BMO Managed Portfolio Trusts: a one-stop shop for income and growth

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BMO Managed Portfolio Trusts: a one-stop shop for income and growth

The BMO Managed Portfolio Trusts have been resilient through the crisis and look well-placed to continue to deliver for their income and growth investors.

BMO Managed Portfolio Income (LON:BMPI) provides exposure to a portfolio of investment companies with the aim of generating an attractive dividend with the potential for income and capital growth. It is currently yielding a competitive five percent with quarterly distributions.

Income

In the financial year ended 31 May 2020 the £61.5m fund made a net asset value total return of -7.3% due to the impact of the coronavirus, although it still managed to comfortably beat the FTSE All-Share benchmark, which lost 11.2%. The longer term performance is pretty decent with an average annualised return of 6.2% per annum since the launch in April 2008 versus the 4.5% produced by the index.

BMPI has a diversified portfolio, with the largest holdings at the end of June being BB Healthcare (LON:BBH)(4.4%), BB Biotech (LON:BION) (4.1%), HBM Healthcare (LON:HBMN) (3.8%), Scottish American (LON:SAIN) (3.6%), 3i Infrastructure (LON:3IN) (3.5%), JPMorgan Global Growth & Income (LON:JGGI) (3.5%) and Hipgnosis Songs (LON:SONG) (3.5%).

Manager Peter Hewitt warns that there may be some further dividend disappointments from the holdings and some of them may have to use their revenue reserves to sustain their payments. However, a number have already indicated that they intend to keep their income unchanged and the fund itself has revenue reserves equivalent to 68% of the annual dividend, so there is a good chance that it will be able to at least maintain the distribution at the current level for the year to 31 May 2021.

Growth

The £80m BMO Managed Portfolio Growth (LON:BMPG) aims to provide capital growth and produced a creditable gain of 1.5% for the year ended 31 May 2020, which was well ahead of the 11.2% loss achieved by its FTSE All-Share benchmark. Since the launch in April 2008 it has generated an annualised average return of 6.4% per annum.

BMPG has a focused portfolio and at the end of June the largest holdings consisted of: Monks (LON:MNKS) (4.7%), Allianz Technology (LON:ATT) (4.6%), Polar Capital Technology (LON:PCT) (4.2%), BH Macro (LON:BHMG)(3.8%), Worldwide Healthcare Trust (LON:WWH) (3.7%) and Scottish Mortgage (LON:SMT) (3.7%).

Hewitt says that the case for exposure to sectors which offer secular growth characteristics remains in place. “When inflation and interest rates are low and growth scarce, investment companies focused on technology, healthcare and biotechnology are likely to continue to prosper.”

Outlook

The plan for the current financial year − and possibly much longer − is to maintain the current bias to secular for the Growth Portfolio and as far as possible for the Income Portfolio as well. As an added safeguard the funds will only invest in the highest quality investment companies with proven management who have had experience of both bull and bear markets.

If you are primarily interested in income then a well-managed portfolio of investment companies with substantial revenue reserves sounds like a good option and a five percent yield is certainly attractive.

For growth investors it mainly depends on your view of the markets. If you think that the best performing areas like technology and growth stocks in general will continue to deliver then BMPG offers a decent ready-made portfolio, although this wouldn’t be the case if you are wary of the valuations in these areas.


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