Ian McVeigh has taken over running Schroder Income Growth from Chris Rodgers. The change is as a res...
Ian McVeigh has taken over running Schroder Income Growth from Chris Rodgers.
The change is as a result of Schroders setting up a specialist team to manage income oriented portfolios. McVeigh already runs Schroder Split. Rodgers is regarded as more of a growth manager and took over the running of Schroder UK Growth from Jeremy Rigg in December 1999. Rigg has since joined Investec Guinness Flight.
Income trusts have endured a bad six months with the sector underperforming the FTSE All-Share index by almost 10% and trading at a discount of 16%. Over the six months to 29 February, Schroder Income Growth's NAV decreased by 10.8% from 159.77p to 142.51p per share. This compares with a capital fall in the FTSE High Yield index over the same period of 17.42% and a capital increase in the FTSE All-Share index of 1.71%. The share price total return in the six months was 17.24%. At close of business last Tuesday the trust was trading on a discount to NAV of 16.6%.
The Schroders strategy is to buy above average yielding shares. The portfolio currently holds a balance between good value stocks in cyclical areas, such as basic industrials, and more defensive areas like financials and utilities. The portfolio has only got a small exposure to highly rated technology and telecom stocks.
John Hignett, chairman of the trust, said that old economy value stocks are now rallying from exceptionally depressed levels and the highly rated technology stocks have seen widespread profit taking. The valuation gap between the two market extremes has probably reached its full stretch and the market should continue to recover going forward, according to Hignet.
He added the market environment will continue to remain volatile, but in the medium term the outlook looks increasingly positive for both the economy and the stock market.
Merrill Lynch's investment trust team believes the downside risk to income trusts is now limited. The high yielding stocks in which they invest have now been marked down so severely there appears to be a great deal of value in the market, according to investment trust analyst Charles Cade.
He added: "As the interest rate peak appears on the horizon, the market seems to be recognising this value, which we believe will be positive for the funds in the universe. In addition, we believe the trusts could well be re-rated upwards if NAV performance improves, especially since many of them are largely retail held and have no institutional overhang."
If the market returns to the old economy, then the trusts which have maintained the strongest new economy tendencies are likely to pick up most strongly.
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