The Merchants Trust conviction investing philosophy requires discipline rather than blind faith, lead manager Simon Gergel argued in a new interview, using Tate & Lyle as a live case study in how perception can diverge sharply from business reality.
Gergel, who has managed the trust since 2006 and brings 32 years of investment experience, described conviction as a continuous process: constantly testing ideas, questioning assumptions, and separating genuine risks from market noise.
Merchants Trust Conviction Investing in Practice: The Tate & Lyle Example
Tate & Lyle illustrates the approach. The food ingredients company, which generated £1.65 billion in revenue from continuing operations in the year to 31 March 2024 and serves customers in 121 countries across more than 3,300 employees, has at times seen its share price fall even as the underlying business improved, according to Tate & Lyle’s own published materials.
Gergel argued that this kind of disconnect, where sentiment turns negative on a company with improving fundamentals, is precisely where long-term value investors can find opportunity. The challenge is withstanding short-term discomfort without abandoning a well-reasoned position.
As of 31 July 2025, Tate & Lyle represented 2.6% of the Merchants Trust portfolio, ranking tenth among the trust’s top ten holdings, according to the July 2025 factsheet.
Behavioural Biases and the Cost of Following Instinct
Gergel also addressed the behavioural dimension of portfolio management. Emotions and cognitive biases, he said, can push investors to sell when they should hold and to buy into consensus when contrarian positioning is warranted. Successful value investing, in his framing, frequently demands acting against natural instincts.
The interview forms part of a broader effort by Merchants Trust to communicate its process to retail and professional investors alike.
The trust itself has a long track record to draw on. Founded on 16 February 1889, it sits in the AIC’s UK Equity Income sector and is benchmarked against the FTSE All-Share Index. Its ongoing charge stands at 0.52%, comprising an annual management fee of 0.35% with no performance fee.
The trust has grown its dividend for 44 consecutive years at an annualised rate above inflation, according to the Annual Report for the year ended 31 January 2026. That record of unbroken income growth is central to its pitch to income-focused investors.
For the financial year ended 31 January 2025, the trust delivered a total return of +13.5% on a share price basis, though it lagged the broader UK market. The underperformance was driven largely by the portfolio’s heavier weighting towards mid-cap stocks at a time when large-cap shares led the market, according to the Annual Report for the year ended 31 January 2025.
As of 31 July 2025, the portfolio held 52 holdings, excluding derivatives. Financials was the largest sector weighting at 22.2%, followed by Industrials at 16.0% and Consumer Discretionary at 15.2%. UK equities accounted for 95.3% of the portfolio, with 4.7% in European equities outside the UK.
Gergel joined Allianz Global Investors in April 2006, taking on the Merchants portfolio that same year. His tenure now spans nearly two decades, covering multiple market cycles, credit crises, and macro shocks, providing the kind of longitudinal experience that shapes the conviction-oriented approach he describes.
The mid-cap tilt that weighed on recent relative performance also reflects the trust’s core value stance: hunting for under-appreciated companies below the large-cap radar, where price dislocations can be more pronounced and sentiment more prone to overshoot. Whether that positioning turns from headwind to tailwind depends on how UK market leadership rotates in the periods ahead.
