The British Empire Investment Trust has increased its dividend for each of the past thirty years.
The trust tends to invest in the holding companies of wealthy families around the world. The fund manager commented that, ‘whilst investors may not be familiar with the names of the family holding companies, they will know the businesses in which they are invested.’
He cited the example of Investor, the family holding company of the Swedish Wallenberg family.
Investor has significant shareholdings in the pharmaceutical company Astra Zeneca, and the telecoms company Ericsson, amongst other investments.
Bauernfreund remarked that Investor shares trade at a stout discount to the value of the assets of the company, and so represent good value.
The second slug of the portfolio’s capital is held in investment trusts, which themselves trade at a discount.
The fund manager commented that, ‘we don’t really buy a lot of the plain vanilla investment trusts that just happen to be trading at discounts right now. We also don’t buy something just because it is on a big discount and we hope something will happen. We only buy trusts we want to own, that are on a discount.’
One trust that is amongst the top ten holdings in the fund right now is Riverstone Energy, which he commented trades at a substantial discount to the net asset value of the assets it owns.
A very significant slug of the capital of the British Empire Investment Trust has been deployed into private equity investment trusts for years.
The fund manager commented that this was, to a large extent, a function of the discounts at which the sector was trading, with some of the funds at 40 per cent below net asset value.
He commented that those discounts have now retreated to more like 15 per cent, which means he is consciously deploying a smaller proportion of British Empire Investment Trust’s capital to the sector.
The British Empire Investment Trust has returned 52 per cent over the past year, compared with 40 per cent for the average trust in the sector in the same time period.
It trades at a discount to net assets of 10 per cent.