It is one of a basket of income trusts held in my SIPP flexi-drawdown portfolio. It is one of the smaller trusts in my collection with total assets of £181m. I generally like to hold the larger trusts as the expense ratio tends to be lower due to economies of the larger operation. Having said that, the expenses for IVI are not too bad for an actively managed trust - 0.90% incl. transaction charges. Furthermore, from 1st April 2015 the management fees have been renegotiated and for the first £150m of market cap, the fee will be reduced to 0.65% p.a. and then 0.55% above this level.
The trust has issued its annual report for the 12 months to 31st March 2015 (link via Investegate).
On a total return basis, net asset value (incl. dividends) increased by a very acceptable 10.3% over the year - ahead of the benchmark FTSE All Share rise of 6.6%. The trust has outperformed its benchmark index over 1, 3, 5 and 10 years - obviously, if this can continue, its worth paying a little extra in charges compared to the lower cost trackers.
|3 yr chart IVI v FTSE All Share|
(click to enlarge)
The board are recommending a final dividend of 3.75p which will make a total of 10.10p an increase of 2.5% on the previous year (2014 was 9.85p). Dividend CAGR over the past 10 years is 7.3%. The current yield is around 3.5%.
The balance of the portfolio is weighted towards FTSE 100 large caps comprising 70%, FTSE 250 23% and the rest made up of smaller companies and some fixed interest. The top 10 holdings have a significant weighting in the traditional big hitters; tobacco - 8.4%, pharma - 7.3% and utilities - 5.5%. Also good to see Next - 2.9% and L&G - 2.9% making the top ten.
Commenting on outlook, the trust manager says:
"The FTSE All-Share Index has risen strongly over the last six years and now stands at an all-time peak level. Although political uncertainty in the UK has been resolved for now, there are other headwinds to withstand in the short term, including weakening demand in the Chinese economy and the political backdrop internationally, but valuations suggest that the long term outlook for returns from investing in the stock market are still attractive.
My investment strategy remains intact - I am seeking companies with strong fundamentals, with sensible management whose interests are aligned with shareholders and with a low risk balance sheet. I remain confident in the long term return potential of the holdings in the Company’s portfolio".
For those looking for a predictable, steadily rising income, investment trusts can be a good option however, they are not without risk - especially the more highly geared trusts. Over the past year, the borrowing level for IVI has reduced from 9.9% to 8.3%.
I am happy to continue with the trust in my portfolio - the only slight reservation is that revenue reserves remain a little on the light side at 91% but have significantly improved from 84% last year. I would be happier if this could be increased to over 100%.
As always, please DYOR.