/ CHANGE / for example , it now has 5 per cent of its assets in emerging markets .
A change in a trust ’ s manager should encourage investors to consider how big a role he or she played in investment selection – did they have complete control or was it more of a team approach ? Carruthers says that if the manager was removed and replaced by an activist investor due to poor performance , this could spell bad news for other minority shareholders .
DUE DILIGENCE It is a good idea to carry out due diligence on the trust ’ s new manager . Hollands says he would want to see clear evidence of a successful track record running similar mandates .
“ This process will either reaffirm your conviction in the trust , involve you putting it on a watch list for closer scrutiny or , if the case really doesn ’ t stack up , prompt a disposal ,” he says .
BlackRock Income Strategies is changing its manager in conjunction with a merger into the Aberdeen UK Equity Tracker Trust . The respected Mike Brooks and Tony Foster will run the new vehicle , which will be called the Aberdeen Diversified Income and Growth Trust .
The trust has been through numerous changes over the past two years . Previously known as British Assets Trust , in 2015 it replaced its focus on UK equities with a multi-asset approach . The trust suffered badly in the weak market environment at the start of 2016 and has fallen 8.5 per cent in the past 12 months .
“ Clearly shareholders in this trust have gone through a number of notable changes over recent years , causing the share price discount to re-emerge , but the board has been
“ I can ’ t help thinking that shareholders would have ended up in a much better situation had it not gone off on its ill-fated experience ” active and relatively quick to act on underperformance and address shareholder concerns ,” says Gordon Smith , fund research analyst at Killik .
“ If the Aberdeen team , which has a demonstrable track record in open-ended fund structures , can deliver a sustained period of performance , the trust has clear attractions with few comparables on the London market .”
30 % 25 % 20 % 15 % 10 % 5 % 0 % -5 % -10 % -15 %
Feb16
Mar
Source : FE Analytics
PAYING OFF HANDSOMELY Some policy and manager changes at investment trusts have paid off handsomely . John Newlands , head of investment companies research at Brewin Dolphin , gives the example of Scottish Mortgage , which used to be a staid global generalist with several hundred holdings .
“ It is now effectively a giant focus fund that takes huge stakes in things that , in some cases , nobody has heard of . Although this has been a success , investors still do need to understand that it is far less of a ‘ sleep at night ’ trust than it used to be ,” he says .
While sometimes a cause for hope , fundamental changes to a trust should be carefully assessed . Hollands argues that although the old British Assets Trust never set the world alight , it delivered solid returns for the most part and was simple to understand : “ I can ’ t help thinking that shareholders would have ended up in a much better situation had it not gone off on its ill-fated experience with BlackRock ,” he adds .•
PERFORMANCE OF TRUST VS SECTOR AND INDEX OVER 1YR
BlackRock Income Strategies Trust ( -8.51%)
BlackRock Income Strategies benchmark ( 23.58 %)
IT Flexible Investment
( 18.31 %)
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan17
12 trustnetdirect . com