In an expensive market like this, it’s hard to find reliable income investments which offer attractive returns. With this in mind, today I’m going to take a look at two investment trusts which have enticing dividend track records and trade at discounts to their net asset values (NAVs).
Global equities
The Brunner Investment Trust (LSE: BUT) is one such fund. With shares trading at a discount of 12% against its net asset value per share of 844p, prospective investors have the opportunity to pick this global equities trust for less than the sum of its parts.
This doesn’t seem like a big discount in comparison to some other trusts, but it does look unwarranted given that the fund owns a highly liquid portfolio of global equities and has a relatively low ongoing charges ratio of 0.73%.
Capital and dividend growth
The fund aims to provide its investors with both capital growth and growing dividends by investing in companies all over the world, seeking out opportunities for growth and reliable dividends wherever they may be. It has 45 years of consecutive years of dividend increases under its belt, giving it one of the strongest track records of dividend growth in the investment companies sector.
With a portfolio of 74 stocks, Brunner has a well-balanced portfolio, with no sector accounting for more than a quarter of its total asset value. Big positions include Royal Dutch Shell (3.1%), Microsoft (3%), Abbvie Inc (3%), UnitedHealth (2.9%), and BP (2.2%).
Multi-manager strategy
Alliance Trust (LSE: ATST) has an even longer track record of boosting shareholder payouts, with 50 years of consecutive dividend growth. That’s an impressive feat, but what really sets it apart from its peers is its unusual investment strategy.
After years of lagging investment returns, the company has shaken up in its strategy by adopting a new multi-manager model. Although there are a few other investment companies which also utilise a multi-manager approach, they tend to suffer from closet tracking and high costs.
Alliance Trust intends to overcome flaws in the traditional multi-manager model, by targeting ongoing charges ratio at below 0.65% — less than half the typical ongoing charges figure for a multi-manager fund. It also intends to avoid over-diversification, which brings closet tracking, by hiring external managers to select only high-conviction picks with specific investment objectives, reducing its likelihood of generating index-hugging performances.
Investment performance
It’s too early to see whether this change in its investment strategy would deliver outperformance for shareholders over the long term. So far though, the results are encouraging. The fund reported a net asset value total return of 11.8% since the change in strategy in April 2017. This compares favourably against the 8.2% return from its MSCI All Country World Index benchmark over the same period.
Alliance Trust currently trades at 6% discount against its NAV, with shares in the fund yielding 1.7%.
