Rising market volatility, Donald Trump’s tariffs and US equity valuations at nosebleed levels are among the risks facing patient portfolio builders at present, which suggests to Shares this is a sensible time to invest in a fund with a capital preservation focus that strikes a balance between quality income and growth.
One trust which should steer a steady course through the ups and downs ahead is STS Global Income & Growth (STS), co-managed by Troy Asset Management’s James Harries and Tomasz Boniek.
Since Troy was awarded the mandate in 2020, the trust’s conservative approach has delivered superior risk and downside protection characteristics for shareholders, who’ve also benefited from lower charges following a 2024 merger with stablemate Troy Income & Growth.
With investors warming to its defensive attributes, STS Global Income & Growth is the Global Equity Income sector’s second-best one-year share price total performer and this concentrated portfolio of resilient, cash-generative companies offers an attractive 3.5% dividend yield.
WINDS OF CHANGE
The £285 million cap trust pursues a quality investment approach, seeking to invest in 30 to 50 stocks Harries and Boniek believe are high-quality and holding them for long periods to capture their compounding power.
The quarterly dividend-paying vehicle benefits from Troy’s conservative investment style and is well positioned to offer an attractive, low-risk source of income and capital growth over the longer haul.
STS Global Income & Growth’s strict discount control mechanism is a further attractive feature for investors who dislike to see trust holdings languishing well below NAV (net asset value).
‘I think we are going through a reverse Berlin Wall moment,’ Harries tells Shares. ‘The world is splitting into two blocks, the US and China, we’re now in a more inflationary environment, there are greater concerns about government balance sheets and the world is less secure. So all the things that have been so good for so long in the past are less favourable today.’
For some time, Harries has felt the US market is ‘pretty fully valued and this economic expansion is quite long in the tooth, and we’ve hit quite a fragile situation with tariffs and geopolitics.’
His key message: ‘Investors have done fantastically well over a very long period of time and the prudent thing to do is to take some of those gains and secure a long-term growing income stream for yourself.’
QUALITY BIAS
That’s where this trust has a role to play. The portfolio includes companies such as Philip Morris (PM:NYSE) and British American Tobacco (BATS), tobacco titans transitioning from the traditional business of selling combustibles to distributing less harmful products.
Other top 10 holdings include US software company Paychex (PAYX:NASDAQ), which has proved ‘an excellent long-term investment’ for the trust, as well as Japanese video game giant Nintendo (7974:TYO).
STS Global Income & Growth has typically low portfolio turnover, but Harries has been able to purchase what he considers some exceptional businesses at low valuations of late.
One such recent addition is Rentokil Initial (RTO), the pest control industry player benefiting from the repeat and non-discretionary nature of spending in this category, often mandated by regulation, which leads to high recurring revenue and solid growth.
Rentokil has temporarily stumbled due to teething problems with the acquisition of US pest business Terminix, yet Harries believes these issues will ultimately be solved and this should boost Rentokil’s rating.
‘Generally, we are pretty sceptical of acquisitions at Troy, but this one is potentially very interesting in the sense that it is the core business of what Rentokil does,’ he explains.
STS Global Income & Growth bought sneakers-to-basketballs franchise Nike (NKE:NYSE) during the Liberation Day sell-off. ‘Nike is now under new management,’ enthuses Harries.
‘The business is returning to its previous model of being multi-channel and sports-based, and we were able to buy it on a low double-digit PE with no debt. Our view is either the tariffs won’t come through in quite the way everyone expects, Nike will be able to shift some of its manufacturing, or it can put up prices, but overall this is manageable.’
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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