The Tip Sheet
The Telegraph spots an outlier in London’s investment trust space: M&G Credit Income (MGCI). Outlier, because such has been demand for the debt fund that it has actually been able to issue new shares; while The Times thinks investors could soon wake up to the opportunity that is value investing and cites Temple Bar’s (TMPL) outperformance of the wider market over the last 3 years as evidence.

By Frank Buhagiar

Questor – This trust offers a yield more than three times greater than inflation
M&G Credit Income Investment Trust (MGCI) is a fund in demand. Exhibit#1: MGCI issued 6.6m shares to satisfy demand over the past year. Exhibit#2: The shares trade at a 1% premium to net assets, making the debt fund something of an outlier in London’s investment company space. All the more impressive given The Telegraph’s Questor Column describes the current environment for a fund manager investing in debt as “tricky.” A nod to rising government borrowing costs around the world.
The fund’s attractive dividend yield of around 8.4%, “making it one of the higher yielding trusts in its peer group”, one reason cited for why the shares are in demand – the annual dividend is calculated at 4% plus Sonia (the sterling interest rate benchmark), meaning the dividend moves up and down with official interest rates. The high payout level is down to the fund’s relatively high exposure to private credit (53% of the portfolio as at the end of November 2024) – private credit securities tend to come with higher yields, compensation for having lower liquidity compared to public credit.
Risk management appears front and centre of the investment approach. 80% of the portfolio is invested in floating rate debt thereby making the fund less sensitive to interest rate risk compared to peers. Meanwhile, 70% of the portfolio is invested in investment grade debt. The portfolio is well diversified too – in all there are 130 holdings. According to Questor “Across its six-year life, the portfolio has experienced some defaults, but diversification and good credit analysis means the impact has been limited.” That does mean that “M&G Credit Income’s returns are respectable but not best in class” which leads Questor to “suspect that investors’ degree of enthusiasm for the trust will reflect their individual risk appetite. Questor says: hold”. Well they do say each to their own.
Tempus – Is it time to look at value investing? There may be good returns
As The Times’ Tempus points out “Value investing is not as popular as it once was among first-time retail investors, with most market newcomers seeking out racier returns in the world of artificial intelligence, fintech or even cryptocurrency rather than in unloved stocks.” But this could be changing as investors “wake up to the value opportunity in the UK market”. It’s an opportunity that value investor Temple Bar Investment Trust (TMPL) has been capitalising on – over the last three years the fund has generated a total return of +24%, easily beating the FTSE All-Share’s +17%.
The outperformance, testament to the fund managers Nick Purves and Ian Lance at Redwheel, who have been running the fund since October 2020, and the trust’s concentrated portfolio of 34 stocks, a third of which belong to the financial sector. Since Purves and Lance have been at the helm, TMPL has generated a net asset value total return of over +100%. That compares favourably to its UK equity income peers, which have delivered a weighted average return of around +86%.
The shares also offer a dividend yield of 3.6%, although that is slightly lower than the 4.3% sector average. And then there’s the discount which, according to Tempus, “suggests that the fund represents decent value for a prospective investor. It currently stands at just over 8%, slightly wider than recent history and compared with an average discount of 4.9% among rival funds. Advice Buy.” The value investor a value play itself, it seems.
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