This update, the latest for our income-focused investment trust portfolio, covers the period from the end of November to 28 February, so it has not been affected by the huge market falls in early March.
Purposeful Portfolios: Regular Income
Note: this portfolio update focuses on the past quarter and was written before the 12 December election result.
"The past quarter was pretty smooth,” says James Brumwell, manager of our regular income portfolio. “Dividend growth continued nudging up, which was pleasing. At the same time, the portfolio held up on the capital front, which is really what the target is.”
Last year, central banks around the world were supposed to be gradually tightening interest rates. After a decade at historic lows, investors were expecting a “normalisation” of monetary policy, led by the US Federal Reserve.
That did not happen. As James Brumwell, manager of our regular income investment trust-focused portfolio, notes: “A year ago we were looking towards higher interest rates and Brexit being sorted. But that’s not happened. The US/China trade war escalated and now there’s a race to the bottom on interest rates.”
A rally in global stockmarkets has helped our regular income-focused investment trust portfolio recover from the market volatility at the end of 2018 – every holding has been in the black over the past four months.
Portfolio manager James Brumwell says of the period: “It has not quite been a case of picking any stock and making money, but it has not been far off .” The portfolio has largely tracked the market, he says, and has risen in value by 7.5% since our previous update in January.
As we usher in the new year, James Brumwell, the manager of our Regular Income portfolio, has made a number of changes over what has been a truly torrid period.
A rising interest rate environment is a difficult one for income investments. The reason for that is quite simple: as rates rise, the dividend or coupon these investments pay tends to look less attractive, so some investors ditch their holdings and the capital value falls.
Our regular income portfolio of investment trusts has posted total returns of 9 per cent since inception last April, despite a ‘hairy start to the year’ which has seen nine holdings in negative territory since our last update. James Brumwell, who is managing the portfolio, has been tinkering to take advantage of capital gains allowances before the end of the tax year.
Our Regular Income portfolio has collected £4,393 in dividends since its April launch, a yield of almost 4.4 per cent. With many UK equity income funds struggling to meet the Investment Association sector requirement to match the yield of the FTSE All-Share index – currently 3.6 per cent – James Brumwell is pleased with his portfolio’s progress
Holly Black speaks to investment trust specialist James Brumwell about his closed-ended line-up for the second in our series of £100,000 portfolios