STS Global underperforms benchmark in market dominated by US tech

(Sharecast News) - STS Global Income & Growth Trust reported a positive first-half performance on Wednesday, but lagged its benchmark as its value-oriented investment style continued to underperform a market dominated by a concentrated group of large US technology names. Net asset value per share rose 1.9% in the six months to 30 September, compared with an 8.3% return from the Lipper Global Equity Global Income Index.

The share price delivered a total return of 3% over the same period.

Net assets fell to £283.6m from £294.5m at the end of March, while the share price increased to 241p and the discount narrowed to 0.56% from 1.69%.

Revenue per share declined to 3.18p from 3.66p a year earlier, but the interim dividend rose to 4.2p from 3.17p, reflecting the board's commitment to maintaining a competitive yield.

The trust bought back 4.39 million shares during the period and issued 225,000 shares amid demand.

Chair Sarah Harvey, delivering her first interim statement, said performance had been held back by the concentrated nature of recent equity market gains.

She noted that "recent market performance, particularly in the US, has been driven by a relatively narrow group of large technology and AI-linked stocks, now often referred to as 'MANGO'," adding that the trust's limited exposure to this cohort had contributed to relative underperformance.

Harvey said the portfolio remains focused on "high-quality, dividend-paying companies trading on attractive valuations".

The managers reiterated that market leadership remains narrow and valuations elevated at the index level, while opportunities are emerging elsewhere as many high-quality stocks trade below long-term valuation averages.

They highlighted new holdings in Nike and Sysco, funded through the sale of Medtronic and Hershey, and said recent volatility had enabled investment at more attractive entry points.

The trust's NAV return over one and three years stood at 8.7% and 19.3%, respectively, against 10.4% and 34.8% for the benchmark.

Looking ahead, the board expects further market uncertainty, citing inflation, interest rate risks and geopolitical tensions, but believes the trust is well positioned.

Harvey said the portfolio's orientation toward income and capital preservation "is designed to perform in a less exuberant market environment" and that investors anticipating greater dispersion of returns "may be better served by a strategy grounded in income and capital preservation".

The board confirmed it continued to operate a discount control mechanism to ensure the shares trade close to NAV and reiterated the long-term objectives of rising income, capital preservation and steady growth.

At 1016 GMT, shares in STS Global Income & Growth Trust were down 0.41% at 240p.

Reporting by Josh White for Sharecast.com.