A bit of a whistle-stop tour around Bankers. So I'm really going to focus on a few areas and a bit of an outlook. But I might just take the first five minutes to run through an introduction for those that maybe don't know us so well. And so maybe we just jump onto the first slide. Some basics about the trust here. You know, really sitting in the global sector, and the objective, twin objectives, to grow capital above FTSE World and grow the dividend above inflation. So sort of real growth in the income streams, and you can see that on the right really, that's our dividend over the last 20 years. I've just picked 20 years, but actually we have 58 years of consecutive annual dividend growth.
We're one of the dividend heroes, if you've heard of that, and just behind City of London. So 58 years we've consecutively grown the dividend, and over the last 20 you can see sort of up three and a half, 3.6 times, where inflation has only been up about one and a half, 1.7 times. So it's a very strong dividend record. The trust really, you know, I suppose still at it, it's an old trust, 1888, is still doing sort of what it started out doing, which was launched to provide clients of Williams and Glynn's Bank, as it was then, sort of democratizing investment, providing sort of easy access to global markets for smaller investors, and we're still doing that. So for just over a pound, £1.20 a share, you can get access to global markets. So jump on one slide, please.
And you know, our core principles, as I say, have not changed a lot. Really about focusing, I suppose, on a core portfolio of about 100 stocks. So that, that, but certainly puts us more concentrated than the index, sort of 1,200 stocks, and many of our peers. So again, trying to back our best ideas to some extent. Very much, you'll see the team in a minute, but local experts based in their regions is something key to us all really. And I think the flexibility, what I like is the flexibility really to shift a little bit between sort of value and growth investment styles. We're predominantly growth at the moment, it seems, certainly the last few years, where most of the better investments have been, but we do have that ability to shift. And certainly within, say, the Asia region, we've got a more value orientation to our investment picking. And then finally, sort of low costs, that's important. Keep those as low as we can. So the ongoing charge, which sort of throws in everything, management charges, fees, and all sorts of audit fees etc., is about 0.51% in the last set of accounts. And then we do have a bit of debt, again very low cost these days. We've managed to recycle debt into the last two or three years, or five years I suppose, as the cost of debt fell. So the average cost of 2.7% for our debt. Right, jump on one more.
You know, in terms of trying to, I suppose, our core principles and therefore our values here. I've mentioned some of these again, regional expertise. I think that's really important, having managers who really understand their markets and are able to pick stocks in those regions. Really backing our best ideas with the majority of our capital, hence that more focused portfolio that we've been following. I put following the cash. I think if there's one process and style that we really like to look at in a good company, it's cash flow generation. I've always sort of believed that the best companies in the world ultimately generate surplus cash which can be returned to us in the concept of a dividend, or it can pay down debt, or it can grow, hopefully grow the business through capex and obviously takeovers and acquiring new opportunities. So you know, I think following that cash hopefully pushes us in the right place for companies. So cash flow yield is again a core metric of value that we look at. And then sort of consider investing here. It's being mindful, I think, of I suppose the inherent volatility of equities. So really trying to have a good spread of investments, trying to focus on environmental impacts, although we're not an ESG fund in any sense, but we do look at a lot of factors around water use, you know, where in the world people operate and companies are operating. So again, trying to see the impacts that our investments have, and really trying to also follow innovation. I've got a slide later on, trying to find the best companies that are going to innovate and disrupt markets. So jump on one more.
Where does that leave us today? And again, online, as I say, there's a lot more information about the latest positioning of the portfolio, but here's a sort of summary snapshot for us. US is by far the largest market in the world, so unsurprising to see us biggest allocation there. Certainly the UK, as many of you will know, has got smaller and smaller, about 4% of global markets, but we are therefore slightly overweight UK, but we see slightly more opportunities in Japan and Europe relative to the UK market. So those are the next two largest areas. And I think in terms of sector profile, again, information technology, technology is a huge component these days of markets, the Mag Seven being very dominant. We are overweight in that technology space. We still see definitely some interesting opportunities in there, but it has quite nice breadth rather than being too narrow into those largest companies. Industrials might surprise many as being really our largest overweight. There's a slight quirk of the index. Some stocks like the credit card companies, so Amex in the US and Visa, are two of our larger holdings, and for some arcane reason they do seem to crop up in industrials support services. So they're in there. But I think others like, you know, big exposures to some defense names in there. Largest holding RTX, which is sort of what used to be called Raytheon, but also a big aerospace component there, Safran in Europe, and also some of the companies like Schneider and Eaton providing, I suppose, equipment for national grids, and I'll talk about that a bit later. So industrial is a key area, we still see big investment spending in that space and benefits there. And then finally financials, again probably prioritizing banks over insurance, and I've got a slide on that. And then the underweights, healthcare has been really very tricky outside a few big stocks, and so we are underweight that sector, but it's probably we should have had less. And consumer discretionary, where I believe, I think a lot of the companies have really taken too much price in the last few years, struggling with volumes. So we're certainly seeing that in areas like luxury being very difficult. So underweight in that space. So finally, let's move on very quickly and finish up with the team. As I said, there's the investors, and Jeremiah's in Denver with our key US office there. I'm here in London, Jinichi in Tokyo, Sat in Singapore. So again, you know, good experience investing in their markets locally. And then finally, if we jump on, just to plug the buffer, my wife, Janus Henderson, many of you will know us, I suppose, but we manage trusts like City of London, European Smaller Companies Trust. So we manage eight trusts in total and 159 investment professionals just in the equity space. We also have experts in fixed interest to help support us as well. Right, so that's the quick plug. Let's talk about the trust on the next page and outlook. So what are we seeing in the world? I've got two slides really, I suppose, just to encapsulate, I think, what I go back to at the moment and I'm thinking about, and it's nothing about Trump. I'm sure there might be some questions about that. But I think the big picture here is a change in really the cost of capital, the cost of doing things, borrowing money, the hurdle rate, whatever you want to think about it. And I've shown here the US 10-year Treasury yield over the last, well, sort of nearly 35 years, sort of my career actually. I started back in 1990. And this period, I suppose, until about 2020 was called the Great Moderation by a lot of people, is when really investment, central banks sort of got a handle on inflation and drove inflation down. There was the peace dividend, all sorts of things going on. But really, you know, in this period, inflation fell very rapidly, interest rates fell, and central banks sort of kept us running. And we can see here the 10-year Treasury almost got to zero. It got negative 10-year yields in obviously Germany and parts of Europe in towards that latter period. And I think this period also, you know, defined, you know, risk-taking. So as rates fell, more people took on more leverage. So risk-taking, I think, elevated. Obviously the world of private capital boomed. But you can see at the bottom there a very clear, to my mind, you know, return towards the average. That line in the middle is the average rate over this period, and we're sort of chunking around there, sort of four to four and a half to five really. And I think in my mind we're not going back. I think interest rates, you know, central banks controlled a lot of the problems by cutting rates, but the problems are all more sort of demand side. But looking forward, I think I see more challenges on the supply side, and this is where Trump and tariffs will come to play. They create a sort of supply-side shock. Suddenly the cost of goods is very expensive, or goods just can't be shipped because of the price being charged through tariffs. And I think, you know, when I look at other aspects, inefficient supply chains, I think about, you know, the hot and cold sort of wars we're seeing now around the world, return of manufacturing to places where really it's inefficient and expensive, but it's done because of governments wanting to see manufacturing return. Then we've got climate change, obviously energy transition, and finally sort of some of those macro-political decision-making. All these, to me, you know, will affect the supply side, will affect inflation, and therefore I think this cost of capital likely to stay, will stay elevated and could even rise further. This is challenging for markets. I think it's not a bad thing for equities in aggregate, but it is an issue about risk-taking, and therefore I see the breadth of the market improving and some of the narrow base of stocks that have been performing, you know, I think will expand out. I think there are issues in here. Positives are probably towards financials, who, you know, banks benefit from higher return on deposits that you're going to see in this phase. You know, there are offsets to that about jobs, but I think really challenging also in private equity and private capital, where again we may see, you know, this cost of capital having an impact. If we looked on the next chair, yeah, that I think about a lot, the next slide as well is an issue which is again showing the very narrow breadth to markets. So here you can see this is the S&P, so it's the US market, so looking at the percentage of stocks that have outperformed in each of the years going back. And really, yes, the medium, the average is around about 50%. So half the stocks outperform, half underperform. You can see the two periods I've outlined there, 98, 99, the dot-com boom when less than 30% of stocks outperformed, a very narrow focus of investors' minds. And really very similar in the last couple of years, 23, 24, where again I suppose signified by the Mag Seven to some extent, but a very narrow focus to markets. And Bankers struggled a little bit in the last year or so, particularly 23 into 23 really, and we had a, we didn't put, underperformed in that period, we underperformed in that 98, 99 period. You can see on the right our returns. So, but what I'm trying to highlight is I think when the market broadens out, which I do think is going to happen as some of the hype rolls over, you can see how our returns expanded in that period, sort of 2000, 2007, 8, 9. So hopefully we see a broadening of markets. Let's touch on a few themes that we're seeing and opportunities. The next slide, electrification, I think is something we've been continuing selectively to invest into. So really here the concept is, I think, national grids. So this is the connectivity of grids, allowing more electricity to flow, has really been hugely underinvested in the last 20, 30 years, and particularly in key markets like the US. And this is the graph on the left is showing us, this is forecast for US power demand, and you can see the green line really last few decades has been very flat, so efficiencies are coming in, more efficient light bulbs, etc., more efficient capital equipment offsetting sort of natural growth. But over the next couple of decades, you can see how, you know, suddenly we've got a step up, a 38% forecast growth in demand for electricity, and really that's funding data centers, it's funding electric vehicles, it's funding growth in the economy. And so we're expecting, you know, huge investments to have to flow to support this. And this is going on everywhere. We see this in India, where we own one of the key grids there, Power Grid, investing in India. We see it in, certainly in China and in Europe. So there's a selection of the stocks we own there on the right, all feeding into slightly different areas, whether they're natural grid providers themselves or providing equipment like Hitachi. You know, Hitachi is a fascinating business. It provides some of the big inverters that convert offshore wind power back onto the grid. And really, as we saw in Spain very recently, in Spain, Portugal, if you don't invest, there's the potential for some serious blackouts. So again, I think that's just going to focus the mind increasingly on this area. We used to have, I think, the beginning of the year was about 4%, we're at 7% of total assets in this area, I suppose, this theme of electrification. So we see, you know, interesting opportunities, and hopefully that will grow for us. We look on the next slide, our next sort of theme has been, I've been a big focus on banks as an area to invest in, where I continue to think certainly they've been very depressed for many years since the great financial crisis really, when a lot of them were bailed out. So one of our key holdings there, NatWest, has finally paid the government back for the investment stake there. But I think as a banking sector in aggregate, what interests me really here, I think, is finally, you know, with interest rates slightly higher, that is supporting net interest income profits here. We've also got to come deregulation, which we're seeing certainly probably start in the US, but I think there's talk of Europe following as well, should allow banks to increase their lending, and therefore we should see more loan growth picking up as well. So, and that's really the heartbeat of a good bank is loan quality and loan growth. So I'm expecting we're already seeing that in Europe pick up from sort of barely 0 to 1% to about 3 or 4%, and hopefully will rise as the economy grows. So, you know, the left-hand graph is just showing the price-to-equity ratio for the banking sector, and I've been very positive as it's been, you know, we've been able to buy banks on sort of six or seven times earnings with dividend yields of that order. So seven times, something like BNP is, you know, roughly on seven times earnings and a 7% yield. But I think we should get 15 to 20% earnings growth out of some of these stocks. They're buying their stock back as well. And therefore, you know, to my mind, they should be trading certainly sort of nine, ten times earnings. And we've had a good recovery, as you can see, that line for European banks is now back to the long-term average over the last 20 years. But again, I feel this could go higher. So we're overweight European banks. I've got three names we own there. And we're overweight banks globally with additional holdings in places like the US with Morgan Stanley and JP Morgan, OCBC in Singapore, Sumitomo, Mitsubishi in Japan. So again, a big sector for us and one we're positive on. Finally, just let's talk on the next slide a little bit about innovation. I think one of the great aspects of owning an equity investment trust and owning equities is you do participate in companies that are really trying to innovate, trying to change the world and make it a better place. You know, I think if you start with Lilly there, which we own, Eli Lilly in the US, and it's for those that don't know, GLP-1s, these are basically the obesity drugs that suppress appetite. So, you know, I think the figures are relative, really quite depressing. Sort of 15% of the world is defined as obese. In markets like the UK, it's 30% of people and 40% in the US. So, you know, I think solving this issue of obesity is going to be a hugely profound change, I think, and companies like Lilly are really at the cutting edge of that. And what interests me, these drugs have some slight negatives. And Lilly are really working very hard on combining them with new compounds where the drugs focus on reducing fat, not muscle, and also more tolerant. Another company DSM that we own, Firmenich. This company makes a lot of flavorings and health products for the food industry. But really what I like about one of the key ones in there is Bovaer, which really reduces methane in dairy cattle. So fascinating compound and additive to food. So it doesn't go into the milk or the meat. But really half a teaspoon, quarter of a teaspoon a day to each cattle, you know, massively reduces methane, which is the largest sort of greenhouse gas coming out of the farming industry. And then finally Safran, which is aerospace. This is again a great innovative company. They dominate narrow-body aircraft engines. Sort of 75% market share there. 10,000 engine order book here. And really these new engines reducing fuel consumption, noise and gases, and really working increasingly on electric engines, liquid hydrogen engines, etc. So again, great innovation. So with that, let's jump on very quick. I'm nearly there. I think I might add one more just summarizing really Bankers, a global trust here, as I say, hopefully in buying stocks with our, you know, with innovation, good value. We're still relatively positive on markets despite the fact they've returned back to their recent highs, and that's, you know, through local equities and a global oversight. So really that's it. I will, happy to go to some questions.
