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31 January 2006
Changes to The Scottish Investment Trust reap rewards
The Scottish Investment Trust PLC (SIT), one of the oldest investment trusts within the Global Growth category, has undergone a complete restructuring which has been rewarded with a marked upturn in its performance with consistent benchmark outperformance from July 2004 onwards.
Over the year to 31 October 2005 SIT’s NAV (with debt valued at par) rose by 21.2%, comfortably ahead of the 16.3% benchmark return.
The AITC’s monthly statistics for December 2005 (with figures by Fundamental Data) show that SIT is now 8th out of 25 in terms of NAV total return over one year to 31 December 2005, beating both the Global Growth sector average and the average of all AITC conventional investment trusts - a significant improvement from its position in 2003.*
This robust performance reflected strong contributions from SIT’s global listed portfolio, which outperformed for the second consecutive year, and from private equity investments.
The listed portfolio outperformed due to sector positioning and good stock selection across the portfolio. The unlisted portfolio, which is maturing rapidly, generated excellent returns with a large number of realisations.
SIT’s share price rose by 26.2 % over the year and the discount with borrowing at market value narrowed from 14.7% to 9.9%.
2004 saw a number of significant changes at SIT. These included:
- repayment of 2 higher coupon debentures in July 2004 to lower the company’s potential gearing
- changes to the senior management of the investment team
- a change in the investment approach to increase the performance potential of the trust.
Prior to these changes SIT had organised its investments as a series of five regional portfolios covering global stockmarkets. Following his appointment in January 2004, John Kennedy restructured these regional portfolios into one single global portfolio and introduced a common investment process across the regions. In so doing, the number of listed holdings has been reduced from over 200 to less than 120.
The changes were made in order to:
- increase the performance potential of the company while still remaining well diversified
- allow increased co-ordination and implementation of investment policy
- place greater emphasis on SIT’s strongest investment ideas worldwide regardless of region and index weight.
*
SIT NAV Total Return Rank Within Sector
Year to 31 December
Source: Fundamental Data
Past performance will not necessarily be repeated and is no guide for, or guarantee of, future returns. The value of shares and the income from them can go down as well as up as a result of market and currency fluctuations and investors may not get back the amount originally invested. SIT has a long term policy of borrowing money to invest in equities in the expectation that this will improve returns for SIT shareholders. However, if markets fall these borrowings will magnify any losses.
SIT’s Standardised Past Performance
Sources: 1The Scottish Investment Trust PLC and Fundamental Data for the AITC, source and copyright 2002. All rights therein are reserved.
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