12:26 Tue 27 Jul 2010
Martin Currie's surviving UK equity fund fears income concentration
Ross Watson's exposure to the mining and banking sector has offset the damage done to his Securities Trust of Scotland by his sizeable position in BP in recent months.
In the tough conditions of the second quarter - which saw the FTSE All Share slump by 11.8% - the trust's NAV fell by 10.8% and its share price by 10.2% with its discount standing at 8.7%.
This was a reasonable showing as at the start of the quarter the trust had a weighting of almost 8.8% in BP, which saw its value nearly halve during the Deepwater Horizon crisis.
The size of the BP stake in the £96.8 million trust has since fallen to 6.2% due to the market movements.
Fellow oil giant Shell represents Watson's largest holding at 7.3%. His largest sector bet is financials at 23.4%.
The trust is on a net yield of 5.3%.
Watson's open-ended UK equity income fund is now becoming a global fund. This is partly in response to his desire to provide investors with a more diversified source of income.
He said: 'The big issue now is income concentration. We are working on how to generate sufficient income with limits on the concentration, not of assets, but of income from individual stocks.'
However, he is optimistic that continued the macro picture will support his total return. 'The bigger picture, however, is that world economic growth continues to be supportive for profits and equity prices,' Watson said. 'This should ensure that markets can rise from here.'
Earlier this week Martin Currie said it intends to close down its open-ended UK equity business on the back of growing interest in overseas and emerging markets.
It opted to keep Securities of Scotland alive on the basis that the retail distribution review will level the playing field between open ended and close ended structures.
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