Edinburgh IT plays tortoise to market's hare

12th Nov 2009 08:39

The defensive approach of the investment manager at Edinburgh Investment Trust saw the investment trust’s performance lag that of the market in the half year to end-September.While the FTSE All-Share advanced 32.8% in the six months to 30 September, the net asset value (NAV) per share of Edinburgh Investment Trust grew just 20.2% from 326.99p at the end of March to 392.89p at the end of September.With the value of the company’s debt ‘marked to market’ value, the performance improves slightly, with NAV per share improving 23.9% to 363.82p from 293.56p.Over the same period, the share price of the investment trust rose 20.5% to 352.4p from 292.5p, widening the discount to NAV.Gearing over the period eased to 25.6% from 31.2% at the end of March.The board remains strongly in favour of the investment manager's defensive posture, particularly as it is likely to sustain the company’s income stream, ‘an issue of major importance to shareholders,’ said company chairman Scott Dobbie.With one or two exceptions, dividends paid by companies in the investment portfolio were either maintained or increased during the first half of the trust’s financial year.The company’s own interim dividend has been maintained at 4.75p.Dobbie said that although UK financial markets have recovered strongly, there are still potential problems lying ahead.‘There is concern that markets will be adversely affected by the removal of the Bank's [Bank of England’s] stimulus and, longer term, that inflation and interest rates will show upward trends,’ Dobbie said.The board believes that its investments will prove resilient in a difficult economic environment and, in any case, to change tack now while its current holdings are lowly rated would give up on the potential for capital appreciation over the longer term time frame on which its investment manager likes to operate.‘In the meantime, the board believes that theinvestment portfolio will continue to provide an income flow to enable your company to meet its own dividend objectives,’ Dobbie concluded.