BRUNNER INVESTMENT TRUST: Trust closing in on its 100th anniversary with a 50-year streak of dividend growth
Investment trust Brunner is closing in on its 100th anniversary and under the management of Allianz Global Investors appears in good shape.
The £433million fund, formed in 1927 and listed on the UK stock market, has 50 years of annual dividend growth under its belt and its board is determined to keep the streak going.
With more than a year’s income tucked away in reserve just in case it is needed to top up the quarterly dividend cheques to shareholders, its reputation as a solid long-term home for investors’ money remains intact.
Over the past one, three and five years, Brunner has generated returns of 15, 45 and 66 per cent, in the process outperforming the FTSE All-Share Index, but slightly underperforming the FTSE World Index. Among its global peers, it has delivered some of the most consistent results. Matthew Tillett, manager of Brunner, describes the fund as an ‘all-weather investment portfolio’, generating returns in most market conditions. It does this by having geographically diverse holdings with key stakes in all the globe’s developed stock markets.
It is also not wedded to any one investment style.
The result is a ‘blended’ portfolio, combining growth stocks such as US computer software giant Microsoft – its biggest investment – as well as stakes in energy companies, healthcare businesses and financial services groups. It avoids start-ups, unlisted companies and ‘risky turnaround companies’.
Although some experts say it’s middle of the road – boring – compared with global rivals such as Scottish Mortgage, Tillett is unconcerned. ‘We want to deliver consistent results over the long-term,’ he argues.
He also believes the approach he follows does permit the fund to invest in exciting companies. In healthcare for example, long-term holdings in mature businesses such as Swiss giant Roche are complemented by stakes in companies involved in cutting-edge technology, such as Intuitive Surgical. This company, listed on the Nasdaq in the US, is a market leader in robotic surgery. ‘It’s a disruptor,’ says Tillett, ‘and the growth opportunities are massive.’
Similarly, in the banking sector, Tillett is happier holding a company such as UBS that has a profitable wealth management arm than the likes of Lloyds. ‘We held Lloyds when I became involved in the trust in 2016,’ he says, ‘but we wanted something offering a bit more.’ As a result, exposure to UK financial companies is now through the likes of Close Brothers and specialist bank Paragon.
Tillett says markets have entered a difficult period. Some company valuations still look too high and ‘maybe have further to fall’.
He also reckons that business risk is an issue – the inability of some companies to pass on rising costs to customers, resulting in a profits squeeze.
The trust has a low annual charge of 0.63 per cent. In the year to the end of November 2021, it paid dividends of 20.15p, an increase of 0.45 per cent on the year before.
Although these are equivalent to a modest annual income of 2 per cent, they are growing.
Its shares trade at a discount to the value of the underlying holdings.
The fund also has borrowings, increasing its exposure to equity markets. This is fine if markets are rising, not so clever when they fall.
The Brunner family, whose name the trust bears, owns a quarter of the shares. The Brunners made their money in industrial chemicals in the early 1900s. The stock market ID code is 0149000, the ticker is BUT.