Trusts’ UK exposure drops 9% over past decade, says AIC

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Investment trusts’ overall exposure to the UK has dropped by 9 per cent over the past decade, according to the AIC.

The findings come as part of AIC data and research into the investment company sector’s exposure to G8 countries, ahead of the G8 summit in Northern Ireland later this month.

Figures show that the investment company sector’s overall exposure to the G8 nations has dropped by 8 per cent over the last decade, from 43 per cent down to just over a third at 35 per cent.

The AIC says this drop can be attributed primarily to a 9 per cent drop in UK exposure over the last 10 years within the closed-ended sector. Trusts have cut their UK exposure from 29 per cent to 20.1 per cent over the period.

A number of trusts within the global growth/global growth & income sectors have significantly reduced their UK exposure.

The Securities Trust of Scotland has reduced its UK exposure from 62 per cent down to 18 per cent over the last 10 years.

As consequence, the trust changed sectors in August 2011, moving from UK growth & income to global growth & income.

Securities Trust of Scotland manager Alan Porter says: “In the UK, for example, there are many sectors such as telecoms, materials, energy, healthcare and IT where the opportunity set for high yielding companies with growth potential is limited.

“On a global basis, in contrast, there is a good selection of high-yielding stocks across all the main sectors. So going global really does provide investors with greater choice.”

However, the investment company sector actually has its highest exposure to the UK out of all the G8 nations, accounting for a 20 per cent majority of the overall 35 per cent exposure.

Law Debenture manager James Henderson says: “We remain with a large position in the UK because we can find cheaper, better managed, internationally diversified companies here than we usually can overseas.

“We are only going overseas if we cannot find an opportunity in the UK.”

According to AIC figures, the sector has little exposure to the rest of the G8 nations. The US has the second highest proportion of G8 exposure at 9 per cent, marking a 2 per cent rise from a decade ago.

The closed-ended sector currently has approximately 2 per cent of its total G8 exposure in Japan. This figure is down from closer to 2.5 per cent 10 years earlier.