The Merchants Trust

Fund Manager Interview

Interview with Simon Gergel, fund manager, The Merchants Trust PLC.

Download (PDF, 243 kb)

The Merchants Trust PLC- benefits at glance

• Navigated through all market conditions since 1889
• Benefits from RCM’s dual research process
• Invests for both income and income growth
• 26 consecutive years of dividend growth*. Please remember that income is not guaranteed and could go down as well as up

The Merchants Trust PLC - We research our investments as thoroughly as you do

In this challenging environment, we believe there is no substitute for research. That’s why each and every stock held in the Merchants Trust portfolio undergoes rigorous analysis and scrutiny before selection. Managed by Allianz Global Investors’ global equity specialist, RCM, Merchants has inputs from 50 in-house analysts and access to Grassroots – one of the industry’s most innovative research facilities and exclusive to RCM.

The Merchants Trust PLC aims to provide an above average level of income which increases over time. It was incorporated in 1889 and has assets in excess of £500m, making it the oldest and largest investment trust that we manage. It focuses on investing in larger UK companies and has negotiated all kinds of economic conditions since it was established. A fact which is underlined by its 26 consecutive years of dividend growth. *This means that over the course of the past 26 years the dividend has grown from 4.2p in 1982 to 21.6p in 2008, an increase of 8% per annum, well above the rate of inflation (source: Allianz Global Investors/ The Merchants Trust PLC Report & Accounts, 31/01/82 to 31/01/08). Please remember that income is not guaranteed and could go down as well as up.

A portfolio of UK companies

Merchants’ remit is UK ‘blue chip’ companies; well-established, well-known companies that we believe are soundly run; we believe this approach means that Merchants is worth consideration by investors who want a spread of leading UK companies. You can find out which stocks currently make up Merchants’ portfolio from the latest factsheet – please click on the link on the right hand side of this page to visit the Trust Factsheets page.

Build up your diversified portfolio

When you buy shares in an investment trust you effectively pool your money with other investors’ money, which allows you to benefit from economies of scale. What’s more, because each investment trust owns shares in a range of companies, buying shares in an investment trust gives you a diversified portfolio in a much more cost-efficient and manageable way than if you invested in each company individually. This means that even with relatively small amounts to invest, such as through regular monthly investments, you can gain exposure to a diversified and professionally run portfolio of shares. And as you’re not dependent on the success of just one or two companies, this spreads your risk. This is called portfolio diversification.

As with all equity-based investments you should be aware that past performance is no guide to future performance and that you may not get back the amount you originally invested. Merchants employs borrowing (gearing) with the intention of enhancing returns. Gearing can boost returns when investments perform well though losses can be magnified when investments do badly. You should be aware that the Trust could be subject to sudden and large falls in value and in weak markets you could suffer substantial capital loss. The Trust also charges 65% of its annual management fee to the capital account. This could lead to a higher level of income and a lower capital return, or future growth may be constrained.

How to invest

You can invest in the Allianz Global Investors managed Investment Trusts - including The Merchants Trust - through the ISA, PEP and Share Plan wrappers of a number of suppliers, including Alliance Trust Savings. Investment Trusts are also available to buy via a stockbroker, and there are now a number that offer an online stockbroking service. You are strongly advised that if you are unsure about the most suitable option for your needs that you contact a Financial Adviser.

20/10/2008