Edinburgh IT - Interim Results

Edinburgh is one of oldest trusts on the market as well as one of the largest investment trusts with assets approaching £1.5bn.

It is almost 2 years since Mark Barnett took over the reins from Neil Woodford.

This trust is one of the top UK Income Trust in terms of net asset value and share price performance over five and ten years, its returns far outstripping those of the FTSE All-Share index. A sum of £1,000 invested 10 yrs ago would now be worth £2,886 compared to a total return of £1,723 from the benchmark FTSE All Share index.

10 yr chart EDIN -v- FTSE All Share Index
(click to enlarge)

The trust invests primarily in UK securities with the long term objective of achieving:

1. an increase of the Net Asset Value per share by more than the growth in the FTSE All-Share Index; and,
2. growth in dividends per share by more than the rate of UK inflation.

Although this is a UK income trust, the manager is permitted to invest up to 20% of the portfolio in overseas listed holdings. Around 15% is currently allocated including Swiss pharma, Roche and US tobacco firms Reynolds and Altria. The rest of the portfolio is comprised 50% FTSE 100, 28% FTSE 250 and a smaller allocation towards UK small caps.

Edinburgh has been one of the cornerstones of my income portfolio for several years and is held in both Sipp drawdown and ISA. Earlier in the week it published  results for the half year to 30th Sept 2015 (link via investegate).

The Company's share price, including reinvested dividends, rose by 6.6% during the past 6m, compared to a fall of  -7.2% (total return) for the benchmark FTSE All-Share Index.

6m chart v FTSE All Share 2015

This 13.8% out performance over just 6 months is quite an achievement. This is largely the result of being underweight in miners and banks and correspondingly overweight in tobacco, pharma, real estate and non-life insurers.

Tobacco stocks - Reynolds, Imperial, BAT and Altria - take up 4 of the top 10 holdings and together account for 19.0% of the portfolio. Maybe not one for the more ethically minded investor!

During the period, the entire holding in GlaxoSmithKline was sold, Rolls Royce was reduced and low cost airline easyJet joined the portfolio.

Dividend

The board recently announced a 4% uplift in the first quarterly dividend to 5.2p (2014 5.0p) giving a current full year dividend of 24.05p

The yield is 3.4% based on the current share price of ~700p.

Conclusion

This year I have embraced passive index funds as I believe they are more likely to generate a better return than most actively managed funds over time. That said, I fully accept there will always be some managed investments that can genuinely add value and Edinburgh appears to be one of them.

There can be little doubt that index investing works; active investing can work as evidenced by the 10 yr performance and therefore a combination of the two can work. Therefore, lets not throw the baby out with the bath water... it's not either/or but take on board index funds and keep the best of the actively managed funds/trusts.

More on this following the full year results next May, but so far, happy with progress made under the stewardship of the new manager.