Investment trust STS Global Income & Growth has undergone a significant reboot since Troy Asset Management took over three years ago.
Troy, an investment house that prioritises the capital preservation of clients’ wealth, has overhauled the trust’s portfolio, jettisoning 95 per cent of the stocks it inherited from Martin Currie, the previous managers.
It has also reset the dividend dial so that shareholders now have every chance of enjoying income growth for the foreseeable future – while last year the trust’s name was changed from Securities Trust of Scotland to give investors a better feel for what it does.
The final part of the trust’s refurbishment will take place in the coming weeks when, subject to a shareholder vote, it will absorb the assets of fellow fund Troy Income & Growth.
The merger should create a vehicle with assets of just under £400 million. The reward for shareholders will be a reduction in the charges that Troy levies against the new combined trust.
Although the stocks that STS inherits from Income & Growth will primarily be UK listed, there will be much portfolio overlap – some 15 stocks (the likes of RELX, Unilever and Reckitt Benckiser) are common to both portfolios.
It will also firmly remain a global income fund with a significant slice of its assets allocated to the United States and Canada.
James Harries, manager of STS, believes it will very much be business as usual. He says: ‘When we came on board in November 2020, we wanted to establish STS as the best high quality, low volatility trust in the global equity income sector. I think we have done this.’
The performance numbers support this claim. Over the last three discrete one-year investment periods, the trust has registered returns of 2.3 (year to early February 2024), 4.8 (2023) and 12.5 per cent (2022).
Given the emphasis on capital preservation, Harries is meticulous about the stocks that end up in STS’s portfolio. He eschews sectors such as energy and mining (too cyclical); automobiles and retailers (vulnerable to disruption from competitors); housebuilders and construction companies (too capital intensive).
In contrast, key areas of interest include selected industrial stocks such as US semiconductor giant Texas Instruments, a company which has invested heavily in cutting-edge technology to secure long-term cash flow growth.
It also has a stake in Canadian National Railway which Harries believes will benefit from the drive to push the transportation of goods off the roads and on to the railways. Harries also likes some of the non-bank financial companies such as wealth managers.
A top 10 holding is Chicago Mercantile Exchange (CME) which has benefited from the growth in interest among US investors for financial instruments such as futures.
Once Income & Growth’s assets have been absorbed into STS, Harries is confident the trust will find widespread appeal among investors keen to preserve their wealth while earning an income from their investible assets.
‘The fund will be invested in resilient businesses,’ he says. ‘It will offer a dividend income equivalent to around three per cent a year and we will endeavour to grow it by around five per cent per annum. Hopefully, we are building an attractive investment which will appeal to young and old.’
The trust’s market ID code is B09G3N2 and the ticker is STS. Total annual charges are 0.94 per cent although these should fall when Income & Growth’s assets are taken under its wing.
Dividends are paid quarterly with the last payment being 1.53pence. The shares currently trade at around £2.25.