Electric trust holdings are slashed

Co-manager Cato Stonex says: “We are now two-thirds of the way to sorting out the portfolio. What we have sold already has given the trust the liquidity to deal with investors who want to exit when we have the tender offer for shares next month.”

Taube Hodson Stonex also runs the £205m St James’s Place International unit trust. Stonex says the changes have been made to ensure consistency across all its funds.

The prospectus for the tender offer will be sent to shareholders in the next few weeks. An extraordinary general meeting is then expected in November, at which investors can vote either to exit and take cash or to stay invested.

Taube Hodson Stonex won the contract to manage the trust from Henderson Global Investors at the start of September. Stonex’s co-managers on the fund are Nils Taube, John Hodson, Mark Evans and Simon Edelsten.

Hodson says that the team has already sold all the portfolio’s smaller holdings, replacing them with a 32.5% weighting in short-dated government bonds to allow the trust to deal with those shareholders who want to exit.

While the managers say they are not planning to change the trust’s investment objective, Hodson says that in the past it has had too many smaller holdings that have hindered performance: “The smaller the size of the company, the bigger the reward percentage has to be to justify owning it.”

He says the overall aim is to run the trust, which should be renamed the Electric & General investment trust after the EGM, on an unconstrained basis, investing in some 60-70 stocks. In line with the St James’s Place unit trust, he adds that turnover will be low at an expected 40% a year.

The trust currently has most of its assets in the UK. Hodson notes that because pension funds and life companies have been selling down their equity weightings and moving into bonds, the market is now unusually cheap.

He says: “The current model portfolio has 35% in the UK, which is more than the historical average of 20-25%.”