Edinburgh Investment Trust: June 2025 update

• Imran Sattar was appointed manager of the trust in February 2024, following the retirement of James de Uphaugh and Chris Field

• The manager’s focus is on providing a balance between longer-term income and capital growth

• The trust achieved a share price return ahead of the increase in net asset value this year through a narrowing of the discount it trades on

How it fits in a portfolio

Edinburgh Investment Trust invests mainly in larger UK companies with an aim to provide a return in excess of the FTSE All Share index over the long term. The trust has a twin objective of increasing Net Asset Value (NAV) more than the FTSE All Share index and growing dividends per share faster than the rate of UK inflation. It could therefore fit as part of an income-focused investment portfolio or add exposure to larger UK companies in a broader, diversified portfolio.

Investors in closed-ended funds should be aware the trust can trade at a discount or premium to its net asset value (NAV).

Manager

Imran Sattar began his career at Mercury Asset Management in 1997, before joining Blackrock to manage UK equity funds. In 2018, he joined Majedie Asset Management to continue running UK equity funds and in Aprill 2022 joined Liontrust when the business acquired Majedie.

Following the retirement of experienced managers James de Uphaugh and Chris Field, Imran Sattar was appointed as portfolio manager of the trust in February 2024. He’s supported in managing the trust by deputy portfolio manager, Emily Barnard.

Barnard started her career at the Wellcome Trust before joining Majedie Asset Management in 2016. She joined Liontrust in 2022 following Liontrust’s acquisition of the business and forms part of the Global Fundamental team

Sattar and Barnard are also supported by the rest of the Global Fundamental investment team at Liontrust.

Process

Edinburgh Investment Trust mainly invests in larger UK companies with a small 5.3% allocation to overseas companies. The objective is for returns to come from a balance of long-term capital and income growth. This approach limits the reliance on either income or capital to drive returns which could result in a smoother ride. The trust is relatively concentrated at 43 holdings, meaning that each investment could have a big impact on performance and increases risk.

Sattar looks for good quality companies with sustainable business models and quality management teams across the value and growth spectrum. His focus is on identifying growing companies with well-established economic moats.

In the year to the end of March 2025, Sattar made a number of changes to the portfolio. This included the purchase of new positions in utility company National Grid and financial markets infrastructure and data provider, London Stock Exchange Group. Retailer Marks and Spencer, and utility business Centrica were sold from the portfolio, with the manager feeling that both companies were fairly priced following successful turnarounds.

The trust can borrow money to invest with the intention of increasing returns (known as gearing), but this could magnify losses in a falling market and increases risk. The manager can also use derivatives, which if used adds risk. The level of gearing as of the end of March (the end of the trust’s financial year) was 5.0%, higher than the 3.1% level a year earlier. In addition, there may be some investments in smaller companies which, by their nature, can be higher risk and illiquid investments.

Culture

Liontrust gives managers the freedom to manage their funds according to their own investment and market views. The company simply asks managers not to deviate from their investment processes. Each manager's funds are regularly checked by other senior managers at Liontrust to ensure they're staying true to their investment processes.

We like that all Liontrust fund managers invest a significant amount of their own money into the funds they run, and their incentivisation is tied to the performance of the funds they manage. We think these factors help to align their interests with those of investors.

ESG Integration

The quality of ESG integration varies across Liontrust. The firm gives fund managers the freedom to run their portfolios according to their own investment and market views. It simply asks managers not to deviate from their investment processes. The quality of ESG integration therefore varies across Liontrust’s investment teams. The firm’s Sustainable Future range of equity and fixed income funds do incorporate ESG analysis and invest to achieve positive change. Every team member is responsible for all aspects of financial and ESG analysis – ESG analysis is not farmed out to a separate team.

The team produces regular insight articles, available via the Liontrust website. They also produce a Responsible Capitalism report, which explores the team’s views on a variety of sustainability-related issues.

The firm publicly discloses all voting decisions on a quarterly basis, although no rationales are provided.

Cost

The trust’s annual ongoing charge to the end of March 2025 was 0.51%. Investors should refer to the latest annual reports and accounts and Key Information Document for details of the risks and charging structure.

If held in a SIPP or ISA the HL platform fee of 0.45% (capped at £200 p.a. for a SIPP and £45 for an ISA) per annum also applies. Our platform fee doesn't apply if held in a Fund and Share Account or a Junior ISA. As investment trusts trade like shares, both a buy and sell instruction will be subject to our share dealing charges within any HL account except online deals in a Junior ISA.

Part of the trust’s annual charge is taken from capital, which can increase the yield but reduces the potential for capital growth.

Performance

Sattar has done a good job since taking over as manager of the trust. Since he took the reins in February 2024, the trust has delivered a share price return of 27.60%* to investors, ahead of the 19.93% return from the FTSE All Share index. Please note this is a short timeframe to consider performance over.

Over the 12 months to the end of March 2025, the trust’s NAV rose 8.30%, while its share price rose 11.30%. This compares with a return of 10.50% for the FTSE All Share index. Please remember that past performance isn’t a guide to future returns. The difference between the trust’s share price return and the NAV return is explained by a narrowing of the discount the trust trades on.

Over this period, the main contributors to the trust’s performance included its position in bank NatWest Group following strong returns to shareholders and an improvement in sentiment, as well as Verisk the US insurance focused data company. Relative performance vs the FTSE All Share index was also aided by the trust not owning shares in Diageo or Glencore which had a difficult time. On the other hand, the trust’s investments in medical products business Convatec and pest control specialist Rentokil were among the key detractors from performance.

In the trust’s last financial year to the end of March 2025, total dividends paid to shareholders amounted to 28.8p per share. This is a 5.9% increase on the previous year. As was the case last year, this year’s dividend payment is not fully covered by revenues so is partially funded by using some of the trust’s revenue reserves. Reserves contribute 3.80p per share of the total dividend figure. This method of boosting the income paid to investors is used by investment trusts during tougher times, using reserves that have been accumulated during the good times.

The trust currently trades at a discount of 6.97% and has a dividend yield of 3.58%, although yields are not guaranteed and therefore are not a reliable indicator of future income.