Schroder Income Growth's Sue Noffke provides some insight into her considerations for running the trust.
Insights into the Schroder Income Growth Fund
Our guest writer Alice Rigby from Kepler recently sat down with Sue Noffke, lead manager of Schroder Income Growth to ask her about how she approaches the management of the trust. This article "Knowledge is Power" originally appeared on Kepler's website.
When I ask Sue Noffke about the differences in managing open-ended funds and closed-ended trusts her mind goes straight to one thing: not having to worry about inflows and outflows.
“With any fund you don’t have insight on flows – even if you get warning from a client you don’t know when the inflow or outflow will land. But, as soon as you receive flows you have to invest them, which can be painful when they are followed by outflows.”
It’s the ability then to plan, she says, that is a key appeal of running an investment trust. “I know what I’m doing in terms of being able to gradually – or not – build up a position and map out dividend flows.”
When it comes to the nuances of the open-ended and closed-ended worlds, Sue is one of the most in-the-know people we have spoken to so far. She has management responsibilities on two funds – the open-ended Schroder Prime UK Equity fund, which she co-manages with two colleagues, and the closed-ended Schroder Income Growth, on which Sue is lead manager.
While both funds follow similar philosophies, there are often clear distinctions between the two portfolios – one cause of which is the difference in structure. In the first quarter of 2019, Sue dramatically increased gearing on the trust from around 8% to just over 16%, on the basis of both promising market opportunities and attractive financing conditions.
For Sue, gearing enables her to invest as close to her philosophy as possible: “you can be tactical with taking money on and off the table. What that means is that decisions are entirely investment case-driven, as opposed to being made based on the fund’s condition.”
Of course, she acknowledges, it is as important to be disciplined when taking gearing out of the trust as it is when ramping it up. In 2017, Sue reduced gearing on the trust from around 8.5% to 4% after a strong run in the market.
She adds that gearing is one of the areas where board consultation can be most fruitful. “Ahead of the changes at the beginning of the year, I had a number of conversations with the board to ensure the correct financing structures were in place. We had a second facility in place so that the good financing opportunity didn’t dissipate on first use – and we have since used that.”
Noffke is enthusiastic about the role of the board. With almost eight years at the helm of an investment trust under her belt, what has she learnt about working with a diverse group of board members?
“It’s important to have robust conversations on both sides. I’ve found that it is helpful with a strong board to be strong in return. In that context, we are able to discuss all manner of topics from service providers, to our peer group, to our target investor base. But altogether, it’s about ensuring the trust remains relevant.”
The rising importance of individual investors has been one of the hotter topics in recent years, and Schroder Income Growth has not been immune. Sue explains that the trust’s marketing activity has evolved to reflect that – driven by both manager and board.
“These days we have to balance the endeavours that are the best use of my time. So yes, that is still sales but also broader marketing and media work too. Hargreaves Lansdown is now in our top five shareholders and we are very conscious of that.
On the board’s side: “they’ve built a completely new website, we’ve been to AJ Bell conferences, we’ve been to AIC roundtables with journalists and have hosted journalist dinners, all in an effort to extend our reach to individual investors.”
Clearly, collaboration between the board and the manager is much more than a talking point for this trust.
These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees