Wealth Shortlist Update: Troy Trojan Income

The fund was originally added to the Wealth Shortlist to provide a differentiated approach to UK income investing and access to the Troy investment philosophy of providing some protection to their funds in weaker markets alongside long-term capital and income growth.

However, our ongoing analysis of the fund has shown that it hasn’t fully met our expectations, and we no longer have the required level of conviction for the fund to have a place on the Wealth Shortlist.

Since Blake Hutchins took over the fund’s management in November 2019, the fund has delivered returns of 10.36%*, lagging the 76.45% return from the FTSE All Share index, and the 60.37% return from the IA UK All Companies sector average. In addition, the income generated by the fund hasn’t grown as much as some peers. As always, past performance isn’t a guide to future returns and income is variable and not guaranteed.

Note that the fund tends to be concentrated with between 35 and 50 investments, which means that each one can have a meaningful effect on performance, though this approach increases risk.

Our view

In recent years, the fund’s investment style of focusing on quality companies rather than those that are more sensitive to economic conditions has been out of favour, which has held back returns. Although we recognise that investment styles move in and out of favour—and that other funds on the Wealth Shortlist have faced similar headwinds—our analysis suggests that this fund has underperformed peers with a similar investment style.

The fund’s quality-focused investment style means that it has provided investors with some shelter during periods of market weakness. We view this positively. However, we’re disappointed with its performance in rising markets. We don’t expect the fund to outperform the broader market in a strongly rising market, but its level of participation has fallen short of our expectations and has been lower than peers with similar investment approaches.

The amount of income paid by the fund also hasn’t been as consistent or grown as much as we’d like to see, particularly when compared to peers. For investors focused on income for their portfolios, we believe there are other funds that offer the potential for greater income growth. Please note that the fund takes charges from capital, which could boost the income paid but reduce the potential for capital growth.

In addition, although we believe that Hutchins has remained true to the fund’s process and philosophy, we currently feel that fund managers with a more flexible approach may be better positioned to outperform over the long term.

We continue to believe that the fund could provide an element of shelter in weaker markets and perform well if its quality investment style comes back into favour. However, for the reasons outlined above, this is no longer one of our preferred options for an income portfolio.

Although we're removing the fund from the Wealth Shortlist, this isn't a recommendation to make any changes to an investment portfolio. Investors should make sure that any investments match their investment goals and attitude to risk and are held as part of a diversified portfolio. If you're not sure if an investment is suitable for your circumstances, please seek personal advice.