Bankers Investment Trust (The) — Navigating through choppy waters ahead

Bankers Investment Trust (The) (LSE: BNKR)

Currency in GBP

Last close As at 26/01/2023

GBP1.03

0.20 (0.19%)

Market capitalisation

GBP1,333m

Research: Investment Companies

Bankers Investment Trust (The) — Navigating through choppy waters ahead

Soaring inflation, rising interest rates, slowing economic growth and the ongoing war in Ukraine have led to equity market weakness and volatility in 2022. Despite these headwinds, The Bankers Investment Trust (BNKR) has done a decent job relative to other global equity managers in navigating these choppy waters. A key strength of its strategy is regional diversification, providing differing and less correlated drivers of returns than some global equity strategies. For example, Asia has always been a notable feature here versus peers (Exhibit 2) and as Alex Crooke, the fund manager, has been looking to regions where economic growth is likely to be stronger, with Asia and China of particular interest, investors may see exposure to this region increase. In addition, in response to a less benign economic outlook, BNKR’s regional portfolio managers have been rotating out of stocks that could struggle in a tougher economic environment and into more dependable and stable stocks.

David Holder

Written by

David Holder

Associate Director, Investment Trusts

Investment Companies

The Bankers Investment Trust

Navigating through choppy waters ahead

Investment trusts
Global equities

22 August 2022

Price

106.2p

Market cap

£1,384m

Total assets

£1,658m

NAV*

116.5p

Discount to NAV

8.8%

*Including income. At 19 August 2022.

Yield

2.1%

Shares in issue

1,302m

Code Ord/A-share

BNKR/GB00BN4NDR39

Primary exchange

LSE

AIC sector

Global

Financial year end

31 October

52-week high/low*

125.5p

95.5p

125.2p

10.3.5p

*Including income.

Gearing

Net gearing at 19 August 2022

8%

Fund objective

Over the long term, The Bankers Investment Trust (BNKR) aims to achieve capital growth in excess of the FTSE World Index and dividend growth greater than inflation, as measured by the UK Consumer Price Index, by investing in companies listed throughout the world.

Bull points

Current discount opportunity.

Enhanced manager of manager structure.

Competitive fees.

Bear points

Performance lagging behind the benchmark.

An element of key person risk remains.

Lower US weighting has been a historical headwind.

Analyst

David Holder

+44 (0)77 9626 8072

The Bankers Investment Trust is a research client of Edison Investment Research Limited

Soaring inflation, rising interest rates, slowing economic growth and the ongoing war in Ukraine have led to equity market weakness and volatility in 2022. Despite these headwinds, The Bankers Investment Trust (BNKR) has done a decent job relative to other global equity managers in navigating these choppy waters. A key strength of its strategy is regional diversification, providing differing and less correlated drivers of returns than some global equity strategies. For example, Asia has always been a notable feature here versus peers (Exhibit 2) and as Alex Crooke, the fund manager, has been looking to regions where economic growth is likely to be stronger, with Asia and China of particular interest, investors may see exposure to this region increase. In addition, in response to a less benign economic outlook, BNKR’s regional portfolio managers have been rotating out of stocks that could struggle in a tougher economic environment and into more dependable and stable stocks.

Current discount opportunity relative to historical levels

Source: Morningstar. 13 August 2012-11 August 2022.

Why consider The Bankers Investment Trust now?

BNKR’s historical performance has been solid, but given the muted weighting to the US market and the material UK weighting, there is scope for outperformance of peers and the benchmark should there be improved sentiment towards this arguably undervalued and unloved UK market. Currently yielding 2.1%, the trust’s dividend has grown by 129.5% over 15 years versus a CPI increase of 41% (source: Janus Henderson Investors, 31 October 2021), which together with the long-term tailwind of the competitive fees continues to make BNKR a sound choice for core global equity exposure.

Discount opportunity

BNKR currently trades on a discount to cum fair NAV of 8.8%, which compares to the 10-year average of a 2.5% discount and the AIC peer group current average of a 5.9% discount (see above). In a historical context, BNKR’s current discount offers investors an attractive entry point or an opportunity to top up holdings.

Searching for pockets of growth and value

Crooke has been in the ‘higher for longer’ camp when it comes to inflation and still believes that, while inflation is currently reaching levels not seen in many years, it will likely moderate over the medium to longer term then settle in a 2–4% range. In the meantime, with inflation surging, interest rates rising, recession looking imminent and the continued conflict in Ukraine, there is more uncertainty and potential variances of outcome than investors have been accustomed over recent years. Markets have sold off through 2022, with global indices witnessing their sharpest corrections since Q120. For UK investors in some cases the losses have not been too material but emerging and European markets are still deeply in negative territory this year. The broad UK market has not seen much correction (although UK small and mid-sized companies have been weak), thanks in part to its valuation support versus other markets, however it remains unloved as evidenced via investor fund flows. The US indices have seen somewhat of a recovery from their nadir in June, while China, which had been sold off aggressively in Q122, has made something of a recovery, although markets remain volatile.

Exhibit 1: Regional performance in 2022 and 12-month forward price to earnings multiple

Regional equity market performance YTD (%, in sterling term)

Regional equity market 12-month forward P/Es (x)

Last

High

Low

5-year average

10-year average

% of 5-year average

% of 10-year average

UK

10.5

15.7

9.8

13.3

13.4

0.79

0.78

US

18.4

23.5

12.3

19.2

17.6

0.96

1.05

Europe

12.2

17.7

10.2

14.8

14.3

0.82

0.85

Japan

13.1

18.6

10.9

14.5

14.3

0.90

0.92

Asia ex Japan

12.1

17.9

10.5

13.9

13.1

0.87

0.92

World

14.9

19.9

11.4

16.4

15.3

0.91

0.97

Source: Refinitiv, DataStream, Morningstar, Edison Investment Research. Note: Data at 22 August 2022.

Forward valuations on a price to earnings basis look more reasonable in some cases (Exhibit 1, right-hand side), but the US arguably still looks more expensive relative to its history. Currently many of the companies that BNKR’s sleeve managers invest in are not seeing a significant decline in end user demand, but there are clearly some concerns that should the current economic slowdown morph into a full-blown recession, corporate earnings, profits and cash flows may come under significant pressure, which in turn makes the case for a more widespread correction in equities more likely. With this in mind, the focus of the regional sleeve portfolio managers is on ensuring that the companies that they invest into are, wherever possible, low-cost price makers and operating in non-discretionary goods and services. On a relative basis, these types of companies should be better insulated from falling demand and rising input costs. In a world where economic growth is stalling, Crooke is looking to tilt the portfolio into areas where economic growth and monetary policy are likely to be more supportive over the next two years and where valuations may be offering better relative value. Thus, it is likely that the portfolio’s already material weighting (Exhibit 2) to Greater Asia (which includes China) may well tick up given the supportive fundamentals and valuations across the region.

Exhibit 2: Greater Asia exposure

Source: Morningstar. Note: Peers = Morningstar global large-cap blend equity category.

The case for China

The Chinese zero-COVID-19 policy has been a source of concern for global economists as it has contributed to a slump in consumption and exacerbated supply chain problems (such as delays in shipping), while increasing costs and fuelling inflation. Mike Kerley, who is deputy fund manager on the trust and has managed the Asia ex Japan sleeve since 2006, notes that while officially the policy has not changed, lockdowns are becoming more targeted in conjunction with mass testing on a localised basis rather than being applied wholesale. This development could help to mitigate the effects of lockdowns on both the Chinese and global economies.

Against this backdrop, President Xi Jinping has reiterated the official 5.5% target for economic growth in 2022. While there may be some scepticism about the likelihood of meeting this target, there is a realisation from the Chinese authorities that the whole economy needs to contribute if it is to meet its growth targets. Consequently, the reopening process must become more effective and the rhetoric around some of the damaging policies previously directed at parts of the economy, such as the internet and education sectors, have been dialled back. The government is currently utilising measures such as increased infrastructure and real estate investment, but could pull yet more levers such as tax cuts and payment vouchers to support growth. In addition, after the market weakness from early 2021 and into 2022, Chinese equities in aggregate trade on lower valuations relative to historical levels

Exhibit 3: Portfolio geographic exposure versus benchmark (% unless stated)

Portfolio end-July 2022

Portfolio end-July 2021

Change
(pp)

Index weight

Active weight vs index (pp)

North America

37.1

36.2

0.9

67.7

(30.6)

UK

19.8

20.5

(0.7)

4.3

15.5

Europe ex-UK

16.6

18.0

(1.4)

12.8

3.8

Pacific ex-Japan

14.9

14.6

0.3

7.3

7.6

Japan

11.7

10.8

0.9

6.6

5.1

Emerging markets

0.0

0.0

0.0

1.5

(1.5)

Source: The Bankers Investment Trust, Edison Investment Research. Note: Figures may not add up to 100 due to rounding.

Increasing caution reflected in stock selection

The emphasis within the portfolio (as ever) is to identify supportive regional growth and to allocate capital to the best quality companies in these regions at the right price. The resultant changes in the portfolio over the past 12 months have seen an increase to more defensive, less richly valued holdings. The fund’s beta (or sensitivity) to market movements is currently around 0.86%, which is towards the lower end historically for the portfolio. New material positions within the portfolio such as Oracle, which was added in March 2022, have lower betas than stocks that they have replaced in many cases such as Meta (Facebook), which was sold in October 2021.

Exhibit 4: Top 10 holdings (as at end July 2022)

Company

Country

Sector

Portfolio weight %

Index weight
(%)

Active weight
vs index (pp)

29 July 2022

30 July 2021*

Automatic Data Processing

US

Industrials

2.4

1.5

0.2

2.4

Otis Worldwide

US

Industrials

2.1

1.6

0.1

2.0

CME

US

Financials

2.0

1.8

0.1

1.9

American Tower

US

Real estate

2.0

1.8

0.2

1.8

Union Pacific

US

Industrials

1.8

N/A

0.3

1.5

Roper Technologies

US

Industrials

1.8

N/A

0.1

1.7

American Express

US

Financials

1.8

1.5

0.2

1.6

Oracle

US

Technology

1.8

N/A

0.2

1.6

Estee Lauder

US

Consumer defensive

1.6

2.0

0.1

1.5

Zoetis

US

Healthcare

1.6

N/A

0.2

1.4

Top 10 (% of holdings)

18.9

10.2

Source: The Bankers Investment Trust, Edison Investment Research. Note: *N/A where not in end-July 2021 top 10.

From a sector perspective, increasingly the focus has been on battening down the hatches, selling where valuations have run ahead and where business models are not as resilient as may be expected. From a high level, the consumer discretionary weighting has decreased, and consumer staples increased, so as to reduce the effects of potentially declining demand in discretionary goods and services. Technology has seen a reduction, after good long-term performance but more recent weakness for longer-duration growth assets in a rising interest rate environment. The defensive healthcare sector has been increased and energy has seen a slight increase in allocation versus a year ago.

Exhibit 5: Portfolio sector exposure versus benchmark (% unless stated)

Portfolio end- July 2022

Portfolio end- July 2021

Change
(pp)

Index weight

Active weight vs index (pp)

Industrials

19.5

19.3

0.2

13.1

6.4

Financials

18.3

18.2

0.1

13.4

4.9

Consumer discretionary

14.3

17.6

(3.3)

14.0

0.3

Technology

13.6

17.2

(3.6)

22.5

(8.9)

Health care

11.1

8.5

2.6

12.6

(1.5)

Consumer staples

10.0

7.8

2.2

6.7

3.3

Real estate

3.2

2.6

0.6

3.0

0.2

Basic materials

3.2

3.3

(0.1)

3.6

(0.4)

Telecommunications

2.6

3.4

(1.2)

3.0

(0.4)

Energy

2.0

0.9

1.1

4.9

(2.9)

Utilities

1.6

1.8

(0.2)

3.3

(1.7)

99.4

100.6

100.1

Source: The Bankers Investment Trust, Edison Investment Research

Review of the UK and US regional sleeves

In our December 2021 update note on BNKR (Steady as she goes), we took a closer look at the European, Japanese and Asian regional sleeves. In this update we focus on the UK and US sleeves, which together account for 57% of BNKR’s assets.

UK sleeve: David Smith – focus on quality growth and income

The UK sleeve was previously managed by Alex Crooke until 2017 when David Smith took on the day-to-day management of this pool of assets. Smith and Crooke have worked closely together since 2010, with Smith being appointed alongside Crooke on the Henderson High Income (HHI) investment trust in January 2014 before assuming sole responsibility in June 2015. It can be assumed that the two share a similar investment philosophy from their many years of working together. The wider experience within the global equity income franchise at Janus Henderson Investors (JHI) is substantial, with the likes of James Henderson, Job Curtis and Ben Lofthouse. Since June 2021, Smith has also been co manager with Job Curtis on the flagship City of London Investment Trust (CTY), which has some £1.9bn of total assets investing in predominantly large UK equities for secure and growing income. Smith’s investment approach is based upon identifying quality companies providing secure and growing dividends at the right price. Specifically, this sleeve is tasked with providing a market level of yield but one that grows its dividends at a faster rate. At 19.8% (July 2022) the weighting to UK equities is substantially above the MSCI ACWI level of 3.8% (July 2022). This overweight position must be put within the context that it provided 32% of portfolio income in FY21. Because this is just one part of an overall portfolio, the UK sleeve’s characteristics are more nuanced than can be seen in Smith’s other UK portfolios. Specifically, because Crooke can also draw upon other forms of income within the portfolio, such as reserves, gearing and revenues from other geographic areas, the UK sleeve is marginally less value biased and has a combination of more blended styles. This is a characteristic that is evident in some other areas of the portfolio (ie Crooke sometimes looks to smooth out material stylistic biases at the regional sleeve level).

The UK sleeve has a bias to mid and small caps when compared with the index, but not hugely out of line with UK equity income peers or Smith’s other mandates. Historically the sleeve has been at a slight premium to the index in terms of aggregate valuations such as price to book or earnings, but with better quality metrics such as return on equity or cash flow growth. From a sector perspective, when compared with the index the portfolio has a larger allocation to cyclical sectors, such as basic materials, consumer cyclicals and financial services, and less in economically sensitive sectors such as energy and industrials. Key cyclical holdings include Anglo American, Compass Group and Lloyds Banking Group. The sleeve incorporates 29 holdings (April 2022), which is more concentrated than it has previously been (FY20: 44 holdings) and it has been a priority for Crooke to concentrate this sleeve down into Smith’s best ideas, which compares to the c60 equity positions in HHI and 45–55 range in his other institutional funds.

Exhibit 6: UK sleeve performance (% unless stated)

BNKR UK sleeve performance

Sleeve benchmark performance

Relative sleeve performance

FY21

30.7

35.4

(4.7)

FY20

(18.5)

(18.6)

0.1

FY19

6.9

6.8

0.1

FY18

(3.4)

(1.5)

(1.9)

FY17

12.7

13.4

(0.7)

FY16

5.1

12.2

(7.1)

Source: The Bankers Investment Trust, Edison Investment Research

Performance of the UK sleeve has been a little challenged historically, with underperformance in FY16 and FY21 and modest underperformance in FY18. There were some errors around stock selection in 2018 with holdings in some arguably value traps such as Ted Baker, while the bias to mid-caps also weighed on relative performance. The failure to keep up with a strongly rising market in FY21 was a result of the focus on quality within the process. Holdings such as Reckitt Benckiser, Hilton Food Group, Sage and Cranswick performed well, but failed to match higher returns from lower-quality companies within the index. Pleasingly the honing of the investment process seems to be coming through in improved investor returns and in CY22 the UK sleeve is 1.2% ahead of the broader UK equity market (to the end of July 2022), with performance driven by defensive holdings such as AstraZeneca and Reckitt Benckiser. Additionally, stocks in the industrial sector, such as RELX and Bunzl, performed well for the sleeve, as did the financial services companies such as the London Stock Exchange.

US sleeve: Gordon Mackay – focus on growth at the right price

The US sleeve represents 37.1% (July 2022) of the portfolio and is the largest single country allocation, however this is still substantially less than the MSCI ACWI weighting of 61.9% (July 2022). While it is the single largest geographic region, it only provides 13% of portfolio income. Gordon Mackay has managed the US sleeve since July 2018 and is part of the global equity team. He does not manage a US fund, rather this is a carve out of the various global portfolios managed by him.

There are a number of themes played within the portfolio that tap into some longer-term secular tailwinds, such as the digitalisation of the economy via holdings such as Alphabet. Then there are cashless payments, which is via American Express and Visa. Another theme is monetisation of data, which is via exchanges such as CME Group and Intercontinental Exchange.

The investment process has a focus on identifying long-term quality growth that is sustainable via barriers to entry and moats such as dominant brands or technology. These criteria mean that certain sectors, such as banks, energy and commodities, are likely to form a small or negligible part of the opportunity set. While the investment process tilts towards growth, there is a valuation discipline, which lends this strategy a necessary pragmatism that avoids the risks arising via valuation bubbles that can form in growth investing. For example, in October 2021 Mackay sold Meta (Facebook) and reinvested into a new position in Oracle to take advantage of the divergent valuation and outlook for growth; likewise, he sold Netflix and used the proceeds to initiate a new position in Coca-Cola. Mackay and team work closely with the JHI technology team in Edinburgh and through them are able to leverage off the extensive global JHI analyst and portfolio management team in the United States, which gives them notable insight in this area.

The US sleeve does have a stylistically growth bias (albeit not high growth) versus the S&P 500 and the Morningstar US large-cap blend category. In terms of average market cap, the portfolio is similar in market value to the S&P 500 but stands at a substantial price premium to historical earnings and book value. Growth and quality measures such as earnings growth, return on equity and net margins are higher. From a sector perspective the portfolio has a significant overweight to cyclicals such as industrials and financial services companies via larger positions such as Roper and American Express and corresponding underweights in aggregate to defensives and economically sensitive sectors such as utilities and energy. The sleeve is relatively concentrated with 24 holdings (April 2022). Mackay has managed the Janus Henderson Global Equity Unit Trust since September 2019, which shares some 41% commonality with the BNKR portfolio (at June 2022). At the end of June, the unit trust had 59.1% invested in US equities, so he is well versed with the opportunity set in the region.

Exhibit 7: US sleeve performance (% unless stated)

BNKR US sleeve performance

Sleeve benchmark performance

Relative sleeve performance

FY21

36.6

35.3

1.3

FY20

20.6

10.5

10.1

FY19

13.5

12.9

0.6

FY18

15.7

10.8

4.9

FY17

24.3

13.5

10.8

FY16

31.3

32.3

(1.0)

Source: The Bankers Investment Trust, Edison Investment Research

Performance of the sleeve has historically been strong, as shown in Exhibit 7. However, as described above, the strategy is more than just a play on high beta growth names. In the calendar year to the end of July 2022, the performance of the US sleeve was 2.5% behind the regional broad-based US equities index, which returned -4.5% (in sterling terms), while purer growth strategies have returned broadly -14.5% over this period. Holdings that performed well within the sleeve included Mastercard, Automatic Data Processing and Visa, while Sherwin Williams, Intuit and the Home Depot were weaker. It is interesting to note that the sleeve is also contributing to the portfolio income, with the US offering investors faster-growing rather than high headline levels of dividend income.

Performance

Over the year to the end of June 2022, BNKR returned -5.0% (NAV with debt at fair value), which compared to the FTSE World return of -2.8% and the Morningstar global large-cap blend category average of -6.6%. The 2.2% of relative underperformance versus the benchmark was broadly a result of one-third sector asset allocation and two-thirds stock selection.

Exhibit 8: Investment company performance to 31 July 2022

Price, NAV and index total return performance, one-year rebased

Price, NAV and index total return performance (%)

Source: Refinitiv, Edison Investment Research. Note: Three-, five- and 10-year performance figures annualised.

From a sector perspective, the underweight allocation to technology was beneficial as the sector began derating as the global economy started its recovery out of the COVID-19 pandemic and investor attention switched to more cyclical areas of the stock market. The biggest relative detractor from a sector perspective was the underweight energy position, which held back performance as the oil price rose steadily through the year as global economic activity increased and then soared on the outbreak of the war in Ukraine. Stock selection was strongest through this period in the broad industrials sector, while it was weakest in consumer staples. At the stock level, the underweight holdings relative to the benchmark in Meta (Facebook) and Amazon and the overweight position (and largest single absolute holding at July 2022) in Automated Data Processing (HR software and services) were the most accretive to returns, contributing 1.2% of relative outperformance. The overweight holding in Faurecia (French auto parts supplier) and off benchmark position in Chinasoft International (IT software and services) detracted, as did the underweight position in Apple, which in aggregate cost 0.9% of relative underperformance.

In the longer term (over three, five and 10 years), the portfolio performance is comfortably ahead of the Morningstar global large-cap blend category average and AIC global peers, but has lagged its broad global equity index. Historically the fund’s volatility sits mid-way between that of the index and peers, with risk-adjusted returns that exceed peers. The focus on long-term, relatively consistent returns with an eye to preserving capital where able has provided some downside protection to the portfolio in line with the index, but appreciably better than peers.

Exhibit 9: BNKR five-year discrete performance data

12 months ending

Share price
(%)

NAV
(%)

MSCI World
(%)

CBOE UK All Companies (%)

31/07/18

11.4

12.4

13.1

9.1

31/07/19

11.0

9.1

11.6

1.1

31/07/20

3.8

1.5

0.6

(18.5)

31/07/21

22.4

22.3

28.1

26.4

31/07/22

(8.2)

(1.0)

4.3

6.1

Source: Refinitiv. Note: All % on a total return basis in pounds sterling.

Peer group comparison: Core, low cost but active

The AIC global category is home to some of the oldest and best-known investment companies, of which BNKR is most definitely one. This large cohort has a variety of investment approaches, styles and biases. We would categorise BNKR as a core offering, that is to say it is well represented across the various investment regions, has a bias to larger companies and is relatively style neutral at the aggregate portfolio level (although there are material stylistic tilts at the various regional sleeves; the US sleeve has historical growth characteristics, while the Asia sleeve is more biased to value opportunities). Further core credentials are illustrated by the portfolio’s low volatility of returns versus its AIC peers, less participation in downside market movements and good risk-adjusted returns. The long-term investment process followed here has resulted in a solid track record of income (55 years of consecutive dividend income), which puts it equal second on the AIC dividend heroes list. Furthermore, while BNKR is arguably a core offering, it does not mean that it is quasi passive. This is a strategy that blends active asset allocation with stock selection resulting in an active share versus the benchmark of 84% (active share calculates the similarity between two portfolios, with 0 meaning that the two are completely identical and 100% indicating no overlap at all). Lastly the management fees that investors pay for holding the trust are low, which is one of the single most important determinants of future returns.

Exhibit 10: AIC Global peer group at 18 August 2022*

% unless stated

Market
cap £m

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Ongoing
charge

Performance fee

Discount
(cum-fair)

Net
gearing

Dividend
yield

Bankers

1384

0.4

29.9

52.7

209.7

0.48

No

-8.9

108

2.1

Alliance Trust

3025

3.2

36.9

55.2

197.8

0.61

No

-5.9

105

2.4

AVI Global Trust

951

2.6

39.7

49.4

162.5

0.85

No

-10.4

97

1.7

Blue Planet Investment Trust

6

-46.5

-63.9

-62.4

-28.1

5.18

No

-25.8

139

4.5

F&C Investment Trust

444

3.4

38.8

59.5

210.9

0.63

No

-11.7

107

2.1

Global Opportunities Trust

4750

5.4

40.5

63.8

238.3

0.54

No

-7.2

106

1.5

JPMorgan Elect Managed Growth

86

11.6

16.4

18.8

134.4

0.98

No

-16.0

67

1.7

Keystone Positive Change

261

-3.9

29.2

47.0

198.5

0.54

No

-6.1

94

1.8

Lindsell Train

136

-28.8

-23.1

-23.9

29.9

0.51

Yes

-11.3

109

5.1

Manchester & London

228

-7.9

17.8

94.6

490.0

0.81

Yes

3.5

94

4.6

Martin Currie Global Portfolio

167

-17.6

2.0

36.0

100.9

0.81

No

-20.9

50

3.4

Mid Wynd International

273

-16.3

21.1

51.6

180.7

0.69

No

-1.6

111

1.3

Monks

499

-4.6

34.7

71.9

263.3

0.61

No

1.2

100

0.9

Scottish Investment Trust

2394

-14.9

33.8

66.6

236.2

0.40

No

-7.4

107

0.2

Scottish Mortgage

605

15.8

17.4

22.3

126.8

0.56

No

-1.1

103

2.8

Witan

12379

-31.1

80.4

130.5

573.0

0.32

Yes

-6.1

114

0.4

Simple average of AIC peer group

1613

-2.9

24.7

34.6

185.6

0.71

-8.3

112

2.4

BNKR rank within AIC peer group

6

7

8

8

7

3

11

6

9

Source: Morningstar, Edison Investment Research. Note: *Performance to 18 August 2022 based on ex-par NAV. TR = total return. Net gearing is total assets less cash and equivalents as a percentage of net assets (100 = ungeared).

All the quantitative measures point to a successful core investment approach, however equally as important are the qualitative merits on show here. In Alex Crooke, BNKR has one of the longest serving fund managers in the sector, with his tenure on the fund dating back to July 2003. Where BNKR has an advantage over other funds that blend asset allocation with stock selection in a similar way, is that by dint of his role of as co-head of equities (EMEA) at JHI, not only is Crooke closely monitoring macro and regional economic developments, but he is very familiar with the regional portfolio managers (many of whom report directly to him). This allows him very detailed real time insight on the performance drivers for these strategies. Thus, when it comes to allocating funds to regional managers, he is able to select with confidence those that best fit into the portfolio. He is also able to direct and tilt these regional portfolios to ensure optimal positioning for the BNKR portfolio. This is a tremendous advantage over fund-of-fund or manager-of-manager investors. Lastly this approach probably would not be as effective in some other investment firms, but here Crooke has a plethora of diverse and good performing strategies from which to select, with the sole use of in-house specialists helping to keep costs low.

General disclaimer and copyright

This report has been commissioned by The Bankers Investment Trust and prepared and issued by Edison, in consideration of a fee payable by The Bankers Investment Trust. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

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This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by The Bankers Investment Trust and prepared and issued by Edison, in consideration of a fee payable by The Bankers Investment Trust. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Scandion Oncology — Approval for CORIST part 3

Scandion Oncology has received approval to initiate part 3 of its Phase II CORIST trial investigating SCO-101 for the treatment of metastatic colorectal cancer (mCRC). Part 3 is an expansion of the trial to evaluate the efficacy of SCO-101 in combination with FOLFIRI in both wild-type RAS (wtRAS) and mutant-RAS patient populations. Part 2 of the trial, which is ongoing, is evaluating wtRAS patients only. With c 44% of mCRC patients possessing the RAS mutation, we believe the pursuit of this new patient population will further enhance SCO-101’s addressable market and commercial opportunity. The expansion has been made possible by an amendment to the ongoing study, utilising activated trial sites to ensure no delays to the current trial timelines. Patient recruitment in part 3 is anticipated to commence in Q322, with initial top-line results expected in Q323. We continue to value Scandion Oncology at SEK586.5m or SEK14.4 per share.

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