# BlackRock North American Income Trust: Investing in a changing world

- Link: https://www.directorstalkinterviews.com/blackrock-north-american-income-trust-investing-in-a-changing-world/412961665
- Published: 2021-02-17T08:43:51+00:00
- Author: Amilia Stone

The global economy is slowly recovering from the havoc wrought by COVID-19. Market
leadership is changing and there is greater clarity on the future. Tony DeSpirito,
Co-Manager of the **BlackRock North American Income Trust plc** ([LON:BRNA](https://www.directorstalkinterviews.com/company/blackrock-north-american-income-trust-plc/brsa.l)),
explains how the portfolio is being managed through these turbulent times.

**Discover more about this Trust at [blackrock.com/uk/brna](https://www.blackrock.com/uk/individual/products/investment-trusts/our-range/blackrock-north-american-income-investment-trust/trust-information?siteEntryPassthrough=true&cid=aff:investmenttrusts2020:brna:directorstalk:link)**

**Capital at risk. **The value of investments and the income from them can fall 
as well as rise and are not guaranteed. Investors may not get back the amount originally
invested.

The world that emerges from the pandemic is likely to have changed in a number of
crucial ways, from the way we use technology to the priorities for businesses. However,
investing in 2021 will be more nuanced than simply targeting the beneficiaries of
a ‘new normal’. How are we investing through this unusual period?

As the world economy slowly starts to recover from the virus, a few trends are clear:
the pandemic has accelerated global reliance on technology, for example. The world
has grown used to a low contact world and this is likely to continue with everything
from ecommerce to payments.

The US/China trade war, pandemic and then Brexit have forced companies to address
the global versus local debate. Lengthy supply chains look increasingly impractical
and companies are willing to pay more for local suppliers to ensure consistency.
US companies are beginning to bring some of their production capabilities back into
the local market. The higher costs associated with local supply could see companies
cut stock buybacks and cut back on mergers and acquisitions (M&A) activity or capital
expenditure.

Equally, even as earnings return to normal, companies may also reconsider the level
of debt they carry on their balance sheets. Companies are usually prepared for a
recession, but they are not built for months and months of zero revenue growth. 
That may influence their view of borrowing and may see some companies cut back.

Environmental, social and governance (ESG) considerations are becoming very important,
both for portfolio managers such as ourselves and for companies. [Sustainability](https://www.directorstalkinterviews.com/sustainability-green-stocks-news)
was a hot topic even before the emergence of COVID-19, but today companies are increasingly
going to find themselves judged on how they treated their employees, their customers
and their local economy.

**Focusing on recovery**

These are sustainable and enduring trends. However, ensuring they are reflected 
in a portfolio is not straightforward. We need to take into account, for example,
that the valuations for the highest profile technology stocks are extremely high.
Market gains in 2020 were dominated by just a handful of stocks and the market is
becoming increasingly concentrated.

Equally, we need to be careful that the gains made by these companies are sustainable.
Some companies are likely to have merely brought forward demand from the future.
When restrictions are lifted, will anyone want to sit in front of a boxset? These
are important considerations for streaming services.

We must also take into account the recovery. News on the vaccine rollout has seen
a tentative shift towards more economically-sensitive parts of the market after 
a long period when this type of stock was out of favour. This is to be expected.
Our analysis of recessions going back as far as 1978 suggests that the cheapest 
stocks get cheaper moving into a recession, but then turn as economic activity starts
to pick up. This trend may be even stronger this time round because the disparity
in valuations is more extreme.

Again, selectivity is needed. While some leisure stocks have bounced from their 
lows, this is likely to be short term. It is difficult to see people rushing to 
get back on a crowded airplane, theme park or movie theatre. There needs to be some
quality control.

**Portfolio themes**

What is our solution to the world we find ourselves in? We believe the rotation 
into economically-sensitive and value areas of the market will continue. Corporate
earnings are likely to matter a lot more in 2021 and cyclical companies have far
easier year-on-year comparisons because of their weakness this year. There have 
been a lot of false starts for value, but we believe this one should endure.

We hold a number of stocks that should benefit from economic recovery when it emerges.
However, we also want to protect our investors against heightened volatility. So,
we are combining recovery-sensitive areas such as financials and energy with more
stable areas such as information technology and healthcare. However, for all of 
our holdings, we continue to focus on quality – that means a strong management team,
healthy balance sheet and dividend growth.  

Dividend growth could be particularly important for 2021. In the short term, interest
rates are likely to remain low and dividend stocks should find favour as investors
hunt for income. Over the longer term, companies that exhibit dividend growth have
delivered a competitive return with downside protection. We believe the wave of 
dividend cuts seen in 2020 are now behind us.

The world is finding its way out of the crisis, but it is a slow process. As such,
we believe a ‘barbell’ approach (an investment concept that suggests that the best
way to strike a balance between reward and risk is to invest in the two extremes
of high risk and no risk assets while avoiding middle-of-the-road choices), that
recognises both the need for stability and the opportunities inherent in recovery,
is the right one.

This material is not intended to be relied upon as a forecast, research or investment
advice, and is not a recommendation, offer or solicitation to buy or sell any securities
or financial product or to adopt any investment strategy. The opinions expressed
are from BlackRock as of January 2021 and may change as subsequent conditions vary.

For more information on this Trust and how to access the potential opportunities
presented by North American markets, please visit www.blackrock.com/uk/brna

**Risk Warnings**

Past performance is not a reliable indicator of current or future results and should
not be the sole factor of consideration when selecting a product or strategy.

Changes in the rates of exchange between currencies may cause the value of investments
to diminish or increase. Fluctuation may be particularly marked in the case of a
higher volatility fund and the value of an investment may fall suddenly and substantially.
Levels and basis of taxation may change from time to time.

**Trust Specific Risks**

Exchange rate risk: The return of your investment may increase or decrease as a 
result of currency fluctuations.

Risk to capital through derivative use: The Fund may use derivatives to aim to generate
more income. This may reduce the potential for capital growth.

Capital growth/Income variation risk: Investors in this Fund should understand that
capital growth is not a priority and values may fluctuate and the level of income
may vary from time to time and is not guaranteed.

Derivative risk: The Fund uses derivatives as part of its investment strategy. Compared
to a fund which only invests in traditional instruments such as stocks and bonds,
derivatives are potentially subject to a higher level of risk.

Gearing risk: Investment strategies, such as borrowing, used by the Trust can result
in even larger losses suffered when the value of the underlying investments fall.

**Important Information**

Issued by BlackRock Investment Management (UK) Limited, authorised and regulated
by the Financial Conduct Authority. Please refer to the Financial Conduct Authority
website for a list of authorised activities conducted by BlackRock.

The Company is managed by BlackRock Fund Managers Limited (BFM) as the AIFM. BFM
has delegated certain investment management and other ancillary services to BlackRock
Investment Management (UK) Limited. The Company’s shares are traded on the London
Stock Exchange and dealing may only be through a member of the Exchange. The Company
will not invest more than 15% of its gross assets in other listed investment trusts.
SEDOL™ is a trademark of the London Stock Exchange plc and is used under licence.

Net Asset Value (NAV) performance is not the same as share price performance, and
shareholders may realise returns that are lower or higher than NAV performance.

The BlackRock North American Income Trust plc currently conducts its affairs so 
that its securities can be recommended by IFAs to ordinary retail investors in accordance
with the Financial Conduct Authority’s rules in relation to non-mainstream investment
products and intends to continue to do so for the foreseeable future. The securities
are excluded from the Financial Conduct Authority’s restrictions which apply to 
non-mainstream investment products because they are shares in an investment trust.

BlackRock has not considered the suitability of this investment against your individual
needs and risk tolerance. To ensure you understand whether this product is suitable,
please read the Key Investor Document (KID) and the current Annual and Half Yearly
Financial Reports which are available on blackrock.com/uk/brna and which provide
more information about the risk profile of the investment. If after reading this
you have any questions or would like any additional information, please contact 
your financial adviser or speak to our Investor Services Team.

Any research in this material has been procured and may have been acted on by BlackRock
for its own purpose. The results of such research are being made available only 
incidentally. The views expressed do not constitute investment or any other advice
and are subject to change. They do not necessarily reflect the views of any company
in the BlackRock Group or any part thereof and no assurances are made as to their
accuracy.

This material is for information purposes only and does not constitute an offer 
or invitation to anyone to invest in any BlackRock funds and has not been prepared
in connection with any such offer.

**Discover more about the BlackRock North American Income Trust plc at [blackrock.com/uk/brna](https://www.blackrock.com/uk/individual/products/investment-trusts/our-range/blackrock-north-american-income-investment-trust/trust-information?siteEntryPassthrough=true&cid=aff:investmenttrusts2020:brna:directorstalk:link)**

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