Holly Black: Welcome to Morningstar. I'm Holly Black. With me is James de Uphaugh. He is Manager of the Edinburgh Investment Trust (EDIN). Hello.
James de Uphaugh: Hi, Holly.
Black: So, James, you're about a year into managing this trust. Pretty interesting year to take over a new mandate. But actually, our sort of recent analysis found that the trust was one of the top performers in the first quarter. So, I mean, what's been going on for you in this first year?
de Uphaugh: Yeah. Well, that question was layered with gentle understatement because it's been a year where there have been lots of different chapters to this crisis. But the key point, which you alluded to by talking about the first quarter is, over that year we have not only outperformed our benchmark, the All-Share, by over 8%, but we've also narrowed the discount from low-teens discount to mid-single-digits. So, two good things. And layered on that also, the board has actually rebased the dividend. So, there's a lot been going on in terms of how we've orientated the trust over that year. But the key metrics which matter – performance, discount, dividend – all have ticks in the box over the first year, but it's just the first year.
Black: So, when a new manager comes into a trust, obviously you want to put your own stamp on things. Did you make a lot of changes to the portfolio?
de Uphaugh: Yeah. We definitely did. And right at the beginning we moved it to a relatively defensive view. If you think back to the headlines, then it was pretty gut-wrenching stuff. I mean, I remember one headline from the FT along the lines of Sterling gets hammered as London goes into lockdown. It's easy to forget how awful things were there. So, very defensive initially. Turnover over the year was about 40%, so quite a big chunk of turnover we did over the 12 months and obviously prior to that we re-orientated the portfolio as well. So, we definitely put our own stamp on it. And the evidence of that is the degree of outperformance, which we achieved over the first 12 months.
Black: And is it quite hard doing that turnover during a pandemic because we know that last year markets were so volatile, and some shares were skyrocketing for no reason and others plunging. So, perhaps more difficult to put your ideas into action?
de Uphaugh: There are a couple of facets to that. The initial reorganization was done by a reorganization specialist. But actually, in Majedie, we're a relatively small boutique which allows us to put the team's ideas into the portfolios with relative ease. Because I think you're right to say that markets are quite illiquid, and volatility was extreme. I'd even go as far to say that actually back in that period we've probably had an intergenerational high in volatility. So, it was a fascinating period to be doing it. But actually, being relatively small as Majedie is, we were able to re-orientate the trust, get enough of our good ideas in, so the likes of the Weir, the Ashtead, the Dunelm, all of these in decent size to really make a difference to the Edinburgh Investment Trust shareholder results. So, good on that front.
Black: And you mentioned there that you do work for Majedie, it's a boutique house and a boutique house is can put your own stamp on things a bit more. There's maybe less bureaucracy. How does that translate to coming into running 100-year-old investment trust?
de Uphaugh: Yeah. Well, obviously, we're conscious of this and a deep history behind such a prestigious trust. And actually, to do that actually it requires so many pieces of the jigsaw to come in right. So, we have a team-based investment approach. So, we have a number of fund managers, a number of analysts, all of which contribute to the trust's result. But also, there are a number of other pieces to the jigsaw for the Edinburgh Investment Trust. There's the reporting; there's the company secretarial side. So, actually, it was a real team effort over the last year to actually produce this result, and it's been very good for the business actually in terms of Majedie.
Black: James, thank you so much for your time. For Morningstar, I'm Holly Black.
