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Cautious Bankers drops LatAm, Africa, holds cash

10 July 2019

Global investment trust reports a good set of half-year results but says it is selling non-Asian emerging market holdings after deciding they are not worth the risk.

Bankers’ (BNKR) fund manager Alex Crooke is selling the global investment trust's direct shareholdings in Africa and Latin America after deciding they deliver too much volatility and not enough return. 

The £1.7 billion trust, whose regional portfolios are managed by fund managers at Janus Henderson, historically had a 2-3% weighting to emerging market stocks outside Asia.

Bankers chair Sue Inglis said the portfolio also had ‘significant exposure to the African and South American regions through companies listed in Europe and New York’.

She said that the small size of the holdings - accounting for 2.3% of the trust's asets at 30 April - had led the managers to conclude ‘that our direct emerging markets portfolio has not contributed meaningfully to the company’s returns’.

‘Accordingly, we will start to sell down our investments in that portfolio, initially raising cash before ultimately reallocating to other regions,’ said Inglis. 

There were no big changes to Bankers' regional allocation which at the end of May had 30.5% exposure to North America, 26.3% to the UK, just over 15% to Europe, 14% to Asia Pacific and 11% to Japan.

All areas made positive returns with Bankers recording an underlying total return on its investments of 8.7% in the six months to April, beating the FTSE World index which returned 6.9%.

Shareholders did better than this with a total return, including dividends, of nearly 10% as the discount - or gap between the share price and net asset value - narrowed to just 0.9% from a 12-month average of 2.2%. 

Bankers is on track to achieve its 53rd consecutive year of dividend growth. Revenue per share rose to 9.25p from 8.52p in the half year enablng the board to reiterate its forecast for 6% dividend growth this year. This would mean a total dividend of 20.9p, yielding 2.2% on the current share price. 

Inglis said the positive returns ‘disguise that the period was quite eventful’ with a global sell-off hitting markets at the end of last year. 

‘Inflationary pressures remain muted, global monetary policy appears to continue to be supportive and corporate earnings growth is still positive,’ said Inglis. 

However, she noted that economic growth could suffer from the US and China as the trade dispute between the two countries could ‘adversely impact business conditions’. 

‘I remain cautious on the outlook for global equity markets,’ she said referring to the net 1% cash the trust held.

‘As our fund manager believes that markets have run ahead of fundamentals, we feel it is prudent to raise cash within the portfolio and would expect to deploy this at more attractive prices later in the year.’

Bankers has a value and income focus that is unusual in the Global sector. Over the past 10 years it has delivered a total shareholder return of 299%, ahead of both the FTSE All-Share's 176% and the MSCI World's 278%, although below the 451% average of its sector which is dominated by growth funds like Scottish Mortgage (SMT).  

Investment company news brought to you by Citywire Financial Publishers Limited.

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