Trustnet Magazine Issue 21 September 2016 | Page 21

/ FUND, PENSION, TRUST / Pension SENECA GLOBAL INCOME & GROWTH The trust has comfortably outperformed its sector over the past three years and has done so with the lowest maximum drawdown 40% Seneca Global Income & Growth Trust (37.48%) 35% IT Global Equity Income (26.77%) FTSE All Share (20.39%) LIBOR GBP 3m + 3% (11.11%) 30% 25% 20% 15% 10% 5% 0% Jul May Mar Jan 16 Nov Sep Jul May Mar Jan 15 Nov Sep Jul May Mar -5% Jan 14 MANAGERS: Alan Borrows and Peter Elston DISCOUNT/PREMIUM: -0.6% GEARING: 9% OCF: 1.52% FE CROWN RATING: PERFORMANCE OF TRUST VS SECTOR AND INDICES OVER 3YRS Nov FILE performance in this regard to its aversion to government bonds and foreign currency. “Lower exposure to foreign currency is a sensible position to have for investors in the income fund who, let’s face it, are probably in retirement and shouldn’t be taking those sorts of risks,” he said. One area in which the managers are happy to take on risk, however, is in mid caps, which have been one of the worst performing areas of the market since the UK voted to leave the EU at the end of June. This has been the main cause of the trust’s underperformance against its peers in 2016 so far. However, you should invest for the long term even in the drawdown stage of your pension, meaning Sep 13 W HEN IT COMES TO THE DRAWDOWN STAGE OF YOUR PENSION, you should look for a fund that pays a decent yield and delivers capital growth without taking unnecessary risks with your money. One trust that ticks all these boxes is Seneca Global Income & Growth. Run by Peter Elston and Alan Borrows, the trust aims to outperform 3 Month LIBOR plus 3 per cent over the longer term, while minimising volatility, through investing in a multi-asset portfolio. It also offers the prospect of capital and income growth. The £69m trust has made 37.48 per cent over the past three years, compared with 26.77 per cent from the IT Global Equity Income sector average and 11.11 per cent from its benchmark. It has also been the least volatile trust in its sector over the period, with the highest Sharpe ratio – which measures risk-adjusted returns – and the lowest maximum drawdown – the most an investor would have lost if they bought and sold at the worst possible moments. Elston attributes the trust’s strong periods of underperformance are to be expected. It is also worth noting that the trust is in the top quartile of its sector over the last month after mid caps began to recover from the aftermath of the referendum result. As Elston put it: “These things take time to recover – mean reversion doesn’t happen overnight. You have started to see mid caps come back, you have started to see them outperform large caps and I think that this will continue for some time.” “Yes, you can have these short term events that affect performance, but as a value investor you just have to buy things with a long-term perspective and then ride out any short-term difficulties that you face.” The four crown-rated trust is 9 per cent geared, is trading on a 0.6 per cent discount to NAV and is yielding 3.9 per cent. Source: FE Analytics 19