EDIN targets quality UK companies to deliver long-term total returns…by Josef Licsauer

 

Overview

 
This year marks five years since Liontrust assumed management of Edinburgh Investment Trust (EDIN), a period marked by exceptionally strong NAV and share price Performance relative to the FTSE All-Share Index. Portfolio manager Imran Sattar, who has played a central role for much of this time and now leads the strategy, brings a renewed energy and disciplined focus on total returns. He seeks companies with pricing power, strong balance sheets, elevated margins, a clear competitive advantage that rivals struggle to replicate and clear long-term growth potential—all traits he views as essential to compounding value.

This approach is reflected in how the Portfolio is positioned, but also the recent changes made. During market dislocations or where company fundamentals have shifted, Imran has not hesitated to reallocate capital to capture businesses capable of delivering strong total returns over time. Having exited names such as BP and Ashtead due to governance or balance sheet concerns and taken profits in strong performers like Marks & Spencer and Centrica, Imran reallocated proceeds into new opportunities, including mid-caps such as Grainger, Marshalls and MoneySuperMarket, where he sees a compelling mix of yield, valuation and long-term growth potential.

Whilst recent market volatility has weighed on 12-month performance, EDIN’s long-term record remains strong. Over five years, both NAV and share price total returns have outpaced the index, underpinned by disciplined stock selection and a quality-focussed approach.

Positively, the Discount has also narrowed recently, supported by this five-year track record, consistent share buybacks (around 17% of shares repurchased since 2020) and stepped-up marketing efforts. Meanwhile, the trust offers a historic Dividend yield of 3.6%, in line with the broader market but below the sector average.
 

Analyst’s View

 

At a time when UK equities remain out of favour and attractively valued versus developed market peers like the US, we think EDIN’s balanced, total-return-driven approach offers a compelling way to access high-quality UK companies. Imran’s style-agnostic strategy blends exposure across market caps with a focus on durable economic moats, robust balance sheets and strong capital allocation, helping the trust navigate volatile market conditions more effectively than some more style-constrained peers. This style agnosticism makes EDIN less susceptible to sharp swings between growth and value, providing greater portfolio stability, in our view.

Whilst the trust’s historic dividend yield of 3.6% sits below the peer group average, this doesn’t fully capture the distributions being made by the portfolio’s holdings. Irman highlights that many chose to also return capital via share buybacks, an approach that contributed an estimated buyback yield of 1.9% over FY 2025. Though not a direct source of income, this form of capital return enhances shareholder value and brings the total distribution yield to approximately 5.3%.

For income-focussed investors seeking higher near-term yields, the trust’s lower yield may appear less compelling. However, Imran’s primary focus remains on delivering sustainable, long-term total returns rather than chasing an unsustainably high yield.

Near-term performance has faced headwinds, notably amid mid-cap weakness. However, this volatility is consistent with the trust’s multi-cap, style-agnostic approach, which aims to deliver steady returns over market cycles rather than short-term outperformance. EDIN’s strong long-term track record highlights the strength of the manager’s disciplined stock selection and total return focus.

Overall, the UK market’s attractive valuations and improving fundamentals present a compelling opportunity for active investors. We believe EDIN is well-positioned, offering a resilient and balanced route to these opportunities with potential for rerating if market conditions improve.
 

Bull

 

  • Relative performance has been strong, supported by stock selection
  • No dogmatic style bias could mean the trust won’t be as impacted in periods of sharp style rotations
  • Low OCF offers investors low-cost access to UK equities

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    Bear

     

    • The UK market offers little exposure to certain high-growth sectors, like technology
    • Exposure to mid caps increases sensitivity to the UK economy
    • EDIN’s dividend is lower than the sector average

     

    See the full research on EDIN here >
     
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    Disclaimer

    Disclosure – Non-Independent Marketing Communication

    This is a non-independent marketing communication commissioned by Edinburgh Investment Trust. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.



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