Midas Income And Growth Trust
Edison | Nov 29, 2013 04:38AM ET
Low-volatility, multi-asset portfolio
Midas Income and Growth Trust (MIGT) has a multi-asset portfolio that is circa two-thirds equities with the balance in fixed income, alternative assets and property. This has historically provided lower volatility in its returns than its predominantly equity-focused peers in the Global Growth & Income sector (MIGT has both the lowest one-year NAV volatility and lowest one-year price volatility among its peers – see page 8) and the FTSE All-Share Index. MIGT’s equity investments are tilted towards defensive stocks. There is also a focus on real assets to provide some protection against rising inflation. The yield of circa 4% is above the sector average.
Strategy: Low volatility multi-asset portfolio
MIGT is a global fund with an absolute return benchmark. Its multi-asset portfolio primarily comprises equities (UK 36.4% and overseas 30.5%) and fixed-income securities (14.2%). Property and alternative assets are also included to take advantage of opportunities in these sectors while reducing overall risk. Managed using a predominantly top-down investment style, the manager varies the strategic asset allocation for each class around a long-term position. MIGT makes direct investments in UK equities and investment-grade bonds. Other exposures, such as overseas equities, are gained via fund investments.
Outlook: Sentiment improving, valuations elevated
Volatility this year, particularly in reaction to talk of tapering, highlights that considerable uncertainty remains, although there is evidence to suggest the economic outlook is improving and, reflecting this, the FTSE All-Share and FTSE 350 High Yield Indices have returned 22.8% and 20.9% during the last 12 months. Price rises have broadly outpaced earnings increases, so that UK and global equities are not as cheap as they were before, but valuation measures remain comparable to their 10-year averages (see page 3). The manager believes MIGT’s portfolio should remain defensively positioned and has moved the directly held equities towards a more defensive allocation during the last six months. Fixed income has seen a modest reduction with a shift towards shorter-duration investments to reduce sensitivity to interest rate rises.
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