UK shares have long been cheap against their peers. The UK market lacks the high-quality growth companies that abound in the US and recently we have seen many companies choose to list in New York in search of greater valuations. It has not helped that regulatory and structural issues have seen wealth managers and pension funds reduce their exposure to their home market. Writing in the Telegraph, Tom Stevenson of Fidelity International thinks things are about to change in light of a more favourable economic backdrop. The trick though is to identify those well-run companies that can generate high returns from capital deployed and particularly in Mid-Cap stocks, rather than settle for general UK exposure via passive strategies.

One fund we have long favoured is Law Debenture, an investment company founded in 1889 to facilitate the issue of corporate debentures. Aside from the investment management that is carried out by James Henderson and Laura Foll of Janus Henderson, the company continues to provide fiduciary services such as corporate and pensioner trusteeships to companies around the world under the heading Independent Professional Services, the revenue of which has contributed to around 20% of the Net Asset Value (NAV) of the investment company and 34% of the dividends payable. Incidentally, the dividend has been maintained or increased now for 45 years. This unique ownership of an individual company is not dissimilar to that of Warren Buffett’s Berkshire Hathaway which, in addition to investing in the shares of publicly quoted companies, also owns some outright.

James and Laura were appointed by the Board to manage the investments of the company in 2019. Their objective is to  achieve a higher rate of total return than the FT All Share index. You might not think that is a high bar to aim for, but over the last five years, not only did Law Debenture outperform the FT All Share, returning + 88.95% against + 30.28%, but it also exceeded the MSCI World Index return of + 69.70%. Considering none of the US based “Magnificent Seven" which make up 20% of the World Index are held within the portfolio, that’s quite a feat.

FE analytics 5 years to 17/07/2024 dividends reinvested

Law Debenture Annual Report & Accounts 31/01/2023

‍