Scottish American seeking steady income with global growth

Scottish American Investment Company [LON:SAIN] (SAINTS) is a GBR1bn income-focussed investment trust from the Baillie Gifford stable. Established in 1873, it falls into the Global Equity Income sector.

Managed by James Dow and Toby Ross, with Ross Mathison assisting, the investment trust positions itself as a retail offering that Baillie Gifford said should be a core component for individuals seeking income and aims to grow the dividend at a faster rate than inflation by increasing capital and growing income. The focus of the portfolio is on global equities but investments are also made in bonds, property and other asset types. The equity portfolio is managed on a global basis and usually consists of between 50 to 100 stocks. In constructing the portfolio, the company says little regard is paid to the composition of the equity indices.

The fund had total borrowings of GBP68.16m at the end of December 2023.

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The fund is benchmarked against the FTSE All-World Index and uses the Consumer Price Index as a reference.

Dow has been at Baillie Gifford since 2004, joining the graduate scheme after a stint as a financial journalist with The Scotsman. Initially working in the US Equity team Dow took over the management of SAINTS in 2017. Ross works in Baillie’s Sustainable Growth team, joining the Scottish fund manager in 2006 and being promoted to partner last year. Ross also spent time at Baillie as an analyst on the UK equity team and as a manager in the Global Income Growth team.

Mathison is the new kid on the block, having only been with Baillie Gifford for five years and previously worked on the Global Income Growth team, joining SAINTS last year. He had been at Aviva and Standard Life Investments prior to joining Baillie.

Origins in Victorian Scotland

SAINTS has its own book – a celebratory publication written to commemorate its 150th birthday and tells the story of the fund’s history from its origins in Victorian Scotland through a turbulent century-and-a-half which: “has been far from plain sailing [but where] SAINTS, managed by Baillie Gifford since 2004, has survived – and thrived – as a vehicle for delivering a dependable and rising income to its shareholders.”

Limited copies are available.

Investors will be more interested in how SAINTS has performed in more recent years. On a discrete basis the NAV of the fund has outperformed its benchmark four years out of five, only underperforming on the year to end December 2023, returning 11.8% against an index return of 15.7%.

On a cumulative basis, SAINTS’ NAV has beaten its index benchmark over three years, returning 30.9%; over five years, returning 84.5% and over 10-years, returning 203.2% to the end of December 2023. Dividends have comfortably outperformed the CPI.

The fund does focus on income and dividend returns, but also hopes to deliver a bit of growth and tilts towards growth over value on an investment philosophy basis. Dow said in an interview (probably replicated in that book) that the fund chases “core growth”.

A focus on high-quality companies

He explained: “[the fund takes a] …more balanced approach, definitely, towards growth, [but] not particularly in extreme.  We’re quite big on balance within SAINTS and not going to extremes […] I think we own a portfolio where the companies can do well pretty much, whatever is thrown at them they can thrive.  So, for example, [2022] was really interesting, folks will be aware, we had this huge shift from growth towards value […] You’d say that’s bad news for growth-oriented trusts like SAINTS, right.  Actually, the trust outperformed [in 2022], despite that huge shift towards value.  I think that’s because [of] the underlying companies. We try to own really good, high-quality companies that can thrive almost whatever the weather.”

The fund has a slight European bias currently, with (at the end of 2023) a 37.6% allocation against a North American allocation of 35.4%.

Scottish American Investment Company top five holdings

Source: Baillie Gifford 31/12/23

The fund is available on most platforms but Baillie Gifford does not have the facility to invest directly and does not offer ISAs, SIPPS or Share Plans and has ongoing charges of 0.59%.