HomeBusinessThese 36 investment trusts have inflation-beating income and growth

These 36 investment trusts have inflation-beating income and growth


Can an investment trust inflation-proof your portfolio? The 36 names that saw both dividend rises and share price gains beat CPI over five years

  • The Bank of England predicts inflation could hit 7.25% by April  
  • AIC research shows 36 trusts have beaten inflation over the past five years
  • Holding real assets in infrastructure trusts is a good way to beat inflation

Inflation officially hit 5.4 per cent in December – its highest point in 30 years – and the Bank of England is forecasting it could hit 7.25 per cent in April, leaving investors understandably concerned.

At the same time large chunks of their share portfolios, particularly any more growth-oriented stocks, may have taken a hit in recent weeks.

This highlights how what’s done well in the past may not do well in the future, but investment trusts with a reputation for beating inflation may still be worth a look.

Research from the Association of Investment Companies (AIC) shows that 36 investment trusts have grown both their dividends and their share price by more than the average Consumer Prices Index inflation rate over the past five years. 

Investment companies can put away up to 15 per cent of their income to supplement payouts and continued to pay dividends during the pandemic

Investment companies can put away up to 15 per cent of their income to supplement payouts and continued to pay dividends during the pandemic

The obvious issue for those staring down the barrel of 5 per cent-plus inflation is that the average annualised rate of CPI inflation over the past five years has only been 2.5 per cent.  

Nonetheless, the AIC said that these trusts both increased their dividends on average over the last five years by more than CPI, as well as delivering an annualised share price return excluding dividends of more than 2.5 per cent. 

None of the companies has cut its annual dividends over this time and all pay a yield of at least 2 per cent.

Some have racked up serious total returns over the period, with Standard Life Private Equity returning 132 per cent, Ecofin Global Opportunities  and Tritax Big Box Reit 114 per cent and BMO Private Equity 109 per cent.

These are speciality trusts and the greatest total returns from more standard equity investment trusts was Fidelity European’s 98 per cent return and JP Morgan Global Growth & Income’s 96 per cent return. 

‘Investors are understandably concerned about rising inflation and many investment companies are focused on growing shareholders’ income and capital in real terms,’ said the AIC’s communications director Annabel Brodie-Smith.

‘It’s encouraging to see that 36 investment companies, from a wide range of sectors, have beaten inflation over the past five years, both in terms of their annual dividend payments and their share price returns.’

The 36-strong list is a diverse bunch, ranging from UK small company investments, to emerging markets trusts and those invested in wind power and non-bank lending. 

NameSectorNet Dividend Yield (%)Dividend Growth (5 year)Raw Price Return (Annualized)5 year share price total return (%)
Standard Life Private EquityPrivate Equity2.4220.2913.82132.10
Ecofin Global Utilities and InfrastructureInfrastructure Securities3.6132.779.10114.14
Tritax Big Box REITProperty – UK Logistics2.642.528.24113.94
BMO Private EquityPrivate Equity3.317.1710.68107.53
ICG EnterprisePrivate Equity2.2016.8913.5199.96
VPC Specialty Lending InvestmentsDebt – Direct Lending8.4410.804.7599.79
Fidelity EuropeanEurope2.0114.319.8997.66
TR PropertyProperty Securities2.9311.207.8596.83
JPMorgan Global Growth & IncomeGlobal Equity Income3.6732.688.6896.30
Apax Global AlphaPrivate Equity4.8122.4310.2291.58
Henderson Smaller CompaniesUK Smaller Companies2.099.639.3490.36
Law Debenture CorporationUK Equity Income3.3711.165.7388.45
Lindsell TrainGlobal4.1442.1815.7088.39
JPMorgan Asia Growth & IncomeAsia Pacific Equity Income4.5145.115.9788.23
Montanaro UK Smaller CompaniesUK Smaller Companies3.9122.514.5878.13
Invesco AsiaAsia Pacific Equity Income4.3132.847.2571.79
MerchantsUK Equity Income4.692.533.4369.20
JPMorgan Russian SecuritiesCountry Specialist5.1020.114.5065.18
MercantileUK All Companies2.689.287.1663.86
Invesco Perpetual UK Smaller CompaniesUK Smaller Companies4.006.207.4963.78
Polar Capital Global FinancialsFinancials2.484.395.2461.70
Templeton Emerging MarketsGlobal Emerging Markets3.3318.166.1159.21
JPMorgan MidCapUK All Companies2.407.035.6253.49
Greencoat UK WindRenewable Energy Infrastructure5.382.524.2453.38
Aberdeen Standard Asia FocusAsia Pacific Smaller Companies2.347.396.1452.20
Henderson European FocusEurope2.094.637.2052.14
Fidelity Special ValuesUK All Companies2.1812.515.1151.53
Invesco Select Global Equity IncomeGlobal Equity Income2.923.425.7750.53
BlackRock Sustainable American IncomeNorth America4.0111.224.9649.74
Aberforth Smaller CompaniesUK Smaller Companies2.415.184.2446.61
Diverse Income TrustUK Equity Income3.336.024.4746.01
Momentum Multi-Asset ValueFlexible Investment3.582.533.2441.54
Henderson International IncomeGlobal Equity Income4.146.264.3540.44
Schroder Oriental IncomeAsia Pacific Equity Income3.954.323.1339.22
North American IncomeNorth America3.618.673.7437.04
Source: AIC using Morningstar (as at 02/02/22). AIC members only.  

Past returns don’t mean future winners…

This is obviously a backward looking list and investors should considerthat  favourable conditions for such investments in the past may no longer be in place for them now. 

Mick Gilligan, partner at Killick & Co, said there are several trusts outside of the AIC’s list ‘that should provide good insulation to their capital values in the event of persistently high inflation.

‘One of the best ways to protect against inflation is to hold real assets – i.e., physical assets that tend to maintain their real value. Several real assets tend to be illiquid (e.g., infrastructure). Investment trusts have a structural advantage over open-ended funds in their ability to hold these assets long term without having to worry about capital outflows.’

A number of infrastructure trusts disclose a so-called ‘inflation data’, which is an estimate of the sensitivity of their NAV to the inflation.

HICL Infrastructure estimates its inflation delta to be 0.80 which means that if inflation is one per cent higher than HICL’s base assumption, the expected return from the portfolio would increase by 0.8 per cent.

International Public Partners’ number comes in at 0.78.

Gilligan added: ‘Capital Gearing and Personal Assets also tend to act as quite good inflation hedges. It is clear from the annual reports of these trusts that inflation protection is a high priority for the board and the manager. These trusts have exposure to a wide range of assets including inflation linked bonds, real estate and stocks with strong pricing power.’



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