On the up
BlackRock American Income Trust (BRAI) has continued to make good progress both in absolute terms and relative to its benchmark since we last published at the end of November 2025. Whilst it is still relatively early days for the strategy, the results so far are very encouraging.
BRAI is benchmarked against a value index, which means it is significantly underweight the AI-driven mega-cap names that dominate broader US indices. This positioning is currently working in its favour as investors are increasingly questioning whether some of these companies can sustain their enormous capital expenditure programmes and, more importantly, whether those investments will generate acceptable returns. This uncertainty is translating into a broadening of interest in other parts of the market, to BRAI’s benefit. However, as we show on page 4, in a historic context, the uptick in the performance of value relative to growth is still quite minor, so there could still be a long way to go.
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).
With effect from 22 April 2025, BRAI adopted a new investment approach. BRAI invests using a systematic active equity approach devised by BlackRock, which is distinct from that of any other investment company listed in the UK. Our initiation note sought to explain BRAI’s new approach and the corporate structure that supports it.
Whilst we have included some historical performance data for reference in the charts on this page, further analysis of it feels redundant. Instead, this note focuses on BRAI’s returns since the strategy change.
Fund profile
More information is available on the trust’s website
BRAI aims to derive income and capital growth by investing in a portfolio of US value stocks.
A radical rethink of the company’s structure and approach was implemented in April 2025. The management fee was halved, and a new dividend policy introduced. The company pays out 1.5% of NAV each quarter as a dividend funded both from 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 proprietary systematic active equity approach. Our initiation note looked at the approach in detail but to summarise:
- 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.
Manager’s view
The manager observes that over the course of 2025, particularly over the summer, poor-quality (heavily indebted and loss-making) stocks outperformed. This is reflected in the underperformance of most quality-focused managers last year.
Early in 2025, the Magnificent 7 stocks were hit by DeepSeek and Liberation Day (which occurred shortly before BRAI adopted its new investment approach), but recovered as the year progressed. Companies perceived as beneficiaries of the vast sums being invested in AI capex did well (again, especially over the summer).
Figure 1: Magnificent 7 stocks versus rest of S&P 500
Another group of outperformers were companies buoyed by the US government’s policy agenda and/or technological advances. Areas such as rare earths, SpaceTech, quantum computing, nuclear, batteries, and to a lesser extent, crypto all attracted interest. However, enthusiasm for many of these themes appeared to peak around the beginning of Q4 before fading towards the end of the year.
The manager interprets this shift as a reassertion of fundamentals. Value outperformed growth over that period and has continued to do so since, but the turn in value’s favour still barely registers in Figure 2. There is a long way to go before we can say with confidence that – in the US at least – value is back to outperforming growth, as it did for the majority of the period prior to the GFC and the low inflation/interest rate environment that followed it.
Figure 2: Value versus growth in US market
Asset allocation
At the end of December 2025, BRAI had 153 stocks in its portfolio – towards the lower end of its 150–250 target range.
Figure 3: BRAI asset allocation by sector as at 31 December 2025
Figure 4: BRAI changes to sector allocations since 30 September 2025
Over the final quarter of 2025 – capturing the reported change since we last published – the portfolio saw a modest increase in its weighting to information technology and a small reduction in consumer discretionary. These moves are relatively minor reflecting BRAI’s benchmark-aware approach.
Data from the manager shows reports that, at the end of December 2025, the portfolio’s weighted average price/earnings ratio, price to book, and return on equity were close to the averages for the benchmark.
Figure 5: Comparison of BRAI with US indices
| BRAI | Benchmark | S&P 500 | |
|---|---|---|---|
| Number of securities | 153 | 870 | 503 |
| Average market cap ($bn) | 408.3 | 299.4 | 1,069.7 |
| P/E next 12 months (x) | 17.6 | 17.6 | 22.9 |
| Price/book (x) | 3.15 | 2.98 | 5.54 |
| Dividend yield (%) | 1.7 | 1.8 | 1.1 |
| ROE (5-year average) (%) | 10.3 | 10.2 | 18.0 |
Top 10 holdings
Figure 6: Top 10 holdings as at 31 December 2025
| % as at 31/12/25 | % as at 30/09/25 | Change | ||
|---|---|---|---|---|
| Alphabet | Communication services | 4.6 | 1.9 | 2.7 |
| JPMorgan Chase | Financials | 3.0 | 3.2 | (0.2) |
| Amazon | Consumer discretionary | 2.9 | 2.6 | 0.3 |
| Berkshire Hathaway | Financials | 2.6 | 2.8 | (0.2) |
| Walmart | Consumer staples | 2.5 | 2.6 | (0.1) |
| Bank of America | Financials | 2.3 | 2.3 | – |
| Morgan Stanley | Financials | 1.8 | 1.9 | (0.1) |
| Meta Platforms | Communication services | 1.8 | n/a | n/a |
| Charles Schwab | Financials | 1.7 | 1.7 | – |
| Micron Technology | Information technology | 1.6 | n/a | n/a |
| Total |
As discussed earlier, the manager does not take large active stock positions relative to the benchmark, and the list of BRAI’s largest holdings reflects that. Since the end of September 2025, Johnson & Johnson and Pfizer have dropped out of the top 10 to be replaced by Meta Platforms and Micron Technology.
Performance
Building a track record of outperformance
As noted earlier, we do not believe that an analysis of BRAI’s returns before the strategy change is relevant for the purposes of this note. Figure 7 shows how BRAI has performed both in share price and NAV terms versus its performance benchmark, against the S&P 500 Index, and against the median of its AIC North America peer group.
Figure 7: Total return performance data for periods to end January 2026
| Calendar year | 1 month(%) | 3 months(%) | 6 months(%) | Since 22 April 2025(%) |
|---|---|---|---|---|
| BRAI share price | 2.6 | 9.0 | 18.4 | 27.1 |
| BRAI NAV | 2.8 | 4.8 | 13.3 | 27.1 |
| Benchmark | 2.6 | 3.5 | 9.6 | 22.7 |
| S&P 500 | (0.5) | (2.5) | 6.2 | 28.9 |
| Peer group median | (0.4) | (3.1) | 4.0 | 27.1 |
Figure 8 shows BRAI’s month-by-month relative returns and highlights the strong run of outperformance achieved over the past six months.
Figure 8: BRAI NAV total return relative performance by month
The trust has clearly got off to a great start under its new investment approach, delivering outperformance of its benchmark and ahead of its peers. In 2025 it was the top performing North American equity trust in the peer group, and it continues to be the top performer over last 12 months. This may reflect the shift back towards a more fundamentally driven market that the manager has noted.
Figure 9: Attribution by sector
Figure 10: Attribution by signal
The manager highlights that the portfolio has done well in periods of volatile markets, when dislocations have created mispricing opportunities. We observe that BRAI’s returns are also less volatile than those of its benchmark, with a standard deviation of 9.9% since the strategy change versus 10.3% for the index.
In Figure 9, the yellow dots represent BRAI’s average active overweight and underweights relative to the benchmark and the bars illustrate the contributions by sector to BRAI’s returns over this period.
Figure 10 breaks down the source of relative return by signal. Helpfully, all three made positive contributions, but market sentiment driven stock selection signals had the greatest impact. Here the manager stresses the importance of being aware of where retail money was flowing (a lesson learned from the meme stock phenomenon over 2024 and into 2025). These flows do not necessarily identify the best long-term performers, but can materially distort short-term returns.
Dividends
New enhanced dividend policy roughly 6% of NAV each year
BRAI has long paid part of its dividend out of capital. However, with effect from 17 April 2025, BRAI adopted a policy of paying a quarterly dividend equivalent to 1.5% of NAV (approximately 6% annually). Without the constraint of having to hold high-yielding stocks to generate its income, BRAI is free to go anywhere within the US market and try to maximise its total returns.
The x-axis labels show historic ex dates for BRAI’s dividends. Going forward, the intention is to pay the dividends in April, July, October, and January.
Figure 11 shows BRAI’s dividend history over the last five years. We now have 12 months of dividends declared under the new system totalling 13.25p.
Figure 11: BRAI five-year dividend history for financial years ending in October
Premium/(discount)
Over the 12 months ended 31 January 2026, BRAI’s shares traded between 9.1% discount to NAV and a 1.2% premium and averaged a discount of 4.8%. By25 February 2026, the discount had been eliminated.
Figure 12: BRAI’s premium/(discount) over the five years ended 31 January 2026
As we explained in our previous note, the widening discount over 2023 came as the Magnificent Seven dominated markets and value stocks underperformed. BRAI’s rating began to improve in October 2024, initially in anticipation of a tender offer. Since then, it has continued to narrow and is currently trading close to asset value or at a premium. The board is keen for the trust to re-expand and has powers to issue stock at a premium to NAV, which would enhance the NAV for existing shareholders and improve liquidity in the shares. It would also have the effect of spreading BRAI’s fixed overheads over a wider base, lowering its average running costs.
Conditional tender offers
If BRAI fails to beat its benchmark net of fees by an average of 0.5% per annum over three-year periods, the first of which ends on 30 April 2028, the company has committed to offering shareholders a 100% tender offer at a 2% discount to NAV less costs. In addition, the 100% tender offer may also be triggered if the net assets of the company are less than £125m at the end of those three-year periods.
SWOT and bull vs. bear analysis
Figure 13: SWOT analysis
| Strengths | Weaknesses |
|---|---|
| Differentiated investment proposition | Investors need to get comfortable with the investment approach |
| Enhanced income whilst maintaining risk-controlled exposure to US equities | |
| Encouraging early performance | Relatively low market cap restricts attraction for wealth managers |
| Considerable backing of BlackRock | |
| Opportunities | Threats |
| Discount has been eliminated, potential for a re-expansion of the trust | Persistent US dollar weakness undermines attractions for UK investors |
| Recent market moves mean that US investors are thinking more about diversification | AI could continue to dominate the investment agenda, perpetuating the outperformance of growth stocks |
| Value is overdue a return to favour |
Figure 14: Bull versus bear case
| Bull | Bear | |
|---|---|---|
| Performance | Off to a great start with fairly consistent outperformance and lower volatility | AI resurgence could depress value stocks further |
| Dividends | Dividend policy results in attractive yield | If markets fell for an extended period, the dividend policy would shrink the capital base of the company |
| Outlook | Value is picking up and a more decisive shift in sentiment could help extend BRAI’s run of good relative performance | Weak dollar and return to outperformance by growth stocks are both possibilities |
| Discount | Appears to be under control | Small size reduces the impact of buybacks as liquidity worsens |
Previous publications
Readers interested in further information about BRAI may wish to read our previous note – And now for something completely different – which was published on 27 November 2025.
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