BlackRock Income and Growth Investment Trust plc

About this investment trust

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

The Company aims to provide growth in capital and income over the long term through investment in a diversified portfolio of principally UK listed equities.

Why choose it?

With longer lifespans and greater demands on retirement funds, investors need a steady source of income and growth. This conviction-led portfolio delivers exposure to a balanced range of sectors and company shares, focused on the UK, which have the potential to deliver capital growth and a growing dividend income.

Suited to…

Investors targeting a steady income that grows over time, useful for retirement planning. The Trust also aims to grow investors’ capital in the longer term.

What are the risks?

• Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
• Net Asset Value (NAV) performance is not the same as share price performance, and shareholders may realise returns that are lower or higher than NAV performance.
• The Trust’s investments may have low liquidity which often causes the value of these investments to be less predictable. In extreme cases, the Trust may not be able to realise the investment at the latest market price or at a price considered fair.
• Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.

Useful information

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Fees & Charges

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ESG Integration

The fund noted above does not commit to sustainable criteria nor does it have a sustainable investment objective.

BlackRock considers many investment risks in our processes. In order to seek the best risk-adjusted returns for our clients, we manage material risks and opportunities that could impact portfolios, including financially material Environmental, Social and/or Governance (ESG) data or information, where available. See our Firm Wide ESG Integration Statement for more information on this approach and fund documentation for how these material risks are considered within this product, where applicable.

Fund manager commentary

30 September 2024

Please note that the commentary below includes historic information in respect of index performance data and the Company’s NAV performance.

The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results.

Performance Overview

The Company returned -1.6% during the month net of fees, performing in-line with the FTSE All-Share Index which returned -1.6%.¹

Market Summary

Equity markets were active in October, filled with corporate earnings and economic data releases, whilst investors paid close attention to the upcoming US Presidential Election and the potential implications of a policy shift on inflation and interest rates. Stock market volatility picked up, despite global equities briefly notching a new high mid-month, on track for their biggest annual gain this century. However, US stock market momentum faded and poor earnings releases from the technology sector saw global MSCI equity markets ending -2.2% as a result. 

In the US, equity markets continued their upward trend for the first 30 days, driven by optimism surrounding corporate earnings and expectations of future Federal Easing. On the final day of October, the S&P 500 was poised to post its biggest annual gain this century, when the final day of trading saw global market tech selloffs wipe out October gains for the S&P500 and NASDAQ. US stocks chalked up their biggest daily drop in nearly two months as tech stocks tumbled, leaving the S&P500 to close the month down c.1%, ending a 5-month winning streak. All of the ‘Mag 7’ stocks closed lower on the final day of trading, whilst utilities led returns as investors favoured relatively defensive stocks.

In Europe, the STOXX600 closed -3.4% for the month, seeing a 1.2% drop in the final day after bleak corporate earnings, with many companies citing anaemic Chinese demand as the driver of earnings misses, and as investors await more clarity on the U.S. election outcome. Technology stocks were among the worst-hit, as U.S. tech giants disappointed on earnings later in October, and key profit warnings halfway through the month took many semi-sector stocks down as a result.

The FTSE All-Share Index returned -1.64% for the month, and the FTSE 100 Index returned -1.45%, with healthcare and consumer staples leading the underperformance. In the UK, equity markets prepared themselves for a tax, borrow, spend Budget in late October, which did not disappoint. Gilt yields, which had risen in anticipation, continued to rise in the immediate aftermath of the budget, whilst sterling was modestly weak. The UK AIM market was up 4% on the day, likely a relief rally as markets had feared a complete scrapping of inheritance tax relief for the market, which only saw a 50% reduction on the day.

Stock Comments

Standard Chartered was the top contributor to performance, after the company reported strong third quarter results, c.20% ahead of consensus. Following a lengthy transition period, which saw the company shrink its balance sheet and geographical exposures, focusing on its core competencies and strongest market shares, the company is once again on the front foot. Growth and cashflow have improved considerably, with sizable buybacks now accompanying an improving growth backdrop.

Pearson was another top positive contributor, delivering higher education growth +4% for the quarter, with higher education returning to growth after the last 18 months. The company continues to improve its execution under its new CEO delivering modestly improved growth and earnings.

Hays was the largest detractor to performance, with first quarter earnings released midway through October suggesting a continuation of tough market conditions. Shares fell over concerns of a recovery being pushed into next year, and because of a subdued trading backdrop for the rest of the year. 

Property companies, including Segro and Great Portland, detracted from performance as rising rates and fears of inflation pressured share prices. This despite a notably strong trading statement from Great Portland during the month highlighting high single digit leasing growth as demand continues to outstrip supply in London Offices.

Changes

We added to Shell and reduced BP on the back of diverging capex spends between the two companies, and our belief in management.

Outlook

Global developed equity markets have continued their broad rallies through 2024 following a trend that started in late 2023. Following a lengthy period of uncertainty through the covid era, with sharply rising rates and inflation, equity markets have now settled down. Having passed peak rates, and with moderating inflation, stable labour markets and broadly stable macroeconomic conditions, markets have moved to ‘goldilocks territory. The promise of greater fiscal spending in the US, China and parts of Europe have served to buoy equity markets further, although have contributed to rising government bond yields as the spectre of fiscal deficits and inflationary pressure loom large for bond investors.

More recently, following a period of extended economic weakness, the Chinese Government have begun a more concerted accommodative campaign aimed at accelerating economic growth and arresting deflationary pressures. Recent policy moves have sought to improve and encourage lending into the real economy with a sizable fiscal easing programme announced. Whilst the scale of the easing is large, western markets and commentators have remained largely sceptical of its impact and effectiveness whilst awaiting evidence to the contrary. In the UK, the recent budget promised and delivered a large-scale borrowing and spending plan whilst sizable increases in minimum wage and public sector wage agreements likely support a brighter picture on the UK consumer. UK Labour markets remain resilient for now with low levels of unemployment while real wage growth is supportive of consumer demand albeit presenting a challenge to corporate profit margins.

With the UK’s election and budget now over, the markets attention will turn its focus on the US election in November. The replacement of President Biden as the Democratic candidate will contribute further to the uncertainty, and we continue to expect that geopolitics will play a more significant role in asset markets. This year sees the biggest election year in history with more than 60 countries representing over half of the world’s population going to the polls. We believe political certainty now evident in the UK will be helpful for the UK and address the UK’s elevated risk premium that has persisted since the damaging Autumn budget of 2022. Whilst we do not position the portfolios for any election outcome, we are mindful of the potential volatility and the opportunities that may result, some of which have started to emerge.

The UK stock market continues to remain depressed in valuation terms relative to other developed markets offering double-digit discounts across a range of valuation metrics. This valuation ‘anomaly’ saw further reactions from UK corporates with a robust buyback yield of the UK market. Combining this with a dividend yield of 3.5% (FTSE All Share Index yield as at 31 August 2024 source: The Investment Association), the cash return of the UK market is attractive in absolute terms and comfortably higher than other developed markets. Although we anticipate further volatility ahead, we believe that in the course of time risk appetite will return and opportunities are emerging. We have identified several potential opportunities with new positions initiated throughout the year in both UK domestic and midcap companies.

We continue to focus the portfolio on cash generative businesses that we believe offer durable, competitive advantages as we believe these companies are best placed to drive returns over the long-term. Whilst we anticipate economic and market volatility will persist throughout the year, we are excited by the opportunities this will likely create; by seeking to identify the companies that strengthen their long-term prospects as well as attractive turnarounds situations.

¹Datastream and London Stock Exchange as at 31 October 2024.

Any opinions or forecasts represent an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results.

This information should not be relied upon by the reader as research, investment advice or a recommendation.

Risk: Reference to the names of each company in this communication is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies.

Portfolio manager biographies

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Adam Avigdori, Director, is co-manager of the BlackRock Income and Growth Investment Trust plc, and is a member of the UK Equity Team. Adam joined BlackRock in 2001 and is responsible for managing UK equity portfolios covering the real estate and construction sectors. Adam has a degree in management sciences.

David Goldman, CFA, Director, is co-manager of the BlackRock Income and Growth Investment Trust plc, and is a member of the UK Equity Team. David joined BlackRock in 2004 and is responsible for managing UK equity portfolios covering the support services sectors. David has a degree with first class honours in economics.

Board of directors

Graeme Proudfoot (Chairman) (appointed 1 November 2019) spent his executive career at Invesco, latterly as Managing Director, EMEA and CEO of Invesco Pensions. Mr Proudfoot joined Invesco in 1992 as a legal advisor and held various roles within the Invesco Group, before moving to take responsibility for a number of businesses in the UK, including Invesco’s investment trust business which he led from 1999 until his retirement from Invesco in 2019. Mr Proudfoot began his career at Wilde Sapte, Solicitors, practising as a corporate finance lawyer in London and New York.

Nicholas Gold (appointed 17 December 2008) is an experienced investment banker with over 36 years’ advisory experience across a wide range of industries and jurisdictions. He retired as the Managing Director responsible for closed-end fund corporate finance at ING Bank N.V. in 2008. Mr Gold is a chartered accountant and a solicitor. He was formerly a member of the Royal Academy of Dramatic Art Council and chairman of its commercial arm, RADA Enterprises. He is a Special Adviser to Pottinger Co Pty Limited.

Charles Worsley (appointed 19 April 2010) has over 25 years’ experience in property management and has been a shareholder of the Company since its launch. Mr Worsley has formerly been a director of retail and media companies.