Brunner: Global equity exposure without heavy reliance on the US

BUT offers global equity exposure without heavy reliance on the US…by Jean-Baptiste Andrieux

Overview

 
Brunner (BUT) has been one of the best-performing investment trusts in the AIC Global sector over the past five years (to 20/05/2025), demonstrating resilience across rapidly shifting market conditions. This adaptability is underpinned by the trust’s investment process: the management team—comprising Julian Bishop, Christian Schneider, Simon Gergel, and James Ashworth—construct the Portfolio on a bottom-up basis, maintaining a balance between quality, growth, and value factors. This diversified factor exposure also sets BUT apart from many of its sector peers, which tend to exhibit a bias towards the growth factor.

The success of this strategy is perhaps best reflected by the fact that BUT has been one of the relatively few investment trusts to have issued shares since 2022, with the board initiating a share issuance programme in November 2024. Since the second half of 2024, the trust has consistently traded at narrow discounts or even premiums, and at the time of writing, BUT is trading at a 3.5% Discount.

Over the past 12 months, the team has trimmed or sold some of its defensive holdings that had reached elevated valuations. These include GE Aerospace, an aircraft engine supplier added to the portfolio in early 2024, which has been one of the key contributors to performance over the past year. The proceeds of these sales have been recycled into value-oriented stocks—predominantly non-US names—as the managers believe the valuation gap between the US and the rest of the world has widened significantly.

In addition, BUT delivered its 53rd consecutive year of annual Dividend growth in its 2024 financial year, strengthening its position among the AIC’s dividend heroes. The trust currently offers a 12-month yield of c. 1.7%.
 

Analyst’s View

European and UK equities have outperformed their US peers year-to-date (as of 20/05/2025), as questions have arisen over the sustainability of US exceptionalism, given ongoing trade tensions, recession concerns, and a widening budget deficit. At the same time, the valuation gap between the US and the rest of the world remains wide, giving non-US markets a more attractive starting point for future returns. As such, we believe BUT could be well positioned to benefit if this trend continues, with European and UK equities accounting for c. 47% of the portfolio, which compares to an average of c. 26% for the AIC Global sector.

BUT also looks well placed to navigate varying market environments, thanks to its strategy of balancing quality, growth, and value factors, resulting in a versatile portfolio. This adaptability is underpinned by a strong track record, with BUT being one of the best-performing strategies in the AIC Global sector over the past five years. However, we would argue that performance has not been driven solely by diversification across factors, but also by strong stock selection, with names added by the current team—who have been in place since 2022—such as GE Aerospace, among the key contributors to returns over the past 12 months.

Finally, BUT has completed its 53rd consecutive year of annual dividend increases, and its reserves appear robust enough to support further dividend growth. In our view, the dividend is an important component of BUT’s investment proposition, as it can provide a source of return when capital growth stalls. In addition, a consistently growing annual dividend means the yield an investor receives also increases year-on-year.

Bull

• Provides diversification beyond US equities amid uncertainty and a wide valuation gap with the rest of the world
• Consistent performance across different market conditions
• 53-year track record of annual dividend increases

Bear

• May lag global equity indices if ‘US exceptionalism’ resumes or in style-driven market environments
• The discount has historically traded at wider levels
• Gearing, albeit modest, can exacerbate performance on both the upside and downside

To read the latest research on Brunner click here >
 

 
_{Disclosure – Non-Independent Marketing Communication. This is a non-independent marketing communication commissioned by Brunner. 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.}