Suits investors looking to access the growth potential of the full spectrum of companies in the UK, while enjoying some income. Long-term investors prepared to accept some short-term volatility from companies outside the main market in return for the prospect of higher growth, may also find it of interest.
The Trust aims to provide a higher-than-average return for investors, with growth of both capital and income over the medium-to-long term. It invests in a broad range of mainly UK companies, from blue chips to small and medium-sized companies, with not more than 50% of the portfolio comprised of FTSE100 companies.
October was another strong month for the Trust as UK equity markets reacted positively to a third consecutive quarter of economic growth and rising business confidence. Gross domestic product (GDP) growth was 0.8% during the quarter, and encouragingly all the main sectors of the economy (construction, services and manufacturing) continued to grow.
Company results are coming through well in general, illustrating the sustainability of margins and strength of cash generation. This cash will ultimately be returned to shareholders, and we are seeing strong dividend growth from companies such as BP and Bellway.
While the UK equity market is reaching a more mature phase, companies continue to keep good control of costs and remain disciplined in their approach to M&A. For example Senior, our largest holding in the Trust, is approaching a net cash position on their balance sheet for the first time in the company's history. Until we begin to see earnings multiples reach unsustainable levels and cash on balance sheets being squandered, we remain comfortable with our positioning amongst high quality industrials.
Buying and selling activity in the Trust remains low as we continue to run with our winners. During the month we added to our position in Royal Dutch Shell as it has a sustainable dividend yield above 5%.