Bankers (BNKR), the £1.3bn global equities investment trust, is banking on companies continuing to spend big on artificial intelligence as it looks to sustain its improved performance following a shift into US technology stocks last year.

The Janus Henderson managed trust, which appointed technology fund manager Richard Clode as co-manager late last year, upped its weighting in North America from 49.6% to 64.5% with the allocation to tech stocks jumping from 27% to 36.8% in the year to 31 October.

At the same time exposure to defensive, lower growth sectors such as healthcare, real estate and consumer staples was cut from 20.6% to just over 13%.

The annual report published today shows that while Bankers’ underlying investment return of 18.1% was below the 21% of the FTSE World index, barring November 2024, when the portfolio trailed the market’s rally at the re-election of US president Donald Trump, it had kept broadly in line with the global benchmark.

However, shareholders actually did better than the index with a 22.8% return, which followed a strong 21.4% in the previous financial year. This reflected increased share buybacks by the board, chaired by Simon Miller, to keep the share price discount below 10%. The shares currently trade 8.5% below net asset value compared to a 9% average discount of the past year.

Co-manager Alex Crooke and Clode said Bankers had outperformed the US S&P 500 index after November 2024, driven by strong returns from top holdings chip maker Broadcom, Google-owner Alphabet and Microsoft. 

“These and the other major US tech companies continued to produce results that exceeded market forecasts and are deploying the cash they generate to support future investments in AI infrastructure. 

“Capital expenditure, as a percentage of cash flow, in the technology sector is forecast to be 40% in 2025, roughly half the level at the height of the last dot com boom in 1999,” they noted in reference to growing concerns of a speculative bubble caused by excessive investment that could lead to a stock market crash.

They added: “The fact that capex is largely funded by cash generation rather than debt supports our view that we are still some way from the peak level of investment.” 

Consequently, they remain confident that the adoption of AI will “significantly improve productivity and economic growth across the globe”. That would lead to a positive broadening of companies beating stock market indices, while the valuation of US tech giants remained lower than at previous market peaks with their highly cash-generative businesses attractive and “hard to disrupt”.

The increased emphasis on tech stocks, which generally pay no or low dividends as they invest in growth has, as expected, reduced investment income from £38.6m to £31.5m. However, the Association of Investment Companies’ “dividend hero” has achieved its 59th consecutive year of dividend increases. A final dividend of 0.686p per share takes the total pay-out for the year to 2.744p, up 2.1% from 2.688p last year.

Gearing, or borrowing, was raised by 1.5% to 5.6%. The board dispensed with a relatively expensive short-term borrowing facility and instead is relying on £37m of cash to support share buybacks and investment opportunities.  

Over one year Bankers ranks third out of 10 trusts in the AIC Global sector with a 19% total shareholder return. That’s up from a mid-table position over five years in which it has provided a 35% return. However, the report showed there is a lot of ground to make up against the FTSE World, which it underperforms over all time periods above 12 months.