Investment Trusts  

Scottish Investment Trust manager says review is 'right thing to do'

Scottish Investment Trust manager says review is 'right thing to do'

The manager of the Scottish Investment Trust has said the board’s investment management review was "the right thing to do".

At the beginning of this month the board of the trust announced it had appointed consultants Stanhope Consulting to review its investment management arrangements. 

Today (June 25) Alasdair McKinnon told FTAdviser: “A strategic review has been launched and personally I think that’s the right thing to do, a company has to have a strategy it is happy with and is confident it will work for the next period [of time].”

Although it does not have a formal benchmark, the board said the trust’s NAV total return had underperformed the sterling total return of the MSCI all country world index over five years to the end of April 2021.

Also, the MSCI index was 5 per cent for the year to October 31, and the trust saw a share price total return of -12 per cent in the period, with a NAV total return of -10.6 per cent.

However, the trust’s performance ticked upwards in the six months to March 31 posting a share price total return of 16.4 per cent. The MSCI index was 19.8 per cent for the same period. Earnings per share for the trust rose 19 per cent to 11.58p.

Meanwhile McKinnon said his strategy for the near future would be value stocks.

“Our view is that value stocks are looking quite attractive," he said. 

“Gold mines are a very attractive investment in a market context and we see gold as a purchasing power hedge against inflation - which is just money supply growth.”

He hinted at turbulent times to come due to rising inflation.

“[Inflation is] what we see masses of - it’s very difficult to predict but it’s going to come through into the cost of real things and when that happens people start to react much more strongly.

In May UK inflation hit 2.1 per cent, ahead of expectations and overshooting the Bank of England’s target of 2 per cent.

The Bank of England's monetary policy committee said yesterday it expected inflation to rise as high as 3 per cent driven by a rise in energy and commodity prices, however this would only be for a "temporary period".

McKinnon said the central banks were currently in a balancing act.

“At the minute if the Federal Reserve increased interest rates it would blow up the economy, which it totally dependent on stimulus and cheap money.

“The Bank of England and the Federal Reserve know we’re in an environment that will create a lot of inflation. And they know it's already in the system. 

“But they've got a balancing act, and they’ve got to stick to a script that they will try and manage inflation and that if we see a spike in inflation, it's just transitory.”

sally.hickey@ft.com