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
companies? 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 investment advice.
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.
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