The Bankers Investment Trust — Well positioned for the current environment

Bankers Investment Trust (The) (LSE: BNKR)

Last close As at 20/04/2024

GBP1.11

0.60 (0.54%)

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GBP1,318m

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The Bankers Investment Trust — Well positioned for the current environment

The Bankers Investment Trust (BNKR) has been managed by Alex Crooke, co-head of equities at Janus Henderson Investors (JHI), since July 2003. It can be considered as a ‘one-stop shop’ for global equity exposure as the fund is made up of six geographic portfolios (sleeves), which harness the talent of JHI’s regional specialists. Crooke (in conjunction with the board) sets BNKR’s asset allocation and manages its gearing. He believes that inflation will remain elevated, and that future shareholder total returns will be more balanced between income and capital growth, which will play into the trust’s strengths. While BNKR’s income growth lagged the rate of UK inflation in FY22, the manager is confident in the prospects for the trust’s income generation. He highlights BNKR’s top 10 holdings, which are dominated by US companies; higher income from these businesses is supporting the trust’s overall income stream. BNKR has paid an annual dividend for the last 132 years, and FY22 marked the 56th year of consecutive growth.

Melanie Jenner

Written by

Mel Jenner

Director, Investment Trusts

Investment Companies

The Bankers Investment Trust

Well positioned for the current environment

Investment trusts
Global equities

3 May 2023

Price

99.4p

Market cap

£1,263m

Total assets

£1,597m

NAV*

111.6p

Discount to NAV

10.9%

*Including income. At 28 April 2023.

Dividend yield

2.4%

Shares in issue

1,270.8m

Code

BNKR

Primary exchange

LSE

AIC sector

Global

Financial year end

31 October

52-week high/low

108.2p

93.0p

116.4p

102.8p

*Including income.

Gearing

Net gearing*

5%

*At 31 March 2023.

Fund objective

The Bankers Investment Trust (BNKR) aims, over the longer term, to achieve capital growth in excess of a global developed markets index and annual dividend growth greater than UK CPI inflation, by investing in companies listed throughout the world. BNKR has one of the longest records of year-on-year dividend growth for an investment trust. It is listed on the London Stock Exchange with a secondary listing in New Zealand.

Bull points

Six geographic sleeves harness the best ideas from regional specialists.

Very commendable dividend track record – 56 consecutive years of higher annual payments.

Competitive, tiered fee structure.

Bear points

Structural underweight US exposure has contributed to underperformance versus the benchmark.

Persistently high inflation could mean that high stock market volatility continues.

High number of portfolio holdings; hence, successful smaller positions do not move BNKR’s performance needle.

Analyst

Mel Jenner

+44 (0)20 3077 5700

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

The Bankers Investment Trust (BNKR) has been managed by Alex Crooke, co-head of equities at Janus Henderson Investors (JHI), since July 2003. It can be considered as a ‘one-stop shop’ for global equity exposure as the fund is made up of six geographic portfolios (sleeves), which harness the talent of JHI’s regional specialists. Crooke (in conjunction with the board) sets BNKR’s asset allocation and manages its gearing. He believes that inflation will remain elevated, and that future shareholder total returns will be more balanced between income and capital growth, which will play into the trust’s strengths. While BNKR’s income growth lagged the rate of UK inflation in FY22, the manager is confident in the prospects for the trust’s income generation. He highlights BNKR’s top 10 holdings, which are dominated by US companies; higher income from these businesses is supporting the trust’s overall income stream. BNKR has paid an annual dividend for the last 132 years, and FY22 marked the 56th year of consecutive growth.

BNKR’s performance over the last decade (to end-April 2023)

Source: Refinitiv, Edison Investment Research

The analyst’s view

An environment of more balanced shareholder returns should favour BNKR’s dual mandate of above-market capital growth and annual dividend growth above the level of UK inflation. While the trust has lagged the performance of its global benchmark, primarily due an underweight US exposure, a market that has outperformed global equities for the majority of years over the last decade, BNKR’s absolute returns are very respectable. Over the last 10 years, it has generated annual NAV and share price returns of 9.9% and 9.1%, respectively. Data from JHI show that an inflation-adjusted £10k invested in the trust in 1973 would have grown to c £114k by 2022.

Scope for a higher valuation

BNKR’s discount has been in a widening trend since early 2022. There is scope for a higher valuation if the trust can narrow the performance gap versus its benchmark. However, to provide some perspective, it has above-average total returns versus the 13 funds in the AIC Global sector over the last one, three and five years. BNKR’s 10.9% discount to cum-income NAV is wider than the 2.4% to 7.9% range of average discounts over the last one, three, five and 10 years.

The manager’s view: Expecting more balanced returns

Alex Crooke comments that FY22 (which ended on 31 October 2022) was a tough period, and one of the hardest during his tenure at BNKR, with underperformance versus the benchmark. He says that investors are used to falling markets as a result of economic and financial crises; however, the 2022 downturn was different. Stock markets declined due to the rapid rise in inflation, to levels not seen since the 1980s, and central banks were forced to aggressively increase interest rates to try to combat higher prices. Crooke notes that in this challenging market environment even quality names underperformed, either due to being over-owned or because their valuations were too high. He comments that energy was the only place to hide in 2022 and BNKR has an underweight position compared with its benchmark.

Chinese equity returns were very poor last year because of the country’s zero-COVID approach, but the market rebounded in November 2022 after the policy pivot and rapid reopening of the economy. The manager highlights the relatively strong performance of the UK market in 2022, which was supported by its defensive names and dollar strength boosting multinational companies’ overseas earnings. Crooke explains that BNKR’s growth sleeves, North America, China and Europe, suffered as investor preference was for value shares, although growth shares have outperformed over the longer term. During 2022, the shares of major-cap companies outperformed, while those of small- and mid-cap businesses lagged, primarily due to valuations derating rather than earnings disappointing.

Crooke believes that inflation rates will come down further, but tight labour markets with wage growth and low unemployment, and savings accumulated during the global pandemic yet to be fully spent, mean that inflation is likely to remain above central bank targets. The manager says that in the United States, while interest rates could be close to peaking, they could stay higher for longer; he considers it unlikely that the Federal Reserve will return to its prior very low interest rate policy.

Future shareholder returns are likely to be more balanced between income and capital, rather than capital growth dominating, as has been the case in recent years, opines Crooke. He expects US outperformance will fade, having outpaced the world market for nine years over the last decade. The US market has been supported by the performance of large-cap technology stocks and these businesses are now facing increased regulatory scrutiny. The manager considers that there could be a faster economic recovery in Europe than in the United States and Europe could deliver superior earnings growth. Crooke believes that BNKR, with its dual mandate of capital and income growth, is set up nicely for an environment of more balanced shareholder returns.

Change of North American portfolio manager

Following the end of FY22, Jeremiah Buckley succeeded Gordon Mackay as BNKR’s North America portfolio manager. Crooke explains that following a reorganisation in mid-December 2022, the US sleeve is now more balanced with a P/E multiple in line with the US market rather than at a premium. It has a higher return on investment and a higher dividend yield. While the new portfolio has lower sales and earnings growth, the manager has more confidence in these estimates than when the fund held more technology companies. BNKR’s credit card exposure has been reduced and there are more traditional financial holdings such as Morgan Stanley and JPMorgan; a higher bank weighting provides more interest rate and less transaction-based exposure. Buckley has a positive outlook for the healthcare sector and exposure has increased. Within technology, there has been a shift from software to more hardware, in particular a higher semiconductor exposure. The technology weighting is lower due to both weak share price performance and portfolio activity.

Crooke explains that the change in manager means that BNKR’s US sleeve now has a different style. Buckley has been managing money for nearly 25 years and has a US large-cap focus. He has a consistent, conservative approach, seeking high-quality companies with robust balance sheets that generate strong cash flows, so they can invest and pay dividends during periods of economic weakness, and where managements’ interests are aligned with those of long-term investors. Crooke believes that this strategy is suitable for the current environment and considers that Buckley has a similar approach to that employed by BNKR for the last 30 to 50 years.

Peer group comparison

BNKR is one of 13 funds in the AIC Global sector, which includes many of the largest and oldest UK investment trusts; they follow a variety of investment mandates. The trust is characterised by a focus on both long-term capital and income growth and is broadly diversified via its six geographic sleeves. BNKR can be considered as a core global equity fund, with a bias towards larger-cap companies and, in aggregate, is style neutral (although the regional sleeves employ different investment approaches).

The trust’s NAV total returns are above the peer-group averages over the last one, three and five years ranking sixth, sixth and eighth respectively, while lagging over the last decade. However, the 10-year average is skewed by the outsized returns of two funds. Lindsell Train’s holding in its own unlisted fund manager has been an important performance contributor and makes up more than 40% of its portfolio. Scottish Mortgage has a growth bias and around 30% of the portfolio is made up of unlisted companies. If these two funds are excluded, BNKR’s NAV total return is comfortably ahead of the average over the last decade. Its discount is above average in a sector where just one of the funds is trading at a premium. BNKR has a very competitive ongoing charge, ranking third, and no performance fee is payable. The trust currently has a below-average level of gearing and a dividend yield that is 10bp higher than the sector mean.

Exhibit 1: AIC Global sector at 2 May 2023*

% unless stated

Market
cap £m

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Discount
(cum-fair)

Ongoing charge

Perf.
fee

Net gearing

Dividend yield

Bankers Trust

1,263.1

2.0

33.3

43.0

156.4

(10.8)

0.5

No

105

2.4

Alliance Trust

2,824.3

4.8

47.1

47.1

154.8

(6.2)

0.6

No

105

2.5

AVI Global Trust

898.8

(1.8)

56.0

37.5

117.6

(9.8)

0.9

No

108

1.8

Brunner Investment Trust

452.5

7.1

55.2

51.8

151.3

(11.9)

0.6

No

106

2.0

F&C Investment Trust

4,592.2

0.4

42.1

45.1

169.3

(5.2)

0.5

No

107

1.5

Keystone Positive Change

125.5

0.8

(7.8)

(29.9)

2.2

(15.4)

0.9

No

109

5.5

Lindsell Train

207.0

5.1

20.5

67.0

374.4

(4.9)

0.8

Yes

100

5.1

Manchester & London

155.1

(1.0)

(13.4)

10.3

66.3

(14.6)

0.7

Yes

100

3.6

Martin Currie Global Portfolio

261.2

9.2

26.0

55.1

168.5

0.7

0.7

No

111

1.2

Mid Wynd Int’l Investment Trust

439.7

(3.8)

32.7

54.4

204.9

(2.4)

0.6

No

101

1.0

Monks Investment Trust

2,220.3

(1.7)

24.8

39.2

173.8

(11.2)

0.4

No

106

0.2

Scottish Mortgage

8,617.4

(27.0)

22.5

66.0

376.9

(21.8)

0.3

No

116

0.6

Witan

1,493.7

4.0

43.6

25.4

128.8

(9.2)

0.8

Yes

113

2.6

Simple average (13 funds)

1,811.6

(0.2)

29.4

39.4

172.7

(9.4)

0.6

107

2.3

BNKR rank

6

6

6

8

7

8

3

9

6

Source: Morningstar, Edison Investment Research. Note: *Performance to 28 April 2023. Based on cum-fair NAV. TR, total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.

Exhibit 2: Five-year discrete performance data

12 months ending

Share price
(%)

NAV
(%)

MSCI World
(%)

CBOE UK All companies (%)

30/04/19

7.8

9.6

13.1

2.5

30/04/20

2.0

(0.2)

(0.2)

(17.2)

30/04/21

28.9

28.8

33.0

25.3

30/04/22

(5.5)

0.9

6.9

9.1

30/04/23

(2.6)

1.5

3.6

7.0

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

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 2023 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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 2023 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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