Fund of the week: Diversified play on British blue chips
Jan 20, 2012
Print this article
The managers of Merchants Trust (MRCH) have stuck with a traditional income-slanted investment approach. “We are 100% invested in UK equities, which are predominately large cap,” Simon Gergel tells Fund Strategy magazine.
Gergel manages the fund, which dates from 1889, and it seems his approach is working. The fund delivered a return of 58.6% over three years and is currently trading at a 5.36% discount to net asset value (NAV).
Also of interest is the 6.2% dividend. “We have a strong history of 29 years of raising dividends. This is the major focus – to deliver high and increasing levels of income,” says Gergel. Numis Securities has placed the trust on its ‘sell’ list, says FT Adviser, because it considers the £366.3m fund to be relatively expensive.
For those seeking large NAV discounts, Numis’s head of investment trust research, Charles Cade, recommends funds focused on emerging markets, smaller UK companies and specialist sectors. However, this approach doesn’t take into account yields or risk.
While bearish on the economy, Gergel is more optimistic about the firms in his portfolio. “They have a better credit rating than most governments,” he tells Fund Strategy. “Many are globally diversified, have good cash flow and a good yield.”
The international nature of the fund’s holdings gives the trust emerging-markets exposure. Oil and gas, financials, and consumer services and goods each make up 13%-15%, followed by telecoms, industrials, healthcare and utilities.
Contact 020-7859 9000.
Merchants Trust top ten holdings
| Name of holding | % of assets |
|---|
| Royal Dutch Shell |
8.8 |
| GlaxoSmithKline |
7.1 |
| BP |
7 |
| Vodafone |
5.7 |
| HSBC |
5 |
| Unilever |
4.3 |
| BAE Systems |
3.5 |
| SSE |
3.2 |
| British American Tobacco |
3.2 |
| National Grid |
3.1 |
Related articles
-
By Tim Bennett, May 24, 2012
-
By Bengt Saelensminde, May 23, 2012
FREE - MoneyWeek's daily investment email
Our free daily email, Money Morning, is an informative and enjoyable analysis of what's going on in the markets. Written by our Editor, John Stepek, and guest contributors.
Sign up FREE to Money Morning here.