This article was taken from the Winter 2025 edition of 1875. To subscribe to our investment publications, please visit www.redmayne.co.uk/publications
Post festive period, we have welcomed the new year with a somewhat rocky start. The usual early January practice of reading through financial market outlooks and consolidating thoughts with respect to the year ahead has been derailed and attention diverted by two headline grabbing events in the early weeks. Upward moves in UK government bond yields have been a common feature of financial news headlines, with some concerns raised over the associated decline in the value of sterling. Further comment is provided on this in our main article, but we would point to the fact that this isn’t an isolated move for the UK as government borrowing costs have been rising in both the US and Europe as markets have been adjusting expectations for interest rate movements. Alongside rising government borrowing costs, a US hedge fund is attempting to shake-up the UK’s investment trust sector. Having requisitioned seven companies for voting on changes to the board of director compositions and investment strategies, participants around the sector, which constitutes 335 companies and manages some £269bn of assets, have been vocal in their opposition.
Within our Stock Focus article, TR Property Investment Trust, the diversified fund of Real Estate Investment Trusts (REITs) takes centre stage. The sector has experienced challenges in recent years following rising interest rates that has caused a resetting of both property valuations and the ratings of the REITs themselves. At the helm of the portfolio is a long-standing manager with a strong track record, having outperformed in twelve of the last thirteen calendar years while helping to produce the necessary income required to enable the board to increase the dividend on an annual basis over a long period of time. With a combination of healthy starting dividend yields, wide share price discounts to underlying net asset values, and the potential for positive earnings momentum, the REIT sector is one to watch in the year ahead.
Overall, there’s reason for positivity for the year ahead. Current yields on bonds are high and generally conducive to some strong forward-looking returns, although we could continue to see volatility in the longer maturity end of the market. Equities broadly start the year at undemanding valuations, with the exception of the US, where valuations remain high, and there is supportive optimism around the pro-growth stance of the Trump administration.
Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned. Investments and income arising from them can fall as well as rise in value. The information and views were correct at time of writing but may have changed at point of reading.
2025 is a very special year for Redmayne Bentley as we will celebrate our 150th anniversary in December. As we look ahead to this significant milestone, we want to thank our clients, readers and listeners for your support.