Seneca Global Income & Growth Trust’s (SIGT’s) manager, is gradually reducing the trust’s equity weighting over the next couple of years, in advance of a global recession it expects in 2020. Consistent with its view, the recent trend in developed economies has been one of falling unemployment, labour markets tightening, wage rates edging up and emerging signs that consumer prices are also on the rise. SIGT’s manager expects inflation to continue to rise, triggering a response from central banks, including in some cases, interest rate rises and ultimately recession.
SIGT has recently underperformed its benchmark and global equity markets (see page 10), but its manager expects its multi-asset strategy to strongly outperform these in the downturn.
Multi-asset, low volatility, with yield focus
Over a typical investment cycle, SIGT seeks to achieve a total return of at least the Consumer Price Index (CPI) plus 6% per annum, after costs, with low volatility, and with the aim of growing aggregate annual dividends at least in line with inflation. To achieve this, SIGT invests in a multi-asset portfolio that includes both direct investments (mainly UK equities) and commitments to open-and-closed-end funds (overseas equities, fixed income and specialist assets). SIGT’s manager uses yield as the principal determinant of value when deciding on its tactical asset allocation and holding selection.