Fund focus: Scottish Investment Trust

By Jeff Prestridge for The Mail on Sunday
Updated: 04:36 EDT, 16 February 2009

Scottish Investment Trust has undergone a quiet revolution in the past five years.

Out has gone the old investment guard, to be replaced with a team of young fund managers keen to impress shareholders and shake off the trust's fuddy-duddy image.

The change has worked. Under the leadership of John Kennedy, the globally invested SIT has improved its performance against its main rivals.

Over five years, its shares have risen 54.3%, beating Bankers (+34.5%), Edinburgh (+13.3%), Foreign & Colonial (+29%), Scottish Mortgage (+23.9%) and Witan (+26.9%).

Like SIT, these five long-standing investment trusts invest across world markets in pursuit of long-term returns.

Though SIT's shares, like all equity funds, have been hammered in the past year (down 20.8%), Kennedy has not been afraid to change the portfolio to withstand the global slump.

The extent of his hands-on approach is revealed in the trust's report and accounts, just published.

In the year to November 2008, it bought holdings in companies to the value of £828m, but disposed of assets worth £867m.

The ratio of disposals as a percentage of average assets was 112% - double the previous year's figure.

SIT defends the high turnover by saying it has had to respond to changing markets, resulting in a more defensive portfolio and the regular trading of UK gilts as an alternative to holding cash deposits.

So far shareholders have little cause for complaint. The 20.8% fall in SIT's shares over the past year compares with a 27.4% collapse for the average global growth investment trust.