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Questor: could this be the ultimate ‘buy and hold forever’ trust for income investors?
Questor investment trust bargain: Bankers offers a compelling combination of settled management structure, low fees and international diversification
In October last year we posed the question: “Which trust should you buy if you never want to sell it?”. The answer, courtesy of one investor who buys investment trusts for a living, was Monks. But Monks pays minimal income. So which income trust is the one to buy and hold forever?
The main attributes we want in a “never sell” fund are predictability of management style and process (as it’s unreasonable to expect the same individual manager to be in place for multiple decades), low cost and international diversification.
The last point is important because sticking to just one market – in all likelihood, for readers of this column, the London one – would almost certainly cut you off from sources of innovation and growth likely to be found in different parts of the world over the coming decades.
More certainly, it would cut you off from the dramatic developments in technology that currently take place principally in America and China.
One long-established global trust with a decent yield, a low management charge and a settled approach to management is Bankers, first tipped here almost exactly two years ago.
The management structure is the antithesis of the “star manager” style, where everything hinges on the sustained ability of one individual. Instead, Bankers has a lead manager, currently Alex Crooke of Janus Henderson, who oversees seven regional portfolios.
Crooke, who has run the trust since 2003, has the responsibility for deciding how much of its money is allocated to each region, but the actual stock selections within each region are made by specialists in those areas.
Currently 26pc of the fund’s revenues derive from Britain, 30pc from North America, 16pc from continental Europe, 15pc from the Pacific region and 11pc from Japan. Exposure to Britain has fallen markedly in recent years.
Analysts at Winterflood, the broker, recently described the trust’s regional management team as “settled”, although one manager, Tim Stevenson, who is responsible for the European portfolio, is due to retire this year. His successor, James Ross, has been with Janus Henderson since 2007.
Each regional portfolio of shares aims for 20 to 30 holdings and the managers employ a “value” investing style with “a particular focus on cash generation and the potential for dividend growth”, Winterflood said.
The trust’s latest “ongoing charges figure”, for the year to Oct 31, was 0.5pc, which is at the low end, especially in view of how many managers are involved in running the portfolio.
The yield is 2.6pc on a “forward” or predicted basis but more compelling is the record of dividend growth: the payment has been increased for 52 consecutive years.
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In last month’s annual report the board recommended a 6pc rise in the dividend to 19.72p for 2018, following a 9.4pc increase in 2017, and said next year’s rise was likely to be about 6pc too.
The manager aims to ensure that the divi is covered by the trust’s income, although there are also “revenue reserves” to meet any shortfall. Winterflood said: “Given the fund’s revenue reserves, it is difficult to envisage a situation where this record [of annual dividend rises] is not maintained.”
Although there are many investment trusts that yield more than Bankers, they tend to be focused on British stocks. Bankers offers an excellent combination of global diversification and income. Although the discount has narrowed from about 8pc at the time of our first tip, we still see the fund as a solid choice.
Questor says: buy
Ticker: BNKR
Share price at close: 844p
Update: Symphony
When we published a round-up of our tips’ performance last month we said Symphony was our worst performer, having lost 30.5pc. While this was strictly correct in share price terms, the trust has paid very significant dividends as a means to return to shareholders the proceeds of asset sales. Including these payments, we have broadly broken even. Hold.
- Questor archive: telegraph.co.uk/questor