Performance, Commentary & Portfolio
ISIN GB0005800072 | SEDOL 0580007
Fund Manager’s Review
The US Federal Reserve cut interest rates in September, for the first time since Donald Trump became president, citing weaker growth and slightly higher unemployment. However long bond yields were broadly unchanged in the month, both in the USA and the UK. Equity markets made solid gains, continuing a strong rally since the lows in April. The UK stock market was up nearly 2%, with the US S&P index up over 3%.
The strongest sectors in the UK included mining, on the back of strong copper and gold prices, aerospace & defence, housebuilding and banks. The weakest sectors included several defensive industries, such as beverages, food producers and tobacco.
Portfolio performance was slightly behind the index return. The Net Asset Value (NAV) total return was 1.38% compared to 1.86% from the benchmark, FTSE All-Share index. The copper miner Atalaya continued to rally after publishing results in August, supported by a strong commodity market, whilst the ingredients company Tate & Lyle, underperformed in a weak environment for that industry. The other main impacts on relative performance came from stocks that were not in the portfolio. AstraZeneca and Diageo were weak and held back the index return, but this was offset by strong moves at HSBC and Rolls Royce, which supported the index.
We sold the investment in Aena, the owner of most Spanish airports and several others, including 50% of Luton. Aena has benefitted from a tourism recovery in Spain and its favourable regulatory structure. The shares have been strong performers since our purchase and have also paid a high dividend yield. This has taken the shares closer to fair value. Aena has recently announced a major increase in capital spending to fund long term growth at several of its airports. Whilst these investments are positive for the long term, they will reduce cash flow in the medium term. We have decided to reallocate this money into opportunities where we see greater upside. The largest of these, was building up the position in MONY (MoneySuperMarket) that we initiated in August.
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"These inefficiencies can be exploited by owning a diversified collection of strong businesses, trading well below our assessment of their fair value and paying a high dividend stream" |
As we explained in the Merchants interim report, we are finding considerable inefficiencies and anomalies in the UK stock market. One example of this is that the yield on medium sized companies is significantly higher than the yield on large companies for the first time in over 20 years. These inefficiencies can be exploited by owning a diversified collection of strong businesses, trading well below our assessment of their fair value and paying a high dividend stream. We believe that the portfolio is well positioned to deliver strong capital returns and income to meet Merchants’ objectives.
Simon Gergel
12 September 2025
This is no recommendation or solicitation to buy or sell any particular security. Any security mentioned above will not necessarily be comprised in the portfolio by the time this document is disclosed or at any other subsequent date.
Key Information |
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Launch Date |
16 February 1889 |
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AIC Sector |
UK Equity Income |
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Benchmark |
FTSE All-Share |
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Annual Management Charge |
0.35% |
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Performance Fee |
No |
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Ongoing Charges 1 |
0.56% |
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Year End |
31 January |
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Annual Financial Report |
Final published in April, Half-yearly published in September |
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AGM |
May |
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Dividend Pay Dates |
February/March, May, August, November |
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Dividend XD Dates |
January, April, July, October |
1. Source: AIC, as at the Trust’s Financial Year End (31.01.2023). Ongoing Charges (previously Total Expense Ratios) are published annually to show operational expenses, which include the annual management fee, incurred in the running of the company but excluding financing costs.
Registrations |
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Company No. |
00028276 |
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FATCA GIIN No. |
ZHLNUL.99999.SL.826 |
Codes |
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RIC |
MRCH.L |
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SEDOL |
0580007 |
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ISIN |
GB0005800072 |
Awards & Ratings
Shares Awards 2021 - Best Investment Trust for Income: The Merchants Trust was recognised in 2021 by the readers of shares magazine. The award is voted for by readers and is not influenced by an industry panel, providing a validation of Merchants' investment strategy from individual investors in the trust.
RSMR Rating: The Merchants Trust has been awarded RSMR’s ‘R’ rating, widely recognised as a mark of quality for funds, ranges and investment trusts that receive this seal of approval. The RSMR research process results in a list of investment trusts which are the trusts that RSMR feel have a robust, repeatable process and the ability to deliver strong performance in the future.
Association of Investment Companies (AIC) Shareholder Communication Awards 2021: The Merchants Trust won the award for ‘Best Report and Accounts – Generalist’. The judges praised the winning entry for the quality of its case studies and investment report, its use of language that was easy to understand, and the level of detail provided on the portfolio.
The RSMR rating is designed for use by professional advisers and intermediaries as part of their advice process. This rating is not a recommendation to buy. If you need further information or are in doubt then you should consult a professional adviser.
A ranking, a rating or an award provides no indicator of future performance and is not constant over time.