Securities Trust of Scotland
GOES GLOBAL FOR INCOME
Shareholders in Securities Trust of Scotland recently voted
to move from a UK to a global equity income trust.
Alan Porter, the new manager, explains why.
In 2011 the board of Securities Trust of
Scotland recommended that it would be in
the best interests of shareholders to position
the Trust as a global equity-income and growth
vehicle, to be measured against a truly global
benchmark. The shareholders agreed with the
board and overwhelmingly adopted this new
approach at their AGM in July. Therefore, the
new objective is for the Trust to invest in
global equities, rather than restricting its
portfolio to UK stocks.
The board based its initial decision on research
by J.P. Morgan Cazenove into the attitudes of
UK shareholders and advisers. The results of
this study showed that there is strong demand
among investors for the diversification of income
away from the highly concentrated UK market.
This, of course, makes sense. It is self-evident
that international investment affords investors
a far greater scope of opportunities than that
presented by an exclusively UK portfolio. Why
should we limit ourselves, when presented with
wide global spectra of countries, sectors and
Given the wider opportunities,
this new global approach has the potential to
generate higher returns over the long term.
Meanwhile, greater diversification should
mitigate against risk.
The change in the Trust’s mandate also
provides it with a uniquely competitive edge.
Despite the demand among investors for higheryielding
global-equity funds, this is generally
not yet reflected in the current offerings from
investment trusts. In fact, Securities Trust of Scotland is the first equity-income and growth
investment trust to be managed against a
completely global benchmark.
While the change in the Trust’s remit may be
fundamental, it is relatively simple to implement.
Firstly, the benchmark will switch from the FTSE
All-Share to the MSCI World High Dividend Yield
index. The Trust will then have the freedom
to choose the best income stocks globally,
while retaining a focused portfolio of 40–60
companies, representing the highest-conviction
ideas. And, crucially, the board intends to
maintain its current dividend-distribution policy,
while progressively increasing the dividend over
the longer term.
Ultimately, it is impossible to ignore the
fact that all investment is influenced to some
degree by world events. This year alone, global
macroeconomic factors have had an enormous
impact on markets: events in North Africa, the
Japanese earthquake and tsunami, rising inflation
in the developing world and concerns over
European sovereign debt have all significantly
affected investor sentiment worldwide, proving
that no market is immune from global forces.
But this is no cause for concern. All we must
do is accept that our investment horizons have
broadened. And with more and more companies
around the world paying attractive dividends
to shareholders, Securities Trust is now able to
embrace these global opportunities and invest in
the best high-yielding companies – wherever in
the world we find them.
This article is intended for investors in the UK and is for
information only. It does not represent an inducement
to buy or sell investments and does not constitute
Your attention is drawn to the risk warnings, and in
particular those pertaining to the risks of investment with
exposure to gearing and single country markets. These can
be found on the trust’s website at www.securitiestrust.com
under the ‘regulatory information’ section. Martin Currie
Investment Management Ltd is authorised and regulated
by the Financial Services Authority and is a member of the
Investment Management Association.
<< Previous Article
| Taking Stock Home
| Next Article >>