The Baillie Gifford-managed Scottish American Investment Trust – known as Saints – said results reported by its equity holdings “have been stronger than even the most upbeat expectations”.
Although trust chairman Peter Moon said to some degree that will reflect re-stocking in the supply chain, some businesses in the portfolio have also used the pandemic to make “real inroads with their customers” and are reaping the benefits of investments in their brands.
He cited examples such as credit bureau Experian which has typically reported mid-single-digit revenue growth but through investment in new software tools and other services to help customers has just reported 22 per cent organic sales growth during its first quarter.
Although the main focus of the £875 million trust aimed at income investors is on global equities, it also holds bonds and property.
During the first half, Saints delivered net asset value total return of 11.3 per cent, marginally behind global equity returns of 11.4 per cent but ahead of the 10.6 per cent seen in the global equity income sector. Over the past five years the trust has significantly outperformed its benchmarks, delivering 107.3 per cent returns against the sector’s 69.8 per cent.
The trust declared a second interim dividend of 3.075p contributing to a rise of 2.1 per cent over the amount paid for the equivalent period in 2020.
Looking ahead, Moon observed that “markets have short memories”.
“A year ago, the fear was a permanent collapse in demand. This demand is now evidently recovering – and so now the concern has turned to whether meeting a rapid increase in demand for all sorts of products and services might unleash a sustained bout of inflation.”
Whatever lies ahead, Moon said the trust strongly believes that over the long run the best defence is likely to be investing in companies where demand, profit and dividend growth is likely to run significantly ahead of whatever the inflation figure might be.
"Finding these companies continues to be our focus,” he said.