The Securities Trust of Scotland [LON:STS] is a London-listed investment trust currently trading at a discount of around 1.8%. It is a long term capital growth fund which achieves this through investing in a balanced portfolio of equities.
The trust’s performance speaks for itself if you look at it over the longer term time frame. This is not a tactical investment but one to leave in your rainy day portfolio. It beats its sector benchmark (AIC Global Equity Income) by a very solid margin of 15% over the five year time frame. It does less well over shorter breaks – e.g. 3.6% over 12 months. But it could be argued that this is really a consistent marathon runner, not a sprinter.
It should be noted that the fund manager uses the Lipper Equity Global Income sector as its own benchmark.
What do you get in your portfolio?
The investment trust’s advisors, Troy Asset Management, like their conservative blue chip stocks. Top holdings include the likes of British American Tobacco, PepsiCo, Unilever and Philip Morris International. But there are some other interesting positions in there, like Paychex at 5.6% or CME Group at 4%.
The overall bias is towards US stocks, as you would expect, at 55%, with another 29% in the UK market. Europe ex-UK is 11%. This is very much a developed markets vehicle.
Who’s calling the shots?
In this case it is James Harries and Tomasz Boniek at Troy Asset Management. They took over management at the start of December 2020. Like many other fund managers, they were in for a three month white knuckle ride. The trust has done well since then, breaking its pre-pandemic valuation in August 2021.
Harries is an ex-Newton fund manager where he won plaudits for his management of the Newton Global Income Fund, making it the first in its sector for 10 years. He joined Troy in 2016 to establish the firm’s global income strategy. Boniek is the co-manager of the Troy Ethical Global Income Fund and came over from Susa Fund Management in 2017. He also worked at Bain Capital in a previous life.
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Troy Asset Management formally took over as the advisor / manager of Securities Trust of Scotland in November 2020. This also included a comprehensive shake up in the trust’s service providers with State Street handing over depositary and custody duties to JP Morgan. The trust was originally launched in 2005 and was managed by Martin Currie for 15 years.
We always get asked by readers about fees: the trust has an ongoing charge of 0.93%. As manager, Troy get an annual management fee of 0.6% of the net assets of the company up to GBP 750m, 0.55 in the GBP 750m to GBP 1bn range, and 0.5% above GBP 1bn. There is no performance fee in place at the moment.
How does Securities Trust of Scotland measure up?
For starters, the growth income strategy has managed to recover quite well from the pandemic under the new management team. In these scenarios we tend to discount the performance of previous managers, hence pre-2020 data is less relevant here.
The trust easily beats the Morningstar sector average by a comfortable margin. The fund measures up well in the Global Equity Income stakes where its closest rival is Henderson International Income, but they really are neck and neck, although Securities Trust is carrying more gearing by the looks of it (6% according to Morningstar data). The trust is certainly one of the higher quality choices in this space, but not one for the short term, tactical investor.
