.

Fund profile

More information is available on the trust’s website

BRAI aims to derive capital growth and pay an attractive income by investing in a portfolio of US value stocks.

In April 2025, the company overhauled its structure and approach, halved its management fee and introduced quarterly dividends of 1.5% of net asset value, funded from both revenue and capital.

A more detailed look at BRAI’s structure and investment process was included within our initiation note

Stocks are selected using BlackRock’s systematic active equity approach, detailed in our initiation note and summarised below:

BlackRock’s Systematic Active Equity (SAE) team of over 100 investment professionals seeks to use data-derived insights to spot and exploit market inefficiencies (mispriced stocks).

The approach draws on over 40 years of insights into what works and what does not work when it comes to active investment management.

The SAE team evaluates sets of data to produce insights into companies’ fundamentals, market sentiment, and macroeconomic themes. The analysis includes both numeric and text datasets (contributing to over 1,000 signals in total) and makes use of LLM models that have been developed and optimised over many years.

Once the manager has a set of signals that it thinks is providing useful information, the scores from these signals are blended to give a view on each stock in the universe.

Higher scores translate into higher return expectations, and this informs portfolio construction, which seeks the best possible trade-off between risk and return net of transaction costs. The manager ensures that there are no big factor, sector, or stock bets that can skew returns. BRAI will hold 150–250 stocks of a universe of 870.

New signals are constantly being identified and evaluated. BRAI’s manager describes this as an “arms race” where the aim is to extract as much information about stocks and the economy as possible, and learn how to interpret that. BlackRock’s scale, depth of resource, and long history in this area gives it an edge that is hard to replicate.

Backdrop

Gasoline prices are well above pre-war levels but inflation is not as high as feared

War between the US/Israel and Iran broke out one day after our last report on 27 February 2026, sending oil prices soaring, raising inflation concerns and shifting market interest rate expectations from likely cuts to possible rises. Oil prices have fluctuated as hopes for a lasting resolution rose and fell, but remain elevated. Petrol prices have fallen from recent peaks, contributing to below-forecast US inflation of 3.4% at end July 2026, but remain well above pre-war levels.

Nevertheless, the US S&P 500 Index in Figure 2 has performed well year-to-date, especially since March’s lows.

Figure 1: Oil price

Figure 2: S&P 500

AI has been a big driver of share prices – both up and down

AI has driven markets. In particular the capital expenditure needed to support it and the potential impact of advances in agentic AI on software and data businesses – the so-called SaaSpocalypse.

Suppliers of semiconductor equipment, memory, optical connections and data-centre infrastructure in BRAI’s benchmark saw sharp share price gains. Micron Technology rose 277% between 30 March 2026 and 25 June 2026. However, some investors increasingly question whether the largest cloud companies can finance this spending and what returns it will generate. This is reflected in the Magnificent 7’s relative performance, as Figure 3 shows.

Figure 3: Mag 7 relative to rest of S&P500

Figure 4: Yield on long-dated US Treasuries

Despite US inflation remaining well above its 2% target, the Federal Reserve has held interest rates steady this year. Long-dated US government bond yields have risen amid growing market concerns over a potential $2trn deficit in 2026 and its sustainability. Higher-for-longer rates favour value over growth strategies.

Asset allocation

At the end of June 2026, BRAI held 155 stocks, two more than at end-December 2025, the date of our previous report’s data, and near the bottom of its 150–250 target range.

The manager’s end-June data shows the portfolio’s weighted average price/earnings (P/E) ratio, price-to-book ratio and return on equity (ROE) were close to benchmark averages but significantly below the wider market’s.

Figure 5: Comparison of BRAI with US indices as at 30 June 2026

Benchmark index rebalancing

A rebalancing of BRAI’s benchmark contributed towards some big moves in the portfolio

BRAI’s benchmark index is now rebalanced every six months, partly based on company size. In June, stocks can also be reclassified from value to growth or vice versa.

Stocks are ranked using one value measure, the ratio of book value to share price, weighted at 50%. Two growth measures — two-year forecast earnings growth and historical five-year sales growth — make up the remaining 50%. Stocks can be classified as entirely value or growth, but most combine both.

The substantial shift at the end of June triggered significant changes in BRAI’s portfolio, shown in the following charts.

Increased exposure to information technology and consumer discretionary, alongside reductions in financials and communication services, mainly reflects changes to the benchmark’s composition.

Consumer discretionary exposure rose as Amazon became the benchmark’s largest stock, accounting for 5.95% of the index at the end of June, according to BRAI. Information technology exposure increased with the addition of Apple and Microsoft to the benchmark, partly offset by stocks such as Micron, Sandisk and Western Digital moving to the growth index.

Figure 6: BRAI asset allocation by sector as at 31 July 2026

Figure 7: BRAI changes to sector allocations since 31 December 2025

As noted earlier, the manager aims to avoid large differences from the benchmark in investment styles, sectors or individual stocks. Changes to the list of the 10 largest holdings reflect this approach.

Top 10 holdings

Figure 8: Top 10 holdings as at 31 July 2026 compared to 31 May 2026

From end-December 2025 to end-May 2026, Exxon Mobil, Procter & Gamble and Chevron replaced Walmart, Meta Platforms and Charles Schwab in the top 10.

Following the 30 June rebalancing, the Amazon holding increased markedly and a new Apple position was opened. Goldman Sachs was the only other new top 10 entrant at 31 July 2026. Morgan Stanley, Alphabet and Micron Technology dropped out after the rebalancing.

Performance

Up to date information is available on our website

We consider analysis of BRAI’s returns before the strategy change irrelevant to this note. Figure 9 compares its share price and net asset value returns with its performance benchmark, the S&P 500 Index and the median for its AIC North America peers: Baillie Gifford US Growth, Canadian General Investments, JPMorgan American, Pershing Square Holdings and The North American Income Trust. BRAI ranks first within this group across all periods shown, with much less variation in returns than its peers.

Figure 9: Total return performance data for periods to end July 2026

Figure 10 shows BRAI’s monthly relative returns, highlighting strong, consistent outperformance over the past year.

Figure 10: BRAI NAV total return relative performance by month

Figures 11 and 12 show the manager’s analysis of BRAI’s returns for the first half of 2026. In Figure 11, yellow dots show average overweight and underweight positions against the benchmark; bars show each sector’s contribution to returns. Figure 12 shows that all signals contributed positively to returns.

Figure 11: Attribution by sector

Figure 12: Attribution by signal

The IT sector’s significant contribution was driven by rising share prices linked to AI investment, including Micron, Applied Materials, LAM Research, Western Digital and Sandisk. As described above, some have since left BRAI’s benchmark and portfolio. BRAI captured their gains but avoided the subsequent falls following the index rebalancing.

BRAI’s stock-selection model analyses companies’ supply chains and helps predict customer demand. The manager says it identified a wide range of beneficiaries of AI investment, recognising the research and development spending supporting their growth. BRAI anticipated the shift as businesses previously seen as dull, cash-generative and slow-growing saw orders multiply and profit margins widen.

BRAI outperformed the wider market partly by avoiding highly valued software and data businesses caught in the sell-off earlier this year. Investors panicked over the potential for AI tools that act independently, such as Claude Cowork, to disrupt business models. High valuations were not the only reason BRAI had no exposure: its model had already identified the threat from these tools.

BRAI’s interim report had a table of contributors to and detractors from its relative returns over the six months ended 30 April 2026, the top five of each we have reproduced below.

Figure 13: BRAI five largest contributions to relative returns over six months ended 30 April 2026

Health care recovered as investors saw drugmakers’ deals with the US government on pricing and overseas manufacturing as easing government intervention risks. Merger and acquisition activity also increased.

Figure 14: BRAI five largest detractors from relative returns over six months ended 30 April 2026

Dividends

Enhanced dividend policy roughly 6% of NAV each year

BRAI has long funded part of its dividend from capital. Since April 2025, its quarterly dividend has been set at 1.5% of NAV, or approximately 6% annually. Without needing high-yielding stocks for income, BRAI can invest across the US market to maximise total returns.

Figure 15 shows five years of dividends. On 3 August 2026, BRAI announced its third interim dividend, payable on 11 September 2026.

Based on NAV at publication, the next dividend would be 4.15p, bringing the current financial year’s total to 15.6p, up 33% on the previous year.

Figure 15: BRAI five-year dividend history for financial years ending in October

Premium/(discount)

BRAI’s shares averaged a 0.9% discount to NAV in the year to 31 August 2026, ranging from a 5.9% discount to a 3.4% premium. The discount closed by 25 February 2026; at publication, shares traded at a 0.6% premium.

Figure 16: BRAI’s premium/(discount) over the five years ended 31 August 2026

BRAI’s discount widened in 2023 as the Magnificent 7 dominated markets and value stocks underperformed. Its rating began improving in October 2024, initially ahead of an anticipated tender offer. The new strategy’s success appears to have encouraged investors, with growing buying interest helping shares reach a premium to NAV this year. This enabled BRAI to reissue shares, as detailed below.

Issuing shares above NAV increases NAV for existing shareholders, makes shares easier to trade and spreads fixed overheads across a larger base, reducing average running costs.

Conditional tender offers

BRAI has committed to a 100% tender offer at a 2% discount to NAV less costs if it fails to beat its benchmark after fees by an average 0.5% annually over three-year periods, the first ending 30 April 2028. The offer may also be triggered if net assets are below £125m at those period-ends.

Share issuance and repurchase

On 27 August 2026, BRAI published a circular calling a shareholder meeting for 14 September 2026 to approve new shares equivalent to up to 30% of its share capital at 21 August 2026. We expect approval, saving the cost of frequent meetings for smaller share issues and enabling significant re-expansion of the trust. This should improve liquidity, lower average running costs by spreading fixed costs across a larger base, and attract larger wealth managers.

At publication, BRAI had 69,620,138 shares in issue with voting rights and a further 25,741,167 shares held in treasury.

Figure 17: Share issuance/repurchases over the past 12 months

In April 2025, before the strategy change, BRAI bought back 10,910,252 shares into treasury at 192.0501p each through a tender offer. Shares have since risen 47%. We welcome BRAI’s renewed expansion, with over 13.2m shares issued in the last six months.

SWOT and bull vs. bear analysis

Figure 18: SWOT analysis

Figure 19: Bull versus bear case

Previous publications

Readers interested in further information about BRAI may wish to read our previous notes.

Figure 20: QuotedData’s previously published notes on BRAI

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