Troy Asset Management is to launch Trojan Global Income Fund, which will be run by James Harries, on 1 November. Mr Harries joined Troy in June from Newton Investment Management where he had managed Newton Global Income Fund (GB00B8BQG486) since launch in November 2005, during which time he made some very strong returns. But it remains to be seen if he can generate similar returns as there are differences in the way that he will run the new fund.
| 1 year total return (%) | 3 year cumulative total return (%) | 5 year cumulative total return (%) | 12 month yield (%) | |
| Newton Global Income Fund (GB00B7S9KM9) | *39.22 | *62.83 | *114.18 | 3.13 |
| IA Global Equity Income sector average | 26.06 | 39.58 | 89.17 | |
| FTSE World Index | 31.29 | 52.84 | 111.24 |
Source: Morningstar as at 7 October 2016.
*Fund performance is that of an older share class rather than the one indicated in the text.
Trojan Global Income won't have a formal yield target though is expected to yield around 3 per cent. Newton Global Income only invests in companies which yield 25 per cent more than FTSE World Index, and sells them if they fall to the index's yield. Mr Harries said there is no yield target because they do not want be forced sellers of what they consider to be good long-term businesses.
Similarly, when former Newton Asian Income (GB00B8KPW262) manager Jason Pidcock launched Jupiter Asian Income (GB00BZ2YMT70), he also abandoned Newton's rigorous yield targets.
Trojan Global Income will aim for steady income over the long-term by investing in global businesses that exhibit high returns on capital employed, which should help avoid permanent capital loss and sustain long-term income growth.
It will hold between 30 and 50 shares, in contrast to Newton Global Income which aims to hold between about 50 and 80. Mr Harries said the vast majority of Trojan Global Income's holdings have been identified and analysed, and they will invest when the valuation is right."
Troy Asset Management has a universe of about 200 shares from which its funds select holdings, and the Global Income fund will invest in a subset of these with an attractive dividend yield. "While some people would say that is a constraint we would say it is a process that should deliver over time," said Mr Harries. "It is right that the security selection should be exacting – there is a tricky backdrop of faltering growth and elevated valuations, and lots of businesses are likely to have a difficult time. So concentration in companies that have stood the test of time and are in control of their own destiny with regard to regulation, pricing and capital needs, as well as being highly diversified in terms of product, market and geography, is really important. Really good businesses over time will compound capital for you."
More opportunities which fit the bill will be added to this universe of about 200 shares but the fund will aim for low turnover to keep trading costs down.
Darius McDermott, managing director at Chelsea Financial Services, doesn't think that being restricted to around 200 shares will limit Mr Harries' ability to perform well. "If you look at the success of Troy's funds it shows that this way of running money has not stopped good long-term performance," he said. "Troy's funds tend to outperform in falling markets and Newton Global Income did well in similar environments."
But he adds: "A key difference is that James had a big bank of global analysts who covered stocks for him at Newton. But he is an experienced investor and should be able to cover the number of stocks in his universe here."
Mr Harries will select holdings according to companies' own attributes, and broader economic, geographic and currency considerations. For example, Troy expects inflation to stay low so Mr Harries "will invest in businesses that benefit from a low rate environment and de-emphasise those that suffer."
But he will avoid emerging markets and related sectors, currencies and economies, as these regions have experienced "an almighty boom and will continue to suffer."
Troy Asset Management estimates Trojan Global Income's 'O' share class, which will be offered by fund platforms and brokers, will have an ongoing charge of 0.98 per cent. This is higher than Newton Global Income's 0.79 per cent ongoing charge, but if Trojan Global Fund grows this should fall.
