InvestmentsJun 4 2018

Brunner trust to use cash windfall for tech investments

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Brunner trust to use cash windfall for tech investments

A drastic reduction in the interest payments on its debt means the manager of the £408m Brunner investment trust will increase the fund’s exposure to technology investments.

Brunner is a global equity investment trust which has increased its dividend for 46 consecutive years and its board recently completed the refinancing of debt in the trust, with debentures requiring it to pay 11 per cent in annual interest and one with a 9.25 per cent rate of interest have been replaced with debt at much lower interest rates.

The higher interest debt was taken out when rates were much higher, but has been refinanced at a level more reflective of today's rates.

Despite the long-standing dividend record of the trust, its manager Lucy MacDonald said the cash saved on interest payments would be deployed into growth focused investments in areas such as technology.

Ms MacDonald said technology would continue to disrupt the business models of many traditional companies and would be the investment opportunity of the future.

She said the dividend of Brunner investment trust was well covered from income generated by the dividend-paying stocks so to broaden the appeal of the trust, the extra capital generated would be deployed in areas of the market where the potential for capital growth was higher.

The trust has returned 84 per cent over the five years to 1 May, compared with 88 per cent for the average trust in the AIC Global sector in the same time period.   

Tony Yousefian, investment trust specialist at FundCalibre, said: "This is a portfolio of international stocks managed on a global basis, it sits in a reasonably competitive sector.

"Its performance in the last five years has been somewhat volatile and below sector average. Although the share price comfortably outperformed the sector average in 2017, regretfully the manager has also not produced alpha over the last three and five years. As such, it has does not pass our initial AlphaQuest quant screen.

"Interestingly, having reached a discount to NAV of approximately 20 per cent in the summer of 2016, this discount has gradually narrowed to the current levels of circa 8.5 per cent, as of 31 May 2018."