The North American Income Trust plc

Leading US companies picked for their higher income potential

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An update from our investment manager, Fran Radano - 28 August 2020

The uncertainty and challenges related to the worldwide spread of Covid-19 have resulted in one of the more unusual periods of equity performance in memory. Initially the more typical bear market themes played out as expected (e.g. quality outperformance, leverage underperformance), which were then followed by unusual day-to-day movements such as utilities being treated like momentum stocks and the ten-year treasury yield rising while the market was plummeting. Subsequently both the Federal Reserve and the US government unleashed a series of policies and programs to prevent the capital markets from seizing up and to help both employees and employers get though the initial economic impacts of the virus. Most recently, the economy has begun a phased-in re-opening and the market has responded in a very positive manner. 

With the outlook still uncertain, we have generally refrained from making large wholesale changes to positioning thus far. That being said, the unusual market movements and volatility have given us the opportunity to selectively realign the portfolio by adding to positions that have seen unjustified value dislocations as well as adding a couple of names from our watch list where they had met the quality threshold, but where valuation was previously deemed a bit too steep. Following the most recent move back toward 2019 highs, we have become a bit more defensive as we have trimmed positions where a full recovery in fundamentals is unlikely over the next 12 months. 

Our use of the options market was quite limited at first, but we have subsequently been able to use this tool more often in a disciplined manner, focusing on short-dated options at prices further out. This works as a means to add to positions at lower prices where we are natural buyers, or to top-slice at higher levels where we would be natural sellers. Lately, we have sold more call options on a few of the stocks given the upward move in the markets.

The significant economic policy response being deployed by central banks and governments has injected liquidity into the marketplace with interest rate cuts, further quantitative easing and fiscal stimulus. Meanwhile, many geographies are commencing phased-in reopenings which should help in normalizing the economy, but the risk remains that reducing "social distancing" policies may result in increased case-loads if done too aggressively. The healthcare industry continues to focus on finding anti-viral measures to combat new infections while ultimately needing an effective vaccine for economies to truly normalize. Despite the fact that this pending recession was not caused by traditional economic excesses or policy errors, we would expect a more muted recovery as employment will likely return at a much more modest pace and continued degrees of social distancing will likely restrain growth over the next year.

In these conditions we are remaining focused on closely monitoring the financial strength of our holdings with an emphasis on operational and financial leverage as well as cash generation. We have adopted a cautious stance for some time and see little reason to shift from this conservative focus on higher quality businesses.

About us

Hear more from our investment manager Fran Radano:

 

Key people

Francis Radano

Francis Radano

Senior Investment Manager

Fran Radano is a Senior Investment Manager on the North American Equity Team. Fran joined Aberdeen in 2007 following the acquisition of Nationwide Financial Services’ equity investment management team, where he had served as a senior equity research analyst providing fundamental research coverage for the consumer discretionary and consumer staples sectors since 1999. Previously, Fran was a research analyst and vice president at Salomon Smith Barney. Prior to that, he was an associate trader at SEI Investments. Fran received a BA in Economics from Dickinson College, and has also earned a MBA in Finance from Villanova University. He is a CFA® Charterholder.

Ralph Bassett

Ralph Bassett

Deputy Head of North American Equities

Ralph Bassett is Deputy Head of North American Equities. Ralph joined Aberdeen in 2006 from Navigant Consulting where he worked as a management consultant providing client analysis and direction on critical business decisions. Previously, Ralph held internships at J.P. Morgan Chase and Boenning and Scattergood, a boutique investment bank. Ralph graduated with a BS in Finance from Villanova University. He is a CFA® Charterholder.

  • Francis Radano

    Senior Investment Manager

    Fran Radano is a Senior Investment Manager on the North American Equity Team. Fran joined Aberdeen in 2007 following the acquisition of Nationwide Financial Services’ equity investment management team, where he had served as a senior equity research analyst providing fundamental research coverage for the consumer discretionary and consumer staples sectors since 1999. Previously, Fran was a research analyst and vice president at Salomon Smith Barney. Prior to that, he was an associate trader at SEI Investments. Fran received a BA in Economics from Dickinson College, and has also earned a MBA in Finance from Villanova University. He is a CFA® Charterholder.

  • Ralph Bassett

    Deputy Head of North American Equities

    Ralph Bassett is Deputy Head of North American Equities. Ralph joined Aberdeen in 2006 from Navigant Consulting where he worked as a management consultant providing client analysis and direction on critical business decisions. Previously, Ralph held internships at J.P. Morgan Chase and Boenning and Scattergood, a boutique investment bank. Ralph graduated with a BS in Finance from Villanova University. He is a CFA® Charterholder.

James Ferguson

James Ferguson

Chairman

James Ferguson, appointed on 12 March 2002, is a former chairman and director of Stewart Ivory and a former deputy chairman of the AIC. He is the chairman of Monks Investment Trust, The Scottish Oriental Smaller Companies Investment Trust, Value and Income Trust and Northern 3 VCT and a director of The Independent Investment Trust.

Karyn Lamont

Karyn Lamont

Chairman of Audit Committee and Independent Non-Executive Director

Karyn Lamont, appointed on 18 September 2018, is a chartered accountant and worked for over 25 years at PwC, including 13 years as an Audit Partner, specialising in the financial services sector across the UK. She has provided audit and other services to a range of clients including a number of investment trusts, a broad range of management companies and outsourced service providers. Her specialist knowledge includes financial reporting, audit and controls, risk management, regulatory compliance and governance. She is the Audit Committee Chairman of The Scottish Investment Trust plc and a non executive director at the Scottish Building Society.

Susan Rice

Lady Susan Rice

Independent Non-Executive Director

Susan Rice, appointed on 17 March 2015, is a chartered banker and is currently the President of the Scottish Council of Development and Industry, the Chair of Scotland's new Fiscal Commission, Vice-Chair of Scotland’s 2020 Climate Change Group and a non-executive director of J Sainsbury and Big Society Capital. Her previous roles include managing director of Lloyds Banking Group Scotland, chairman and chief executive of Lloyds TSB Scotland, a director of the Bank of England and a non-executive director of SSE plc and a member of the recent First Minister's Council of Economic Advisers. Originally from the United States, her early career was at Yale and Colgate universities and then at NatWest Bancorp. She was the first woman to head a UK clearing bank in 2000. Susan also chairs the Edinburgh International Book Festival and Edinburgh's Festivals Forum, and works extensively with Scotland's National Galleries to ensure a vibrant cultural base in the country.

susannah nicklin

Susannah Nicklin

Independent Non-Executive Director

Susannah Nicklin, appointed on 18 September 2018, is a financial services professional with over 20 years of experience in executive roles at Goldman Sachs and Alliance Bernstein in the US, Australia and the UK. She has also worked in the social impact private equity sector with Bridges Ventures, the Global Impact Investing Network and Impact Ventures UK. She is the Senior Independent Director of Pantheon International plc and a non-executive director of Amati AIM VCT plc, City of London Investment Group plc and Baronsmead Venture Trust plc. She is a CFA® charterholder.

Charles Park

Charles Park

Independent Non-Executive Director

Charles Park, appointed on 13 June 2017, has over 25 years of investment management experience. He is a co-founder of Findlay Park Investment Management, a US boutique asset management house which was established in 1997. Prior to his retirement from the firm in 2016, he was deputy chief investment officer with joint responsibility for managing Findlay Park American Fund.

Prior to co-founding Findlay Park, Charles was an investment manager at Hill Samuel Asset Management and an analyst at Framlington Investment Management.

  • James Ferguson

    Chairman

    James Ferguson, appointed on 12 March 2002, is a former chairman and director of Stewart Ivory and a former deputy chairman of the AIC. He is the chairman of Monks Investment Trust, The Scottish Oriental Smaller Companies Investment Trust, Value and Income Trust and Northern 3 VCT and a director of The Independent Investment Trust.

  • Karyn Lamont

    Chairman of Audit Committee and Independent Non-Executive Director

    Karyn Lamont, appointed on 18 September 2018, is a chartered accountant and worked for over 25 years at PwC, including 13 years as an Audit Partner, specialising in the financial services sector across the UK. She has provided audit and other services to a range of clients including a number of investment trusts, a broad range of management companies and outsourced service providers. Her specialist knowledge includes financial reporting, audit and controls, risk management, regulatory compliance and governance. She is the Audit Committee Chairman of The Scottish Investment Trust plc and a non executive director at the Scottish Building Society.

  • Lady Susan Rice

    Independent Non-Executive Director

    Susan Rice, appointed on 17 March 2015, is a chartered banker and is currently the President of the Scottish Council of Development and Industry, the Chair of Scotland's new Fiscal Commission, Vice-Chair of Scotland’s 2020 Climate Change Group and a non-executive director of J Sainsbury and Big Society Capital. Her previous roles include managing director of Lloyds Banking Group Scotland, chairman and chief executive of Lloyds TSB Scotland, a director of the Bank of England and a non-executive director of SSE plc and a member of the recent First Minister's Council of Economic Advisers. Originally from the United States, her early career was at Yale and Colgate universities and then at NatWest Bancorp. She was the first woman to head a UK clearing bank in 2000. Susan also chairs the Edinburgh International Book Festival and Edinburgh's Festivals Forum, and works extensively with Scotland's National Galleries to ensure a vibrant cultural base in the country.

  • Susannah Nicklin

    Independent Non-Executive Director

    Susannah Nicklin, appointed on 18 September 2018, is a financial services professional with over 20 years of experience in executive roles at Goldman Sachs and Alliance Bernstein in the US, Australia and the UK. She has also worked in the social impact private equity sector with Bridges Ventures, the Global Impact Investing Network and Impact Ventures UK. She is the Senior Independent Director of Pantheon International plc and a non-executive director of Amati AIM VCT plc, City of London Investment Group plc and Baronsmead Venture Trust plc. She is a CFA® charterholder.

  • Charles Park

    Independent Non-Executive Director

    Charles Park, appointed on 13 June 2017, has over 25 years of investment management experience. He is a co-founder of Findlay Park Investment Management, a US boutique asset management house which was established in 1997. Prior to his retirement from the firm in 2016, he was deputy chief investment officer with joint responsibility for managing Findlay Park American Fund.

    Prior to co-founding Findlay Park, Charles was an investment manager at Hill Samuel Asset Management and an analyst at Framlington Investment Management.

Financial calendar

Year End 31 January
Accounts published March
Annual General Meeting June
Dividend Paid February, June, August, November

Trust details

The North American Income Trust plc

Registered Office:
1 George Street
Edinburgh
EH2 2LL

Registered in Scotland as an Investment Company Number SC005218

Launch Date: November 1902

Risk warning
Risk warning
The value of investments and the income from them can go down as well as up and you may get back less than the amount invested. The tax benefits relating to ISA investments may not be maintained. Investors should review the relevant Key Information Document (KID) brochure prior to making an investment decision.
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