CT Global Managed to up dividends and increase gearing after new managers’ successful switch to Asia

CT Global Managed Portfolio Trust plans to switch to monthly dividends next year and make more use of gearing, or borrowing, as part of changes to make the one-stop investment trust shop more attractive for shareholders.

The changes, which include improvements to how the trust measures its performance, came in annual results showing a good first year under managers Adam Norris and Paul Green.

Norris and Green took over the £192m investment trust in May last year after the retirement of Peter Hewitt, who had managed it since launch in 2008. The trust, which invests in other investment trusts, offers two share classes of income (CMPI) and growth (CMPG).

In the year to 31 May, the growth portfolio returned 25.6% to shareholders, beating the 21.6% advance in the FTSE All-Share although it lagged the FTSE All-Share Closed-End Investments index which returned 27.6%. It made 1.6% in the previous 12 months.

The income portfolio came in slightly behind the All-Share with a 21.2% shareholder return that included 7.85p per share of dividends that put the shares on a 6% yield. The pay-out rose 3.3% on the 7.6p of the previous year, a 15^th consecutive annual increase that beat the 2.8% rise in inflation. It returned 3.8% in the previous year.

For the new financial year, the board is looking to pay CMPI holders 2p a quarter to lift the total for the year to 8p. It will then start paying monthly dividends, recognising this is more convenient for investors, although it will not increase the total level of income shareholders receive.

Chair David Warnock said the company also intended to make “fuller use” of gearing. This is the ability for investment trusts to borrow relatively modest amounts to increase the amount of money invested on behalf of shareholders, thus potentially boosting their returns. Currently the income portfolio only uses 4% of borrowing while the growth pool is ungeared. The company has a £10m credit facility.

Warnock said: “We have listened carefully to what matters most to shareholders and, as a result, have undertaken a number of initiatives… each initiative is designed to improve the experience and outcomes for our shareholders.”

The changes come as the portfolios stand in the lower half of their Flexible Investments sector, having returned 19.6% to growth investors and 12.4% to income investors over five years, although their ranking over three years has improved with 45% and 47% total returns.

Today’s results showed the managers had repositioned the portfolios, reducing their number of holdings and swinging them to Asia and emerging markets with the growth allocation rising from 3.4% from 18.1% and for income from 7.3% to 17.7%. This was funded by a reduction to UK investment trusts with the growth portfolio exiting six in the first half of the year and the income portfolio selling out of Montanaro UK Smaller Companies (MTU), Mercantile (MRC), City of London (CTY) and Merchants Trust (MRCH) in the second half, having disposed of three UK holdings in the first half.

Returns in the growth portfolio were boosted by Baillie Gifford’s Schiehallion (MNTN) and Scottish Mortgage (SMT) which more than doubled in the year, as did Fidelity Emerging Markets (FEML), although it was not held for the whole period.

Our view

Matthew Read, senior analyst at QuotedData, said: “This is an encouraging first year for CT Global Managed Portfolio’s new managers. Both portfolios delivered strong absolute returns and beat the benchmark, helped by a substantial repositioning towards Asia and emerging markets and away from the UK. That shift looks well judged so far, although the portfolios still lagged the closed-end investment companies index. However, with the portfolios now more concentrated around the managers’ highest-conviction ideas and greater use of gearing also on the cards, the trust feels more focused than it did a year ago, while the move to monthly payments will hopefully improve their appeal to income investors.”