Edison Investment Research Limited
London, UK, 20 November 2023
Edison issues review on BlackRock Sustainable American Income Trust (BRSA): A unique fund focusing on value and sustainability
BlackRock Sustainable American Income Trust (BRSA) underwent a strategy change in July 2021, to incorporate explicit ESG objectives into its investment approach. Its three managers, Tony DeSpirito, David Zhao and Lisa Yang, aim to deliver an attractive level of income and long-term capital growth from a portfolio of attractively valued, dividend-paying companies, which have favourable ESG credentials either as leaders, improvers or ‘sustainability enablers’. While growth stocks have been favoured by investors for much of the last decade, data from BlackRock show that since 1978, in the one, two and three years following a recession, which is a possibility given the sharp rise in US interest rates, value stocks meaningfully outperformed growth stocks. Also, since 1984, following periods when the US Federal Reserve hiked interest rates, quality stocks led the US market in the subsequent one, two and three years.
For investors seeking US equity exposure, BRSA may be worthy of consideration, especially if the consensus view of a soft US economic landing proves to be too optimistic. In an environment of higher-than-average investor risk aversion, the trust’s discount is wider than its historical averages. This provides scope for a higher valuation when sentiment improves or if BRSA’s relative performance gets back on track. In the meantime, the trust offers an attractive 4.3% dividend yield, as the policy is to pay out a regular annual distribution of 8.0c per share, using BRSA’s considerable reserves when required.
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