By Ian McConnell

SCOTTISH Investment Trust says its portfolio would have required a "proportionately large exposure to a very small number of companies" that it believes are “greatly overvalued” to have kept pace with global markets this year.

The Edinburgh-based trust’s chairman, James Will, flagged the dominance in global markets of a “momentum” style of investing which he claimed “seemingly pays scant regard to valuation”. He described this as “an anathema” to SIT’s “value-focused” style of investing, as the trust announced it had made a negative total return on net asset value of 10.6 per cent in the year to October 31.

The £663 million trust does not have a formal benchmark.

Mr Will noted the total return in sterling terms on the MSCI All Country World Index over the same period was positive, coming in at 5%. However, he added that there was a negative total return of 20.6% on the MSCI UK All Cap Index.

Mr Will said: “To have kept pace with global markets this year, our portfolio would have required a proportionately large exposure to a very small number of companies that we believe are greatly overvalued and a lot less exposure to the names which we consider offer the best potential for long-term gains.”

SIT proposes a final dividend of 6.1p, resulting in a 1.8% rise in the total payout for the year to 23.2p a share.

Mr Will said: “Stock market movements have been nearly as extraordinary as the events that swept the world. Fear and euphoria made their mark in equal measure, resulting in a period of significant volatility. The health and economic costs are still being counted, although, for the year under review, the significant interventions by governments and central banks have largely defined outcomes for equity investors.”