Brunner Investment Trust Investment Trusts Review

The Brunner Investment Trust (BUT) is a global growth investment trust. It was established in 1927 to manage the financial interests of the Brunner family, part founders of ICI. It has been managed by RCM, a company of Allianz Global Investors, and its predecessors since launch. BUT is jointly managed by Lucy Macdonald, who
has managed the overseas portfolio since June 2005, and Jeremy Thomas, who has managed the UK portfolio by since July 2010. These managers have been refocusing the portfolio on a smaller number of high-conviction holdings, supported by RCM’s growing research platform. This process was completed in early 2011 and one-year NAV outperformance vs benchmark has also lifted the three-year performance. BUT has a 40-year record of uninterrupted dividend growth.

Investment strategy: Medium-term bottom-up stock picking
In managing the portfolio, the equity assets are split c 50/50 UK to international. Just under 12% of the portfolio is invested in UK government bonds to partially offset the gearing effect of BUT’s debentures. Equities are managed bottom up incorporating extensive fundamental research, with an initial investment horizon of a minimum three years. The trust employs moderate gearing (currently 7.9% net or 24.0% gross). The UK portfolio is further split 80% between large-cap, dividend-paying defensive stocks and 20% domestically oriented special situation investments. Around 4% of the UK portfolio is currently invested outside of the FTSE 350.

Sector outlook: Opportunity in uncertainty
In an uncertain economic environment the portfolio is constructed to be broadly beta neutral on an NAV basis. The managers expect global economic growth will remain positive but with considerable variations across countries and regions. Reflecting this, BUT has holdings in large well-financed businesses with good yields and the portfolio is also tilted towards industries with expected long-term growth potential. The managers are selectively positive on healthcare, technology, global travel and companies exposed to Asian/Emerging market growth. They like companies with a global reach, pricing power and strong corporate liquidity.

Valuation: Discount above long-term averages
The discount based on the fair value NAV, currently at 16.1%, is above its three- and five-year averages of 11.5% and 11.3% respectively. BUT offers the third-highest yield when compared to its peers.

To Read the Entire Report Please Click on the pdf File Below.