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An update from our investment managers, Ben Ritchie and Louise Kernohan
As we write this, UK Equity markets have fallen 30% over the past month (since 20th Feb) as a result of the COVID-19 pandemic, in what has been one of the fastest market declines in history. This is as investors try to rationalise a collapse in global demand, rolling supply chain shocks, an increasingly strained financial system and on top of that a significant health threat amplifying uncertainty and stress. The economic consequences are as yet unclear but as it stands a global recession looks likely. It is also worth noting that alongside the COVID-19 spread we have seen the effective collapse of OPEC+ as a price setting cartel which has led the oil price to fall back towards $20 a barrel, a level last achieved in 2001.
What does this mean for the companies we invest in? The outlook for corporate earnings growth in 2020 has significantly deteriorated in the last 4 weeks. It is difficult to quantify the magnitude of the impact at this stage, but there is certainly the capacity for many companies to become loss making in the short term. This will inevitably have an impact on company dividends, particularly in the most vulnerable industries such as travel, leisure and retail. However, more positively, corporate balance sheets remain relatively strong, central banks and governments are taking major action and with pandemics being finite in length there is scope for a rebound which has the potential to be a lot quicker than in 2008/09 if productive capacity of both labour and capital is effectively insulated.
What does this mean for DIGIT? Our strategy to invest in high quality businesses aligned to structurally growing industries and with strong balance sheets leaves us in relatively good stead and to date the investment portfolio is outperforming the FTSE All Share. We are benefited by our overweight position to sectors that are relatively less affected such as healthcare and non-discretionary consumer products, plus our underweight position to the Oil & Gas sector and only very modest exposure to the heavily impacted industries of travel, leisure and retail. The modest gearing position that we run with however is a headwind in the declining market. The outlook for company dividends for the year ahead is uncertain, but we believe that as it stands today the income we anticipate to be at risk remains a manageable portion of our total expected income. We will continue to closely monitor the situation.
We have adopted a cautious stance for some time and see little reason to shift from this conservative focus on high quality businesses. We cannot fully mitigate the impact of falling markets but we will continue to ensure that the companies we hold are in a position to minimise the long term impact on franchise value and their ability to pay and maintain their dividends.
Ben Ritchie is Deputy Head of European Equities at Aberdeen Standard Investments and originally joined Aberdeen Asset Management in 2002 as a graduate, having interned with Aberdeen in 2000 and 2001. Ben graduated with a BA (Hons) in Modern History and Politics from Pembroke College, University of Oxford and is a CFA Charterholder.
Louise Kernohan is an Investment Director in the UK Equities team at Aberdeen Standard Investments, having joined Aberdeen Asset Management via the acquisition of Deutsche Asset Management businesses in 2005. Louise graduated with a BSc (Hons) in Mathematics, Physics and Philosophy and an MA in Management from the University of Durham and is a CFA Charterholder.
Senior Investment Manager
Ben Ritchie is Deputy Head of European Equities at Aberdeen Standard Investments and originally joined Aberdeen Asset Management in 2002 as a graduate, having interned with Aberdeen in 2000 and 2001. Ben graduated with a BA (Hons) in Modern History and Politics from Pembroke College, University of Oxford and is a CFA Charterholder.
Senior Investment Manager
Louise Kernohan is an Investment Director in the UK Equities team at Aberdeen Standard Investments, having joined Aberdeen Asset Management via the acquisition of Deutsche Asset Management businesses in 2005. Louise graduated with a BSc (Hons) in Mathematics, Physics and Philosophy and an MA in Management from the University of Durham and is a CFA Charterholder.
Catherine Claydon worked for Goldman Sachs International from 1992 until 2007, most recently as a Managing Director in its Pension & Insurance Strategies Group. Previously, she was Global Head of Goldman Sachs Commodity Index marketing. Catherine was an MD at Lehman Brothers in its Pension Advisory Group from 2007 until 2008. She is also a director of the Barclays UK Retirement Fund, chairman of the BBC Pension Trust and a trustee of the British Steel Pension Scheme. She is the Senior Independent Director.
Jasper Judd is a Chartered Accountant. Until 2012, he worked for Brambles Limited, a listed Australian multinational, where he held a number of senior executive roles including Global Head of Strategy. He is also a non-executive director of JP Morgan Indian Investment Trust plc.
He is Chairman of the Audit Committee.
Christine Montgomery has over 30 years of investment management experience, most recently as Head of Global Equities at AustralianSuper in Melbourne from 2016 to 2019. She previously held roles as a global equities portfolio manager at Fidelity Worldwide Investments, Martin Currie and Edinburgh Partners.
Elisabeth Scott worked for Schroders in Hong Kong from 1992 until 2008, most recently as Country Head. Previously she was responsible for Schroders’ institutional client business in Hong Kong and managed multi-asset portfolios. She chaired the Hong Kong Investment Funds Association between 2005 and 2007. She is also director of India Capital Growth Fund Limited, Fidelity China Special Situations Investment Trust PLC, Allianz Technology Trust PLC and the Association of Investment Companies.
Howard Williams has over 35 years’ of fund management experience and was, until October 2017, Chief Investment Officer and Head of the Global Equity Team at JPMorgan Asset Management. Prior to joining JPMorgan Asset Management in 1994, he held a number of senior positions at Shell Pensions and Kleinwort Benson Asset Management. He started his career at James Capel & Co. He is also a non-executive director of Schroders Unit Trust Limited.
Chairman
Non-Executive Director
Catherine Claydon worked for Goldman Sachs International from 1992 until 2007, most recently as a Managing Director in its Pension & Insurance Strategies Group. Previously, she was Global Head of Goldman Sachs Commodity Index marketing. Catherine was an MD at Lehman Brothers in its Pension Advisory Group from 2007 until 2008. She is also a director of the Barclays UK Retirement Fund, chairman of the BBC Pension Trust and a trustee of the British Steel Pension Scheme. She is the Senior Independent Director.
Non-Executive Director
Jasper Judd is a Chartered Accountant. Until 2012, he worked for Brambles Limited, a listed Australian multinational, where he held a number of senior executive roles including Global Head of Strategy. He is also a non-executive director of JP Morgan Indian Investment Trust plc.
He is Chairman of the Audit Committee.
Non-Executive Director
Christine Montgomery has over 30 years of investment management experience, most recently as Head of Global Equities at AustralianSuper in Melbourne from 2016 to 2019. She previously held roles as a global equities portfolio manager at Fidelity Worldwide Investments, Martin Currie and Edinburgh Partners.
Non-Executive Director
Elisabeth Scott worked for Schroders in Hong Kong from 1992 until 2008, most recently as Country Head. Previously she was responsible for Schroders’ institutional client business in Hong Kong and managed multi-asset portfolios. She chaired the Hong Kong Investment Funds Association between 2005 and 2007. She is also director of India Capital Growth Fund Limited, Fidelity China Special Situations Investment Trust PLC, Allianz Technology Trust PLC and the Association of Investment Companies.
Non-Executive Director
Howard Williams has over 35 years’ of fund management experience and was, until October 2017, Chief Investment Officer and Head of the Global Equity Team at JPMorgan Asset Management. Prior to joining JPMorgan Asset Management in 1994, he held a number of senior positions at Shell Pensions and Kleinwort Benson Asset Management. He started his career at James Capel & Co. He is also a non-executive director of Schroders Unit Trust Limited.
| Year End | 31 January |
| Accounts Published | March |
| Annual General Meeting | May |
| Dividend Paid | August, November, February, May |
Hear fund manager Louise Kernohan presenting Dunedin Income Growth's interim results
Hear fund manager Ben Ritchie discuss key themes for European equities'