Jupiter’s £49.5m Dividend & Growth investment trust halved its discount in 2013 even as management of the portfolio passed from the retiring Tony Nutt to Alastair Gunn.
Mr Gunn officially took control of the trust in October last year, and in spite of veteran income manager Mr Nutt stepping back, the trust’s common shares rose 36.5 per cent, according to the trust’s annual report and accounts, published earlier this month.
The net asset value (NAV) of the portfolio rose 28.8 per cent for the year.
Both figures were substantially higher than the 16.7 per cent capital return on the FTSE All-Share index, and the strong performance saw the trust’s discount on the common shares halve to 8.2 per cent. So far in 2014 this level has halved again to 4.9 per cent.
In his commentary, Mr Gunn said Vodafone had been a key contributor to returns. In 2013 the telecoms giant’s shares climbed by 53.5 per cent during the year, driven in part by the sale of its stake in US company Verizon.
“While the group benefited from the strengthening UK recovery, international mergers and acquisitions activity was responsible for much of the rise,” Mr Gunn added.
Other blue-chip holdings in the shape of GlaxoSmithKline and AstraZeneca were also among the top-performing holdings, while Petrofac and Highland Gold Mining were detractors, with the managers exiting the latter as the gold price fell to a two-year low.
In the last three months of the year, Mr Gunn added positions including housebuilder Galliford Try, which he believes should benefit from initiatives such as the government’s Help to Buy scheme for first-time buyers, as well as a pick-up in the broader UK construction market.
Mr Gunn said: “We also bought Esure Group, as we expect to see a decline in motor rates to stabilise and reverse, and are already beginning to see signs this may be correct.”
Overall, Mr Gunn cited the pick-up in British manufacturing activity as encouraging, but emphasised that improved earnings growth was necessary to maintain current valuations.
“Our central scenario is that strong economic data should result in a resumption of earnings growth and healthy dividends,” he said.
“We will continue to pay attention to cyclical and UK domestic consumer stocks to take advantage of this improving outlook, while our emphasis will be on companies with strong balance sheets and sustainable dividends.”
As well as the Jupiter Dividend & Growth trust, Mr Gunn is also co-manager of the £382m Jupiter Distribution fund and the £560.6m Jupiter High Income fund. The High Income fund was also previously run by Tony Nutt.
