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Brunner Investment Trust relishes its geographic diversity


What it does

Brunner Investment Trust PLC (LON:BUT) has been around a long time and is a balanced fund focusing on income allied to capital growth.

Formed in 1929 by the Brunner family (who still own a 29% stake), the trust is managed by Allianz Global Investors, with Matthew Tillett taking over as senior portfolio manager this year after four years working on the fund.

At around sixty companies, it is a concentrated portfolio and the mandate is to meld income with growth.

ESG (environment, social and governance) is also becoming increasingly important and companies failing in this regard and not showing any signs of improvement are unlikely to be considered going forward.

Brunner has raised its dividend for 47 years on the trot with a notable 15% hike at the half-way point of the current year.

How it’s doing

In its latest half-year report, the company increased its interim dividend and said it will use its reserves to maintain payments while payouts from its portfolio recover after the coronavirus (COVID-19) disruption.

Brunner said it had revenue reserves equivalent to 27.6p at the end of May to continue to pay the dividend and sees payment expectations improving though recovery to former levels will take time.

Microsoft was the portfolio’s best performer over the half-year as the resilience of the software giant’s corporate cloud revenues has provided a strong underpin to growth during this period.

What the manager says

“We’re not setting out to buy companies with high dividend yields. We look at income when we come to portfolio construction,” Tillett told Proactive.

“Our bias to quality means we’re looking for companies with differentiated business models that we think can sustain high returns over the long term and ideally with a decent amount of growth. And we’re looking to buy them on attractive valuations where that long-term dynamics are not priced in.”

“In a year where income funds the world over have been hit by the effects of the coronavirus pandemic as companies scrapped and suspended dividends, the trust remained a staunch source of income.

“One of the great things about Brunner is that it can offer this yield but it’s not a burden – it’s not something that we having to stretch the portfolio’s balance sheet to try and achieve,” Tillett adds.

“The trust has been able to deliver this long-term track record of such impressive dividend growth over the very long term as we’re owning good quality companies that fundamentally have the capacity and ability to keep growing free cash flows and keep growing their dividend.”

Inflexion points

  • Company has raised the dividend payment for 47 years consecutively.
  • Philosophy is concentrated on stock picking
  • Remit is wide and global

What the market says: Edison (February)

“BUT is currently trading at a 14.0% discount to cum-income NAV, which is wider than the 10.2% to 12.1% range of averages over the past one, three, five and 10 years.

“Given the trust’s long-term record of outperformance and the very smooth manager transition, arguably a narrower discount is warranted. BUT has increased its dividend for the past 48 consecutive years and currently offers a 2.3% yield.”



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