Investors in Baillie Gifford’s Scottish American (SAIN ) have profited from a rebound in infrastructure assets, helping the portfolio to keep up with global markets over a turbulent six months.

In results to the end of June, the £866m global equity income trust, often known as ‘Saints’, highlighted infrastructure as its strongest performer – a 15% return from this group of holdings was supported by robust operational performance, a catch-up from previously depressed valuations and corporate activity.

Managers James Dow and Ross Mathison said the sector had been ‘priced for disappointment’ at the start of the year,’ singling out UK renewable trusts for trading at discounts of over 30% to net asset value (NAV). But after a spate of reassuring results and a stabilisation in bond yields, valuations lifted.

European grid holding Terna did particularly well, boosted by expansion plans and ‘rising demand for defensive assets in an environment of growing geopolitical and policy uncertainty.’

Other infrastructure holdings include UK-listed trusts Greencoat UK Wind (UKW ) and Assura (AGR ). The Baillie Gifford managers said they ‘stood up for shareholders’ by vocally backing GP surgery owner Assura’s merger with Primary Health Properties, while opposing KKR’s ‘opportunistic’ private takeover bid.

Law Debenture (LWDB ) is another London-listed fund that backed cheap infrastructure trusts in the first half of the year.

A ‘smoother’ ride for investors

Alternative assets more broadly buoyed Saints’ returns over the period, with fixed income holdings – led by Nestlé and Tesco bonds – and the property portfolio also adding value. 

Overall, net asset value (NAV) total returns stood at 1.1%, just ahead of the FTSE All-World index’s 1%. Shareholder returns were stronger at 3.8%, as the discount narrowed slightly.

Despite the similar headline return, the managers stressed that ‘the portfolio’s emphasis on long-term compounding and dividend dependability resulted in a smoother return journey’ during a volatile six months.

‘Saints offers a middle ground: an island of sanity in the eye of the storm,’ they said.

In terms of equities, derivative exchanges including Deutsche Boerse, Hong Kong Exchanges and CME stood out, with the Baillie Gifford duo noting: ‘High volatility in financial markets is actually a boon for these companies.’ UK-based insurer Admiral Group (ADM) was another top performer.

On the downside, losses were spread across sectors and included Procter & Gamble, PepsiCo and Watsco.

Novo Nordisk faced a ‘difficult first half of the year’ as its CEO was asked to step down. The managers continue to expect strong earnings growth and dividends despite more competition in the weight loss drug market. 

The trust took advantage of volatility to make several changes over the period, adding global consulting firm Accenture and US banking software provider Jack Henry, both identified as ‘resilient compounders with attractive valuations’. These were partly funded by the sale of UPS, TCI and the BBGI Global Infrastructure (BBGI ) trust following a takeover bid. 

Looking forward, the managers commented: ‘While the early April storm in financial markets may have passed, volatile headlines and executive orders have stirred an undercurrent of uncertainty.’

In this environment, Saints’ portfolio ‘anchored in high-quality businesses with solid functions, strong leadership and the ability to weather cycles’ offers ‘reassurance’, they said. 

Saints has underperformed the AIC’s Global Equity Income sector average, as well as global markets, over one, three and five years. As of yesterday, it traded at a 9.7% discount to NAV, having bought back 6m shares for £31m over the period.

The two dividends announced for the first half are 5.4% higher than the equivalent dividends in 2024. Saints has a 3% historic yield.