Winterflood hails BlackRock trust turnaround

Investment trust analysts at Winterflood Securities have hailed the turnaround in BlackRock North American Income trust in the year since Tony DeSpirito joined as manager.

Since Mr DeSpirito joined BlackRock from Pzena Investment Management in August 2014, performance on the trust has begun to pick up following a lengthy period of underperformance.

In the past year, the share price total return on the trust has been 6.2 per cent, slightly less than the 6.8 per cent return on its Russell 1000 Value benchmark but significantly higher than the average return of -2.4 per cent from trusts in the AIC North America Equities sector, according to data from FE Analytics.

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The pick-up has meant the trust has outperformed its sector average since its launch in 2012, but its 21.3 per cent return has been dwarfed by the 54.5 per cent rise in its benchmark.

The Winterflood analysts said while part of the trust’s underperformance had been due to its style being out of favour, they said there had been “issues with the investment process, which Tony DeSpirito has addressed since his arrival last year”.

However, Winterflood said performance on the trust was still significantly behind that of the S&P 500 index, which has risen by 11.1 per cent in the past year.

The Winterflood analysts also raised concerns about the trust’s 3.8 per cent dividend, saying they had “reservations regarding the relatively high proportion of income that is generated through option writing, which can act as a headwind in a rising market”.

Option writing involves the managers selling potential future capital growth in order to fund a dividend payout in the near term.