Ashfield has managed the £70m fund, which is a fund of investment trusts, since September 2009 having taken over the portfolio from his father, Gerry Ashfield, who originally launched the vehicle way back in 1941.
Consistent Practical aims to deliver a growing source of income to investors and therefore Ashfield has a bias towards yielding trusts within his fund. Our data shows the fund has delivered £319.52 in income on an £1,000 investment made when Ashfield took over the portfolio.
This process has worked well from a total return point of view as well. According to FE Analytics, it has been the best performing portfolio in the IMA Mixed Investment 40%-85% Shares sector with returns of 75.66 per cent, beating its FTSE All Share benchmark by more than 20 percentage points.
Performance of fund vs sector and index Sep 2009
Source: FE Analytics
The manager says he doesn’t try to time the market, but when he finds income opportunities at an attractive entry point he will aim to take advantage.
While he has been relatively quiet during the recent correction, he has been buying a couple of trusts and in this article he explains why.
British Assets IT
Ashfield has been topping up his exposure to F&C’s British Assets Trust, which is managed by Phil Doel.
It is now his fourth largest holding, making up 4.51 per cent of his Consistent Practical fund.
The major reason why the manager has been buying up shares in the trust is due to its income characteristics because, as he rightly points out, its total return performance has been poor for a number of years now.
“We have bought a bit more British Assets, which has yield of 5 per cent and is on an 8 per cent discount. More importantly, though, it has been growing its dividend,” Ashfield said.
“British Assets is a global equity income trust and has actually underperformed over the medium to longer term, which is probably why it is trading on a wide discount. However, with that sort of yield I think it is a good opportunity and the hope is that other investors start to take notice too.”
According to FE Analytics, it has been a bottom quartile performer in the IT Global Equity Income sector and has underperformed against its composite benchmark – FTSE All Share and FTSE All World ex UK 80/20 split – over five, seven and 10-year periods.
Doel has managed the trust since September 2011 and it has underperformed against both the sector and its benchmark since then, with returns of 20.33 per cent.
Performance of trust vs sector and composite benchmark since Sep 2011
Source: FE Analytics
It has, however, increased its dividend over the last three years.
Doel holds 63 per cent in the UK equity market, 10 per cent in North America and 7 per cent in continental Europe. It also has around 10 per cent in corporate bonds.
Doel’s top 10 holdings include HSBC, Royal Dutch Shell and more out-of-favour stocks such as Rio Tinto and Barclays.
British Assets is relatively highly geared at 17 per cent and has ongoing charges of 0.7 per cent.
Henderson Far East Income
Ashfield has also been topping up his exposure to Henderson Far East Income, which is his eleventh largest holding making up 3.5 per cent of his fund.
While global emerging markets trusts have been hit hard during the recent sell-off, the IT Asia Pacific ex Japan Equities sector has held up much better.
Ashfield says the Henderson closed-ended fund, which is run by Mike Kerley, isn’t the best discount value – as he bought at NAV – but is a great option for income investors.
“Asia Pacific hasn’t come back all that much [over the last few weeks] but I was concentrating more on the trust’s dividend more than anything else,” Ashfield explained.
“The Henderson trust pays its dividend quarterly and is due to go ex div next month, which is quite handy for me. Its dividend yield is 5.5 per cent, which is attractive, and it has been growing that over which is also good.”
Kerley has managed the Henderson Far East Income trust since January 2007.
According to FE Analytics, it has returned 102.87 per cent over that time, which is less than the IT Asia Pacific ex Japan Equities sector, but close to 25 percentage points more than the gains of the MSCI Asia Pacific ex Japan index.
Performance of trust vs sector and index since Jan 2007
Source: FE Analytics
It has also beaten the index over one, three and five years. Its factsheet shows the board has increased the dividend in every year since Kerley has been in charge, growing it from 8p per share in 2007 to 17p per share as of last year’s pay-out.
Henderson Far East Income’s largest regional exposures are mainland China, Taiwan and Australia, which make up 19.3 per cent, 18.8 per cent and 17.4 per cent respectively.
The largest sector weightings are financials and industrials, which combined make up more than half of the trust’s NAV.
While Ashfield bought at NAV, the trust has moved onto a slight premium over the last week.
It has gearing of 2 per cent and has ongoing charges of 1.33 per cent.
