Brunner Investment trust manager rings the changes in new role

Lucy Macdonald FS 450 largeAllianz Global Investors’ Lucy Macdonald has ramped up the exposure to overseas stocks and increased positions in higher quality companies since assuming control of the Brunner Investment trust in June last year.

Macdonald had been co-manager of the trust with Jeremy Thomas since 2010, becoming sole manager when Thomas left the firm in 2016.

Over the past 18 months the trust’s UK exposure has dropped from 33 per cent to 30 per cent, falling from the top position into second place. North America now makes up the bulk of the trust’s geographical exposure, up from 29 per cent to 32 per cent.

Speaking at the Allianz Global Investors Investment Trust Forum, MacDonald says: “The trust has a 45-year dividend track record. Income is increasingly important to shareholders. We took more exposure overseas to diversify the sources of income and to free up the trust through a broader universe of growth companies.”

Cash has also been put to work globally, with the cash weighting falling from 11 per cent to 6 per cent.

However, MacDonald is keeping some cash ready to invest when there is a market pullback.

“There are plenty of opportunities for volatility to rise. It is very, very low,” MacDonald says. “Valuations are at quite high levels. We have cash on the side to invest when we do get a correction of some sort.”

MacDonald has also increased the trust’s exposure to technology, taking it form 7 per cent to 11 per cent over 18 months, which she says led returns in October. Whereas technology was not traditionally a source of income generation, the likes of Microsoft and Apple now pay dividends.

“Microsoft has been the portfolio’s top contributor,” MacDonald says. “The technology company released its Q1 2018 results towards the end of the month, beating both revenue and earnings expectations. Microsoft is showing particularly impressive growth in cloud computing, achieving its target subscription rate of $20bn three quarters ahead of its June 2018 target, and emerging as a real challenger to Amazon Web Services.”

The changes implemented by MacDonald have led to improved performance for the trust, which aims to provide capital growth and dividends over the long term.

Over one year the trust is up 34 per cent against the Global sector average of 28 per cent, FE data shows, while the discount has narrowed to 12 per cent compared to the one, five and 10-year averages of 15 per cent, 14 per cent and 13 per cent, according to Edison.