STS GLOBAL INCOME & GROWTH TRUST: New name, more assets… and a real opportunity to boost income

The investment fund STS Global Income & Growth has undergone a major reboot since Troy Asset Management took over three years ago. Troy, an investment firm that prioritizes capital preservation for clients’ wealth, has recently overhauled the fund’s portfolio, divesting itself of 95 percent of the shares it inherited from Martin Currie, the previous managers.

It has also reset its dividend so shareholders now have every opportunity to enjoy income growth for the foreseeable future – while the name of the fund was changed last year from Securities Trust of Scotland to give investors a better sense of what it does.

The final part of the trust’s revamp will take place in the coming weeks, absorbing the assets of the Troy Income & Growth Fund, following a shareholder vote. The merger should create a vehicle with assets of just under £400m. The reward for shareholders will be a reduction in fees charged by Troy on the new joint trust fund.

Although the stocks that STS inherits from Income & Growth will primarily be UK-listed, there will be a lot of portfolio overlap – around 15 stocks (the likes of RELX, Unilever and Reckitt Benckiser) are common in both portfolios. It will also remain a global income fund, with a significant slice of its assets allocated to the United States and Canada.

James Harries, director of STS, believes it will be largely business as usual. “When we joined the team in November 2020, we wanted to establish STS as the best quality, low-volatility trust in the global equity income sector,” he says. “I believe we have done that.”

Performance numbers support this claim. Over the last three separate one-year investment periods, the fund has recorded returns of 2.3 (year through early February 2024), 4.8 (2023), and 12.5 percent (2022).

Given the focus on capital preservation, Harris is meticulous about which stocks end up in STS’s portfolio. It avoids sectors such as energy and mining (too cyclical); automotive and retailers (vulnerable to disruption from competitors); Home builders and construction companies (extremely capital intensive).

In contrast, key areas of interest include selected industrial stocks such as US semiconductor giant Texas Instruments, a company that has invested heavily in cutting-edge technology to secure long-term cash flow growth.

It also has a stake in Canadian National Railway which Harris believes will benefit from the campaign to push freight transport off the road and onto rail. Harris also likes some non-banking financial companies such as wealth managers.

Among the top 10 stocks is the Chicago Mercantile Exchange (CME), which has benefited from growing interest among American investors in financial instruments such as futures.

Once the income and growth assets are absorbed into STS, Harris is confident that the trust will find broad appeal among investors keen to preserve their wealth while generating income from their investable assets.

“The fund will be invested in resilient companies,” he says. He added: “It will provide a dividend income equivalent to about three percent per annum and we will seek to increase it by about five percent per annum. We hope to build an attractive investment that will attract young and old.”

The fund’s market ID code is B09G3N2 and the ticker is STS. The total annual fee is 0.94 per cent although that should come down as Income & Growth’s assets are taken under its wing.

Dividends are paid quarterly, with the final payment being 1.53p. Shares are currently trading at around £2.25.

(Signs for translation) Daily Mail

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