Bad news for income trusts

There's very little good news around the future of income trusts, says Merryn Somerset Webb.

Bad news. Last week we wrote about the dismal performance of Temple Bar, one of the constituents of our model investment trust portfolio. We also said that we weren’t dropping it (for now). Yes, the trust went into this crisis very well positioned for a surge in value stocks – but extremely badly positioned for a pandemic that favoured the business models of seemingly overpriced growth stocks. And yes, it is still down 46% in the last three months – double that of the average equity income trust. However, we have long had great respect for Temple Bar’s manager Alastair Mundy’s well-established contrarian approach (which is why we chose the trust in the first place) and we felt we should wait to see how the next few months went before abandoning his process.

Sadly as with everything these days, events have moved faster than expected. Mundy has now stood down on health grounds and Temple Bar’s board is wondering what to do next. So that, I am afraid, is that. We will take it out of the portfolio. Possible replacements are Troy Growth & Income (but Personal Assets, which we also hold, has the same management company, which might be style overkill for us); Aurora Investment Trust (which takes a contrarian value approach a little like Mundy’s – and is down 35% in three months); Dunedin Income Growth, or perhaps (to give us more of a global income) JP Morgan Global Growth & Income. Otherwise I wonder if it is time to add a Japanese fund to the mix – particularly given that we are replacing what was an income generator and Japanese dividends seem safer than most. Opinions on this are welcome – send your thoughts to editor@moneyweek.com below and we will decide over the next week.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.