The board of Edinburgh Investment Trust plans to remove Invesco’s Mark Barnett as manager following a period of underperformance, replacing him with Majedie Asset Management. 
Barnett (pictured) has run the £1.3bn investment trust since January 2014 and total returns were in the top quartile of the IT UK Equity Income sector during 2014 and 2015.
However, it is currently in the bottom quartile over one and three years – and lagged its FTSE All Share benchmark by a wide margin over both periods.
The trust has also seen its discount widen during that time. It currently stands at 10.98 per cent discount to net asset value (NAV), wider than its three-year average of 8.29 per cent.
Performance of trust vs sector and benchmark over 3yrs
Source: FE Analytics
At the end of December 2013 when former manager Neil Woodford left the trust, it was trading at a discount of 2.6 per cent to NAV.
Edinburgh Investment Trust chairman Glen Suarez said: “I am disappointed by another weak result for the company in today’s interim results, extending the period of underperformance to beyond three years.
“Since 2018 your board has worked hard to understand the causes of this underperformance, cognisant of the long-term investment objective of this company and the recent trends in the UK equity market.”
In its explanation of the change, Edinburgh’s board stressed that it understands good fund managers will experience periods of underperformance and a focus on the long term is needed when a manager’s style is out of favour.
However, it added that the number of stock specific issues affecting the portfolio – which cannot be attributed to broad market movements – had caused it to “question the effectiveness of the investment process”. Following a review, it concluded it was in shareholders’ best interest to change the investment manager.
Suarez said: “Following a detailed assessment, thorough review and selection process, the board has decided to change the company’s investment manager and I am pleased to report that we have chosen Majedie.
“James de Uphaugh will be the portfolio manager and he is a highly experienced active manager with a flexible investment approach. The board believes that James has the right approach to meet our company’s objectives of capital appreciation and dividend growth over the long term.”
Majedie Asset Management is an independent investment management firm with a strong track record in UK equities. It has a total return approach to investing, where income is an important component of returns rather than their main driver, which aligns with Edinburgh’s twin objectives of capital and income growth.
Edinburgh’s board said the trust’s portfolio will be “closely aligned” with an existing sub-portfolio managed by de Uphaugh and not directly available to retail investors. This sub-portfolio has outperformed the FTSE All Share index by 3 per cent net per annum since the start of 2007.
“Majedie’s long-term, flexible investment approach, incorporating a commitment to ‘responsible capitalism’ backed by fundamental analysis, is well suited to an investment trust that seeks total returns from both income and capital growth,” de Uphaugh said.
“The team here looks forward to working with the board to build the value of the company in the years ahead.”
Majedie will receive an annual management fee of 0.48 per cent of the market capitalisation of trust up to £500m and 0.465 per cent on amounts above £500m.
Edinburgh’s board said this represents “a significant reduction” from the current levels of fees paid to Invesco of 0.55 per cent of market capitalisation.