InvestmentsMay 31 2016

Scottish Investment Trust returns plunge two thirds

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Scottish Investment Trust returns plunge two thirds

The £818m Scottish Investment Trust has reported a significant fall in returns since last year, with the fund’s manager partly blaming the threat of Brexit and negative interest rates.

According to interim results released today (31 May), before tax the trust returned £25.5m to the end of April, down two thirds from the £75.5m reported at the same time last year.

The return attributable to shareholders has also dipped considerably, falling to £24.7m from £75m over the same period.

Despite this, the trust’s total income was up 15.7 per cent, rising to £13.7m from £11.8m year-on-year.

The results are the first to cover a complete year since Alasdair McKinnon was named lead manager.

In today’s statement, he said the past six months have been an “interesting period” for investors favouring a long-term contrarian approach.

“Central bankers seem keen to sustain investor confidence at a time when corporate profitability appears to be slowing,” he commented, explaining his decision to increase exposure to companies which appear good value and are near to the bottom of their respective cycles.

Mr McKinnon said the largest loss came from British Land, as the company suffered from a change in perception towards the London property market and uncertainty around the EU referendum.

He said the majority of other losses in the period came from financial holdings, which reacted to “both the actual or speculated imposition” of negative interest rates, as well as the prospect of losses from loans to commodity backed ventures.

“The actual increase in US interest rates in December seemed to be the trigger for a sharp shift in sentiment as investors realised the US economy was not isolated from the global economic slowdown.”

The board also declared an interim dividend of 5.25p per share, an increase of 5 per cent from a year ago.

The discount was more volatile than in previous reporting periods, but finished at 8.6 per cent at the end of April.

According to FE, the trust has lost 4.6 per cent in a year, against 3.3 per cent in 2015.

Dan Farrow, director of SBN Wealth Management, said: “I’m really disappointed the manager has blamed Brexit and negative interest rates.

“This tells me nothing apart from an unwillingness to tell investors the reason for the poor performance and what specifics led to the trust’s demise from the last reporting period.

“This certainly isn’t a great advert for the investment trust sector.”

katherine.denham@ft.com