IP Select UK Equity shares owns an actively managed portfolio of UK equities held for the long term, with the manager, James Goldstone, aiming to identify undervalued companies and take advantage of the under-pricing.
James has repositioned the UK equity portfolio since taking over in October 2016, and the focus is on companies exposed to the UK economy and consumer, which James thinks are currently undervalued. However, this exposure is balanced out by holdings with international earnings, although these positions are all held because of the manager’s conviction in them as businesses and the attractiveness of their valuations, rather than simply risk-management tools.
The trust has underperformed this year due to the exposure to domestic earnings, with the UK market being unloved thanks to the uncertainty around Brexit. However, negotiations over the UK’s exit from the EU are nearing a conclusion with the “divorce” scheduled for the first quarter of next year.
Gearing has remained at the upper end of the permitted range under James’ management. However, this debt is not structural but reflects the valuation opportunity the manager sees in the UK market.
The company tends to trade quite closely to NAV, supported by a strong buyback policy, and in fact traded on a premium prior to the June 2016 referendum.
The dividend yield is 4%, paid quarterly, and the board’s intention is to at least maintain the dividend in each year going forward. It has backed this up by using capital reserves to pay when necessary.
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Fund History: Invesco Perpetual Select Trust plc: UK Equity Share Portfolio
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