Investment Trust thread ......
Prompted by some recent discussions on the SCVR board, I’ve initiated a discussion thread here to bring together thoughts and ideas, positive or negative, about things Investment Trust related. At risk of upsetting the purists, can I suggest we add REITs (real estate ITs) and appropriate ETFs to the list on the grounds that they share many of the DNA of ITs (collective investment pools of shares (or derivatives thereof) evidenced by shares freely traded on a relevant exchange).
Feel free to post about specific ITs, the sector in general or shared resources (preferably freely accessible) that might be useful for other users. It’s not a sector that is particularly well covered by Stocko (hopefully at the moment and will improve in due course) so an initial plug is to provide a link to the AIC site that is very good for those ITs that are members of the Association and reasonably good for the others that aren’t.
https://www.theaic.co.uk/aic/f...
If anyone has either created or found useful an article, comment or discussion in the past tag it on below.
Gus.
Disclaimer
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117 comments
We have an Investment Trusts and Funds show this coming Tuesday and it is completely free to join us and lots of well known Stockopedia faces and speakers are presenting. It will be a very informative and educational show
Join us at 3pm on Tuesday 14th September for our Trusts and Funds event! The show will be packed with interviews, educational presentations and four company presentations!
The companies presenting are Sanford DeLand Free Spirit Fund, Downing Renewables & Infrastructure Trust plc, India Capital Growth Fund and NextEnergy Solar Fund.
The full programme is as follows:
3.00 pm Mello introduction and welcome
3.05 pm The AIC and the benefits of investing in Investment Trusts & Funds
3.30 pm Company presentation by India Capital Growth Fund
4.00 pm Reg Hoare presents an update on Investment Trusts & Funds
4.15 pm Company presentation by Sanford DeLand Free Spirit Fund
4.45 pm David Stredder interviews Alyx Wood, Fund Manager at Kernow AM
5.05 pm Introducing Edmund Shing, private investor in Investment Trusts & Funds
5.15 pm Company presentation by Next Energy Solar Fund
5.45 pm Company presentation by Downing Renewable & Infrastructure Trust (DORE)
6.15 pm Money Makers – Join Jonathan and Simon for the latest Investment Trust news
6.35 pm Investment Trusts & Funds panel session with Q&A
You can book your place at the show and see recordings of some previous shows here:
https://melloevents.com/trustsandfunds14thsept/ and if you would like a complimentary ticket to the event then please use the code MITF1409.
There are lots of interesting sessions and all annual pass holders and individual ticket holders will get sent the recordings 24 hours later once you have registered.
See you all on the show!
David
Following a discussion on another thread https://www.stockopedia.com/content/can-i-avoid-roller-coasters-864050/ I posted a summary of my recent research into using investment trusts to diversify income. I have collated a list of 30 investment trusts across asset classes that would generate an income of around 5.5% per annum - I have not focused on growth for this portfolio, although some of my selections have a growth dimension.
I thought others might find it a useful starting point for their own research and as ever, all comments are welcome, especially if there are any health warnings to be shared http://shareknowledge.blog/investment-trust-dividend-ideas/
Cheers
Simon
Hi
Good write up on £MNTN. Recent performance and activities.
https://citywire.co.uk/investm...
Regards
Howard
Two investment trust that look "cheap" are Hansa Investment (LON:HANA) and Georgia Capital. I assuming they are hugely below book value because of where they are predominantly invested - Brazil in the case of Hansa Investment (LON:HANA) and Georgia in the case of Georgia Capital.
Hi letap73.
I hold Hansa Investment (LON:HANA) . As you say it trades at a significant discount to NAV, not last due to the Brazilian focus. Worth noting that about 24% of the fund is invested in Ocean Wilsons Holdings (LON:OCN) which is a holding company with an operating port and a portfolio of securities which is itself also trading at a significant discount to NAV so there’s a double dip for Hansa Investment (LON:HANA) holders.
Gus.
Hi
As previous recent posts have discussed fintech related products and services and the thread is about Investment Trusts, some might like to take a look at Augmentum Fintech (LON:AUGM) as it is the only UK-based trust which invests into fintech.
To dig deeper to get an overview (the easy way), their YouTube channel has some useful results vids as well as some quite interesting pitching to Augmentum Fintech (LON:AUGM) vids. Their portfolio is quite interesting as well.
https://www.youtube.com/channe...
I hold
Regards
Howard
Hi Howard,
Thanks for mentioning Augmentum Fintech. I've just had a quick look at it on the AIC website. It's interesting, as you wrote, however there are a couple of things that would deter me from investing in it at present:
- It's on a 24% premium to NAV, according to the AIC.
- The charging structure seems to me to be over-generous to the IT's management. According to the AIC:
"Subject to certain exceptions, the Investment Adviser will receive, in aggregate, 15% of the net realised cash profits from the investments and follow-on investments made over the relevant period once the company has received an aggregate 10% p.a. realised return on investments and follow-on investments made during the relevant period."
But Money Week likes it more than Chrysalis, a rival private equity IT:
https://moneyweek.com/investments/funds/investment-trusts/603649/two-private-equity-trusts-one-to-buy-one-to-avoid
Re. Augmentum Fintech (LON:AUGM) , I’m not sure the AIC discount is correct. When they did the placing at the end of June the NAV was quoted as being £144.25p per share as of 11/6/21. I don’t think this has been updated since - not unusual since most of the holdings are unlisted private companies. Assuming the effect of the cash raised in the issue is roughly neutral, with a current share price of 162.2p this would suggest the shares are at a premium of about 12%, still high but possibly not 24%.
I looked at the issue when it was announced via PrimaryBid but didn’t invest. Probably a mistake since they were being offered at 135p/6% discount although I recall the offer was heavily oversubscribed so I would presumably have been heavily scaled back. I like the idea of the IT (investing in mostly unquoted Fintech) but felt the recurring fees were high and that there seemed to be a lot of hot money in the sector the prices up. Will possibly buy at some point but probably look for a better entry point both in terms of a better price/NAV ratio and also when/if some of the general froth in the sector has blown away. That may never happen!
Gus.
Hi pka
Thanks for your detailed analysis. It offers me a useful prompt to recall my own investment thoughts on my Augmentum Fintech (LON:AUGM) holding.
I agree with all your points and had reservations for quite some time before finally taking a position.
In my particular case, I fully expect to hold for at least five years (unless significant adverse change to an upward trajectory).
I believe fintech in UK and Europe (where Augmentum Fintech (LON:AUGM) are also beginning to explore) is establishing itself as a strong contender in fintech at the global level and thus inward investment into UK and European early stage fintech companies is a tailwind.
London/UK is traditionally a strong player in financial services and fintech is now the next evolution in that sector, thus I expect this sub-sector to attract investment, experience M&A and continuously throw up new innovative companies. Which I cannot access easily without using a PE IT. In this case one which is a specialist in this fintech space.
I have also (through my other innovation investments) noted that innovative companies are staying private for longer periods of time than in the past and are coming to market as more mature but quite highly valued entities (I cite Ballie Gifford, Cathie Wood amongst others who have commented on this behaviour) and thus saw Augmentum Fintech (LON:AUGM) as a vehicle to join in on the early stage investment portion of the lifecycles of these companies.
In short, I accept I am investing in the 'story' of £AUGM over and above the fundamentals as I categorise it as an innovation investment. It also offers me a niche diversification within my overall portfolio design.
Regards
Howard
Hi again pka
Thanks for the Money Week link, I had missed reading that Max King article. It's interesting to me as it echoes several of my own thoughts.
I too had looked closely at Chrysalis Investments (LON:CHRY) but felt it to be less diverse than £AUGM. Also, Augmentum Fintech (LON:AUGM) had published several useful vids on YouTube which helped me to better understand who they were and what their strategies were. Chrysalis Investments (LON:CHRY) don't seem to have done such a strong job on communications.
With reference to the Max King article, I also hold Hgcapital Trust (LON:HGT) and Draper Esprit (LON:GROW) which he mentions.
Again with both these I found their published materials to be particularly helpful in disclosing in depth information about themselves. This 'qualitative' assessment has actually become quite an important tool for me and I hope more companies invest in video presentations to help us private investors get to know them better (Baillie Gifford do quite a good job in this area, but US commentators do a far better job. I hope UK & Europeans catch up soon).
Regards
Howard
Hi Howard,
As previous posts have mentioned the fintech company Revolut, I today noticed a Citywire article which says the Schroder UK Public Private (SUPP) investment trust , formerly the Woodford Patient Capital trust, has invested $13.7m (£9.8m) in Revolut:
https://citywire.co.uk/investment-trust-insider/news/schroders-takes-big-revolut-stake-in-former-woodford-fund/a1541209?re=88033&ea=104441&utm_source=BulkEmail_Investment+Trust+Insider+Daily&utm_medium=BulkEmail_Investment+Trust+Insider+Daily&utm_campaign=BulkEmail_Investment+Trust+Insider+Daily
However, I would be very cautious about buying SUPP shares, because it probably still contains a lot of dubious investments made previously by Woodford, such as the 'cold fusion' company Industrial Heat.
If you’re interested in Schroder Uk Public Private Trust (LON:SUPP) and it’s investment portfolio there’s quite an extensive thread with some interesting discussions/links here:-
https://www.stockopedia.com/co...
Agree with pka that Industrial Heat is a dead duck (currently still on the books with a „hope“ value of £4m) but Schroder Uk Public Private Trust (LON:SUPP) also has a decent chunk in Oxford Nanopore that is due to IPO later this year at a value that could (DYOR!) have a material upward impact on Schroder Uk Public Private Trust (LON:SUPP) ˋs NAV. Much of the Woodford dead wood has now been disposed of/written down, the IT has been deleveraged and the new Schroders’ management appear to be getting on top of things with new investments such as Revolut.
Gus.
The performance of Schroder UK Public Private Trust (LON:SUPP) has been rather moribund recently - there seems to be recent uptick for IP (LON:IPO).
The performance of Schroder UK Public Private Trust (LON:SUPP) has been rather moribund recently - there seems to be recent uptick for IP (LON:IPO).
I think investors are bored waiting. The recent underlying news is generally good, especially if you think the downward revaluation of Atom Bank and Rutherford Health was pandemic driven and is likely to reverse.
The remaining Woodford era investments are either performing well, are being taken over (Kymab, Inivata and Kuur this year so far), have been flogged off at a discount (mainly via the Rosetta transaction) or are now an insignificant part of the overall NAV (e.g. Industrial Heat), so this is now all about the new managers (as seen in the recent investments in Tessian and Revolut).
But really everyone is just waiting for the Oxford Nanopore IPO to see exactly how insane the valuation is.
timarr
The fact that Schroder Uk Public Private Trust (LON:SUPP) values its investment in the 'cold fusion' company Industrial Heat at £4 million, when it is obvious that Industrial Heat is in reality worth zero, makes me doubt its valuations of the rest of its unquoted portfolio. So what reliance can one put on its estimated Net Asset Value or on its published discount to NAV?
The fact that Schroder Uk Public Private Trust (LON:SUPP) values its investment in the 'cold fusion' company Industrial Heat at £4 million, when it is obvious that Industrial Heat is in reality worth zero, makes me doubt its valuations of the rest of its unquoted portfolio. So what reliance can one put on its estimated Net Asset Value or on its published discount to NAV?
Well, individuals need to make their own assessments.
The valuations on SUPP's unquoted investments are made by Link - companies aren't allowed to mark their own work - which saw significant downward valuations in a number of major holdings at the last count. The rules around revaluations mean that are limits to what they can do - so, for instance, writing Industrial Heat to zero while it's still trading isn't possible. But that doesn't stop us doing it ourselves, wiping 0.9% off the NAV.
The top 10 holdings at last valuation were worth 75% of the NAV:
We can now add a stake in Revolut to that list. So about 30% of the value is cash or mark to market. ON is between 20% and (say) 30%.
Personally I think the Rutherford Health stake remains quite worrisome - but if a cancer treatment specialist can't make money post-pandemic when the UK government is trying to bring down waiting lists by paying private companies then there's not much hope for them. Atom Bank got a bit unlucky with their timing, that should revalue upwards on the next funding round.
Overall I don't think this looks too risky at the current levels. I'm sure there'll be more writedowns in the long tail of investments, but other than Rutherford the remaining large stakes look pretty good - they're proper companies with multiple backers. Plus it's now debt free and Schroders are starting to make their own investments.
It's a nice diversifier, but I wouldn't want to have a huge amount of money riding on it. I have far more in IPO, for instance.
timarr
Hi pka
Thank you for highlighting Schroder Uk Public Private Trust (LON:SUPP) I did consider it during last year but held back as I felt other ITs offered more defined investment cases.
Regards
Howard
Hi again pka (and others)
In your 11/08/21 you mentioned Revolut and the recent Schroder Uk Public Private Trust (LON:SUPP) investment.
Another long term investor into Revolut is £GROW.
Draper Esprit (LON:GROW) is not an investment trust (the focus of this thread), but a venture capital firm.
As a private investor, I do not personally feel the distinctions between the two are something to be concerned about as both vehicles offer a way for me to access hard to reach early stage companies which I am interested in.
I though you and others might be interested to take a look at Draper Esprit (LON:GROW) if you have not already researched it.
Over 5yrs the share price is up +246% (on a simplistic annualised view this is +49% p.a.).
Over 1yr it's up +88%, YTD its up +57%, over 6mths +30%, 1 month +13%.
What I like about Draper Esprit (LON:GROW) is that they focus on fintech, tech and innovative companies in the UK and across Europe. They have recently moved from AIM and Euronext Growth indices into the main markets (LSE & Euronext).
I feel that they have a well established process and team are attracting inward investment successfully. Their recent funding round (14/06/21) was oversubscribed.
If you/others want to gain a quick insight into them this interview from Edison with the CEO is a useful overview (17 min)
I hold Draper Esprit (LON:GROW) and am quite enthusiastic about its prospects.
I feel, as they do, that the UK and Europe offers some really attractive growth companies but which have historically not attracted the sorts of inward investment their US-based counterparts have achieved.
I think the UK/European investment scene is just getting started in contrast to their US counterparts.
See for example the growth of the Swedish investment company KINV B (I hold), and as I mentioned in a previous post Augmentum Fintech (LON:AUGM) (I hold). Also, the strategy Baillie Gifford has adopted to also invest in private growth companies as well as listed companies.
Regards
Howard
Hi Howard,
Thanks for mentioning Draper Esprit and the link to the interesting video of the interview with the CEO. It has certainly done well so far.
However, I'm a bit put off in investing in it by its performance fees. According to the AIC website:
"Management fee of 2% of the NAV p.a. Performance fees are payable after a return of 3.5p per Share as a distribution in any one financial year then, as long as the NAV, before the distribution, is higher than 70.6p per Share, the fee is calculated at a rate of 20% of the distribution amount over 3.5p per Share. The performance incentive fee will also have a catch-up should any previous years distribution not be met."
I'm not sure what to make of the fact that the performance fees are only payable if there's a distribution to the shareholders..
Hi pka
I had not noted that AIC point, thanks for highlighting it. I'll take a deeper look.
Looking at the AIC posting, the quote you have extracted seems to relate to the 'Draper Esprit VCT' which has a TIDM Draper Esprit Vct (LON:DEVC) .
The equity I posted about was Draper Esprit (LON:GROW) the Plc. The Plc owns the DEVC trust and it also runs EIS funds as well as seed capital funds (some of these also list on the AIC site).
I think the AIC is only listing the investment trust funds that Draper Esprit (LON:GROW) operates, not the details of Draper Esprit (LON:GROW) itself as Draper Esprit (LON:GROW) is a Plc not an investment trust.
Having looked at Draper Esprit (LON:GROW) from this perspective I am not at all sure how management fees within each of the different trusts Draper Esprit (LON:GROW) operates impacts the value of Draper Esprit (LON:GROW) (and thus its share price).
I posit that they are in fact revenue to Draper Esprit (LON:GROW) and thus valuable to a Draper Esprit (LON:GROW) investor. But that said, I am only guessing that is the case. I would be pleased if you or others could offer clarifications to my musing.
Regards
Howard
JulWilf,
Thanks again - I will tell my son about Mint Mobile!
Thanks very much to everyone who replied to my post with suggestions. There's plenty of food for thought there!
My son is about to start a one year master's degree in law at Harvard and is taking out a substantial student loan to help pay for it. The loan is in dollars and has to be repaid in full within ten years. The interest rate is 5.1%, which I think is reasonable for an unsecured loan. My son is confident that he will be able to repay the loan once he gets a job, which he is hoping to find in London. However, as a precaution, I would like to be in a position to help him financially if he has difficulty in repaying the loan over the next ten years. As the loan is in dollars, there is an exchange rate risk, so I am thinking about moving part of my portfolio into investment trusts or funds that invest mainly in the US stock market, preferably ones that have a non-zero dividend yield so that I won't be relying solely on capital growth. Does anyone have any suggestions for such ITs or funds? One fund I am considering is Fundsmith, which seems to have the bulk of its investments in US companies and has performed very well in the past.
Hi pka.
Quick trawl on the AIC Website for North American focused IT‘s throws up the following list:-
Of these, I hold CGI which I purchased largely on the basis of the decent portfolio and the substantial discount to NAV which is widely attributed to being a function of the management company holding a dominant stake (thereby being able to fix the level of fees and being effectively irreplaceable) and Canadian securities laws that preclude the IT buying back its own shares to narrow the discount gap. (See posts earlier on this thread from early June). JPM American looks of interest given decent scale/liquidity, strong historic performance, current 4.7% discount and low ongoing running cost. I suggest you use the table as a basis for further research.
Gus.
Hi Gus,
Many thanks for the suggestions. I had also thought about CGI (Canadian General Investments), but as 88% of its portfolio is in Canadian stocks (according to the AIC website) isn't there still an exchange rate risk against the US dollar?
Another IT I'm thinking about is PSH (Pershing Square Holdings), which has 64% of its portfolio in US stocks (according to the AIC) and is also on a large discount to NAV.
Fair comment about the extent of the Canadian company focus of CGI and the long term FX risk. For reference, here’s a chart of the USD/CAD FX cross for the past 25 years. Quite a wide range although should be seen in the context of returns from the underlying fund over the long term.
Gus.
..........difficult to get away from the heavy-hitting US stocks FAANG, GAFAM, FAAMG, however you group them.
They show up in UK funds previously anchored around the FTSE.
Take MNKS, presently trading at a 1,45% premium which has MSFT, GOOGL, AMZN & SHOP(I hold).
Furthermore some say they are due for a correction.
On the X-change rates some also say the pound is relatively undervalued and could rise more against the dollar(s).
Canadian dollars are 1,25 to the U.S., have done better recently and worse during the March crisis when 1,40 were needed to buy a USD. It is a resource currency so if Oil does better so does the currency. It exports lots of metals which will command high prices if the inflation story plays out.
Of the trusts mentionned I hold CGI & MCT on the Canadian side, the latter up 32% since purchase.
On the US there is the Alliance series ATT and ATST, whatever the difference. I hold the latter, still at 5% discount but up 41% since purchase.
I hold PCT at 7% discount which holds US heavy hitters plus Asian semi-conductor & electronics. I hold NAS at 23% discount which holds POLR which runs PCT plus a lot of esoteric North Atlantic smaller cos. I bought early so it is up 73%.
It is a difficult decision to take some profits when US markets are at 'nose bleed' valuations.
It is a difficult decision to take some profits when US markets are at 'nose bleed' valuations.
Well:
These are near monopolies with massive earnings power. Microsoft isn't much higher, Netflix looks expensive and Amazon is hard to figure out due to its policy of reinvesting everything.
Sure, there are plenty of US companies lower down the tree trading on insane multiples of imaginary future revenue, but I don't think the FAANG stocks are particularly expensive and I wouldn't be too concerned over IT's holding them. I'd be more worried about exposure to Chinese tech and more speculative US tech stocks.
timarr
pka
This reply won’t help much!
First: I presume you know about the aic website as an earlier reply from gus1065 included a page from it.
This link would enable you to compare all the US Trusts and all the other sectors:-
https://www.theaic.co.uk/companydata/0P00008ZOI
A problem if starting to invest now is that so many Trusts have had a great run over the last 18 months from the then very oversold levels and discounts are much narrower. So starting now is much riskier than if starting to invest faster big market falls. So there’s a case for waiting for a dip.
There are plenty of Trusts where dividend yields are high and even increasing. e.g in the Commercial Property sector and some mainstream UK income and growth Trusts including the so called “dividend heroes” who have increased their dividends every year for over 50 years,
Also Henderson Far East Income have increased their dividend for many years and after recent fall the dividend is approaching 8%, but capital gain is much smaller than others in the sector.
You’ll see if using aic and checking US Trusts that it is possible to get decent income from a couple. Problem with US is that though some shares are on reasonable ratings their markets are at record levels. Record levels are not the ideal time to commit too much cash imo.
PKA,
Not my area of expertise, but to be as helpful as I can for a worthy cause, I looked into my (managed) SIPP fund, and my investment managers are in Baille Gifford American Fund B Accumulation, for what it's worth.
That said, if your son intends to work in the UK (and if it was an option), personally I'd try to remortgage in the UK at a likely much lower interest rate and lend him the money so avoiding future Forex exposure.
Being in a similar situation to you last year, if you have not already got one, can I suggest getting a Revolut account with a couple of cards (one for you, one for son). I found it invaluable.
JulWilf,
Thanks very much for your suggestions, which I will look into.
With regards to Revolut, my son already has a Monzo account and an HSBC bank account. I have a standing order set up from my UK bank account with Barclays to transfer a monthly allowance in pounds to his HSBC account at no cost while he is in the USA. His plan is to transfer money online in pounds from his HSBC account to his Monzo account, also at no cost, and then use Monzo to convert it to dollars at a very favourable exchange rate compared to that offered by ordinary banks. Would using Revolut instead of Monzo have any advantages over this plan?
Revolut - you can hold multiple different currencies at the same time and exchange at a good spot rate between any of them at any time. So, similar to your plan, but maybe a bit more flexible? Also your son may find https://www.mintmobile.com useful once he finds out US mobile charges!
Fantastic thread! I hold a number of ITs since earlier this year in order to focus more on equities myself but allow a portion of my PF to be managed. I have tried to get a wide range of exposure - US Growth, Smaller European, UK Micro, Global, Private Equity, Pacific and Emerging Markets, plus the Tech Focus in SMT. In order of % of my SIPP:
ESO, MTE, USA, SMT, OCI, PHI, RMMC, OIG, KMG and MINI
MINI and JMG are down since I bought. I also sold BSRT as it fell more than my stop loss limit. I tend to hold natural resources as equities as I am more comfortable in that domain anyway.
An intriguing one is BMPG. It's effectively a trust of trusts and top 10 holdings are below. I don't hold as yet but it's on my watchlist. It is another layer of abstraction in terms of passive investing but I like all of its holdings and the diverse geographic spread. My argument against it - simply hold some of the underlying, as I do with SMT. However, I really like Polar Capital but have been waiting on a dip for way too long. So I may well add BPMG as a safer proxy for these watchlist investments.
https://www.trustnet.com/facts...
Hello everyone,
This was a good thread so I will add a post in order to bring it back to life. This is a Trust which I hold - Oakley Capital Investments (LON:OCI) and am interested in your thoughts. In particular, can anyone add anything cautionary around investing in Private Equity Trusts or OCI? I am thinking of adding further before the 28th July business update, at which we will see June 30th NAV reporting. Current NAV is still based on 31st December 2020.
Oakley Capital
Western Europe business focus (i.e. DACH, plus Italy, Spain and France). Offers me an intro to a geography which I do not normally invest in.
Strong digital business focus in Technology sector, Education and Consumer sectors. They report that 75% of their investments deliver their business model digitally and that this has been a major beneficiary of Covid 19. A focus on investing in ideas which may replicate digital solutions from one location into another under developed location in order to lower delivery risk. A 22 company portfolio at present. Backing the business founder (who is looking for OCI expertise - rather than founder trying to sell out at premium). So, they are often the first private equity capital into a founder business.
16% average NAV growth per year over most recent 5 year period.
OCI back business founders, and doing so multiple times in some cases. 85% deals from primary or founding backers (not other PE houses). Those business founders now backing OCI (Euro 200m in Oakley funds reportedly). 95% of investments finish business with management that started out with.
Mostly off market investments. Outside of a competitive auction. 75% deals uncontested. State they are able to do this due to reputation. This can potentially uncover value that would otherwise be outed during a competitive auction.
Look for recurring revenue. Particularly so towards the end of an investment when looking to sell. Buyers like the predictability. Mention of 70% companies focus on recurring revenue within portfolio.
Around 11.5 EBITDA / EV. Tech buyouts can average 25x EV so plenty of opportunity on exit for a premium.
Recent NAV performance driven by working with invested companies to drive earnings growth (i.e. EBITDA). If higher multiple achieved on exit then this can be ‘icing on the cake’.
Average a 44% premium on exit (based on last NAV recorded).
Next NAV update is 28th July. NAV of 403pps was December 2020. A lot of cash and no debt. Board of OCI does not employ gearing at present and has not needed to.
Bear:
Focussed, with a small portfolio (22 co's). 57% NAV in top 10 so company specific risk. Higher risk relative to peers if get selection wrong.
Illiquid, stuck with the companies in portfolio for a long time.
Very high fees. Looks like approximately 2.5% of NAV for year ended 2020. Based around fees on commitments and capital invested (but not cash). There is also a high performance fee of 20% above a hurdle rate of 8%.
Not as good performance as HGT, who would be a principal competitor.
Sits on a persistently wide discount to NAV, possibly as only reports 6 monthly updates. Is narrowing recently and there is discussion around moving to quarterly NAV updates as they improve governance.
Hi OldSchool05
Good post re: Oakley Capital Investments (LON:OCI)
It's a bit of an odd one - it's historically had lots of corporate governance issues, and has a complex structure of trusts underpinning it. It also had (has?) a large stake in Time Out (LON:TMO) which was particularly hard hit in the pandemic. It also tends to invest in smaller companies than it's direct comparitors, so there's both more opportunity and risk.
All that has contributed to the large discount to NAV.
Most of those issues are being dealt with and what we have here is a very interesting PE IT focused on digital opportunities, notably in the education sector. I've never managed to get round to investing in it, as I've always felt there are simpler opportunities out there, but its recent record is very good.
timarr
Thanks Timarr,
Oakley Capital Investments (LON:OCI) has reported an update this morning for 6m's to end June 2021. It looks like a strong result to me:
Highlights for the period
● Net Asset Value ("NAV") per share of 445 pence
● Total NAV return per share of 11% since 31 December 2020
● The Company invested £95 million and its share of proceeds was £51 million
● Cash of £172 million at 30 June 2021
● Outstanding Oakley Fund commitments of £438 million
At a share price of 354, it now sits back on a 20% discount to NAV. I topped up on Monday so hope this discount narrows back closer to the levels it had reached prior to the results.
They report that companies representing 54% of NAV are trading at or above expectations, whilst a number still continue to be impacted by Covid 19.
Regards
James
I’ve looked at Oakley Capital Investments (LON:OCI) in the past but not bought in, mainly due to the complicated structure and layering of the investments between different Oakley funds which each have their own incremental management charges such that the end investor ends up paying a hard to quantify compounded management fee. On top of this there is also a further 20% Success Fee on any returns above an 8% threshold target - it takes a lot of „alpha“ to cover such charges and potentially skews the risk:reward in such a way to make the Investment Manager perhaps take on a higher degree of investment risk. This type of „2&20“ fee structure is not unusual for an active hedge fund but is that really what you are getting with this particular investment?
Gus.
In order to participate in a number of trusts with significant discounts, including OCI it is possible to buy MIGO (Miton Global Opportunities) which has its own discount.
Having the greatest respect for Miton's managers I bought earlier in the year and am now in profit. One never knows for how long.
Under one umbrella I hold therefore the following trusts.
BSRT (Baker Steel)
RMMC (River & Mercantile Micro cap)
DNE (Dunedin)
VOF (Vietnam) after a long time on my buy list
ESO
ARTL (Alpha real) which I had been after for ages
AJG (Japan)
ATS (Artemis)
TPOS (Third Point) with a good reputation
AUGM
PSDL (Germany)
CHRY (Chrysalis)
PCFT (Polar Capital global financials) No intro needed
and of course
OCI (Oakley capital)
As these were the holdings at time of purchase and I have not updated them today, some one on this thread may oblige.
If the market takes fright, small, micro and private equity will all crash together so discussion of relative discounts is academic.
Hi aflash.
Here is a list of the top 10 Miton Global Opportunities (LON:MIGO) assets as of 30/6/21. Looks as though there have been a few changes since your purchase. Holding a fund of funds like this is a good means of diversification albeit with yet another layer of fees (AIC of 1.34% pa plus a 15% above SONIA plus 5% hurdle rate Success Fee) on top of the fees charged by the holdings themselves. Current discount to NAV is about 1.1% which should more than cover brokerage and spread costs of any purchase.
Gus
Thanks Gus, appreciated
Great points. I have been trying to work out the performance fee / success fee for £OCI
The 2020 Directors Report mentioned a performance fee of 20% of profit (after expenses) on disposal of any direct equity investment subject to a 8% preferred return.
Would this likely be an annualised 8% hurdle for each year of the holding period? So it has to have grown by 8% annually over the holding period?
It then goes on to say that no performance fee is payable by reference to the Company’s current direct investments. I assume this means a holding such as Timeout is not subject to performance fee, only those in the managed funds??
Confusing hey!
James
Confusing indeed. The cynic might suggest it’s deliberately so to obfuscate just how much of the investment return is being leeched out in fees! I’ve cut and pasted below the summary section from the AIC website which describes the £OIC management fee arrangements:-
„The Manager received a management fee at the rate of 1% p.a. in respect of assets that were not committed to the Funds and which were invested in cash, cash deposits or near cash deposits and a management fee at the rate of 2% p.a. in respect of those assets which were invested directly in co-investments. The management fee was payable monthly in arrears. The Manager was also entitled to receive a performance fee of 20% of the excess of the amount earned by the Company over and above an 8% p.a. hurdle rate on any monies invested as a co-investment with any Fund.“
This suggests the hurdle rate for the success fee is an 8% per annum compounded rate, although I wouldn’t necessarily assume it doesn’t apply to listed holdings as it’s not entirely clear to me what „a co-investment with any (Oakley) Fund“ means.
Gus.
Essentially 2 and 20 then, a hedge fund charging structure. Taking 1% of uninvested cash as well is pretty cheeky.
Any reasons as to why Monks Investment Trust (LON:MNKS)and Allianz Technology Trust (LON:ATT) are relatively cheap at the moment?
Hi letap73.
Presumably by “cheap” you mean trading at a discount to NAV? Monks Investment Trust (LON:MNKS) is currently at a 3.0% discount and Allianz Technology Trust (LON:ATT) is at 6.4%. Both have actually been cheaper in the recent past. Chart below shows Monks Investment Trust (LON:MNKS) discount during 2021 YTD has narrowed from over 4% a few weeks ago, although in the past few years both ITs have generally traded at a premium. At risk of being flippant, like any individual share the price of an IT relative to its implicit value is a function of supply and demand. If an IT is at a discount this typically suggests market sentiment is against the underlying theme of the IT investment strategy. In both cases these two ITs are weighted towards US tech stocks (Allianz Technology Trust (LON:ATT) is 87% North American, 77% technology Monks Investment Trust (LON:MNKS) 50/24% ) which came off the boil a couple of months ago in a general swing from “tech growth” to “value” shares which has partly reversed recently which I think possibly explains the underlying swing in market sentiment evidenced by the discount levels.
One of the attractions of ITs as opposed to open ended funds (which are priced at NAV) is that it’s possible to trade the relative discount to NAV on a given IT depending on your view of the wider market (i.e. buy at a discount with a view to selling at a premium) as well as looking for an increase in NAV. It’s analogous to buying an individual company share whose value is based on a given p/e multiple, (say a company on a p/e of 10 with eps of 5p so a value of 50p/share) and looking for both higher earnings/NAV and a lower discount/higher p/e ratio. In the case of an IT its discount/premium is a bit like a share’s p/e ratio. (Hope that last bit makes sense!)
Gus.
Any reasons as to why Monks Investment Trust (LON:MNKS)and Allianz Technology Trust (LON:ATT) are relatively cheap at the moment?
I'm not sure that they are. If this is taken from the filter JohnEustace put up below then that's not showing especially cheap trusts, it's looking at historical performance. Which, as we all know, doesn't give much of a guide to the future.
The two trusts on that list that are "cheap" - in the sense of trading significantly below NAV - are Herald Investment Trust (LON:HRI) and Harbourvest Global Private Equity (LON:HVPE) which are both specialists. Herald specialises in small cap technology stocks, mainly in the UK, and the Harbourvest trust is a private equity fund, so the assets tend not to be on quoted markets.
PE funds usually trade at a significant discount to NAV because of the obscurity of their holdings and are not something to invest in unless you have a good understanding of the risks. Herald looks interesting though - its manager is Katie Potts who has probably done more to keep the UK's IT sector going than any other person.
timarr
One of the reasons that Monks might be trading at a relatively modest 3% discount is that Charles Plowden, the trust's lead manager since March 2015, retired from Baillie Gifford at the end of April 2021. He headed Baillie Gifford's Global Alpha team which he established in 2005. It was his record there that led the Monks board to switch to his strategy in 2015, and it has paid off handsomely in terms of Monks' superior performance since then. Although Baillie Gifford stresses that its top managers are all team players, the departure of Plowden, along with James Anderson who managed Scottish Mortgage, Monks' bigger global sister, has raised concerns whether the next generation of managers at Baillie Gifford's two biggest trusts can do as good a job as Plowden and Anderson.
I had been looking at the Saxo bank investment thread. It mentioned the BH Macro (LON:BHMG) investment trust as a a possible diversifier within a portfolio of investments - it is listed as a investment trust hedge fund.
However, I have spotted the Pershing Square Holdings (LON:PSH) trust which seems very successful as an investment trust hedge fund - does anybody know anything about this trust?
I’ve looked at Pershing Square Holdings (LON:PSH) in the past but not held. I believe it is a North American equities IT unlike the Saxo Fund and Bh Macro (LON:BHMG) IT which are “Macro funds”, i.e. funds that are focused on a wider range of investment strategies and assets thereby offering a complementary/ potentially uncorrelated return to a pure equity play. Given the US focus of Pershing Square Holdings (LON:PSH) , no surprise it has done well given the recent out performance of these markets. Notable that it’s currently trading at a 26% discount to NAV. Here is a link to the AIC coverage and also the latest Pershing Square Holdings (LON:PSH) annual report.
https://www.theaic.co.uk/compa....
https://assets.pershingsquareh....
Gus.
Thank-you for reminding me. I thought PSH was getting ahead of itself after inclusion in FTSE100 so did not buy. It was at 25 ten days ago and bounces off that price regularly which would be O.K.
'Everybody knows' Bill Ackerman. He often talks to the media and asks questions at Berkshire Hathaway annual meetings.
A famous short of Herbalife Nutrition (New York: HLF) a few years ago misfired and he had to close it at a loss.
Recently he has talked up the price of his (PSH) Pershing Square Holdings but this is justified. Working to reduce the discount with employee purchases. Shorting last March and scooping up bargains went well.
Principal holdings appear to be consumer stocks: Restaurant Brands International is the result of Burger King buying Tim Hortons, a Canadian Coffee shop chaIn.
Then Starbucks and Chipotle.
Hilton Hotels.
10% of Lowe's (renovation as per KGF (Kingfisher) but higher rated )
Also Fannie Mae, the government backed mortgage services entity but he seems to have reduced this. Fortuitously. FMCC fell yesterday. Crashed in 2008.
I was trying to find this fund on stockopedia
Vanguard Small Cap Value Index Admiral VSIAX
but for some reason cant find it, is there a reason stockopedia wouldnt have it
https://www.morningstar.com/fu...
Could it be that this is a USA quoted mutual fund?
As Macro says, the security you describe is a US mutual fund so not on Stocko. According to the Vanguard site, it is available as an ETF, albeit denominated in US$ with a minimum $3,000 investment. This is shown on Stocko with the identifier of VBR .
https://investor.vanguard.com/....
https://investor.vanguard.com/...
https://www.stockopedia.com/et...
I think the only readily available to U.K. account holders Small Cap fund from Vanguard is this one (which I hold in my SIPP) which is a Global rather than US small cap index tracker.
https://www.vanguardinvestor.c...
Gus.
Very useful to have this available every day in addition to the weekly free analysis provided by 'Investment Trust Insider' via their regualr 'Trust Watch' article: https://citywire.co.uk/investm...
M.
There is an existing filter in the SharePad library for Cheap, High-Performing Investment Trusts. It looks back further at performance and includes the charges. MNKS and ATT also come high on this view and it picks up some different names as well.
Thanks JohnEustace!
I am so new to SharePad that I had not found the Library - I have now!
M.
Where is the library in Sharepad? Thanks
That's a bit better on the 2nd attempt. Added filters for Morningstar Return rating and Morningstar rating each over 3 years. To weed out VCTs and dross.
Almost worth a subscrption on its own once I work out how to add a technical entry and alarm.
M.
We have a Tuesday late afternoon and early evening bonus show next week with seven Trusts and Funds joining us for presentations and a great line up of guest speakers and panelists who have had very good experience investing in Investment Trusts and Funds rather than just individual equities. Here is the webpage and links to sign up for the event
https://melloevents.com/trustsandfunds/
As a goodwill gesture to all our friends at Stockopedia the first 150 using the following code will be able to register for free... STOCKO1506
https://www.stockopedia.com/content/mello-investment-trusts-and-funds-show-822189/
Hi Macro.
A couple of interesting posts. Thanks for these. As a matter of interest, what criteria did you use for your initial selection of ITs, especially for the RRG analysis? Given there’s a universe of about 600 ITs, is it just a random selection or did you screen them first?
Gus.
I cannot remember what screening criteria I used for that list when it was created. I know that sounds like a stupid thing to say but in Stockcharts I am allowed 400 chartlists (similar to portfolios in Stockopedia). That means that I have enough room for charlists for Investment Trust Sectors, even chartlists for individual ETF constituents.
I do keep a set of lists for recommendations:
So I suspect that the list used for the RRG example was probably a composite list of favourites honed down to a small enough number to still be readable on an RRG chart!
M.
Using Stockcharts.com and their Relative Rotation Graph (RRG) function on a selection of Investment Trusts:
- The benchmark is the S&P500
- Lookback period on the tails is 1Q (13 weeks)
The 'Green' list is those that are stong now. The Yellow list is those that have been weakening. The Blue list is those that are strengthening versus the benchmark. And the Red list is those that are still lagging the benchmark.
RRG's are not the most agile of tools for identifying buying points. More for those that are slow to act and investing for the longer term rather than attempting short term trades.
M.
First attempt at an Investment trust screen in Sharepad:
- Looking for 3 Year Sharpe ratio's in the upper half of distribution
- Looking for for 3 year Sortino ratio's in the upper half of distribution
- Then sorting by rising Z-Score statistic to show who is more heavily discounted than usual
Interesting to see Allianz Technology Trust (LON:ATT) with a Z-Score of -2.33 indiating just how much sentiment has shifted against large cap Techology stocks. Similarly Polar Capital Technology Trust (LON:PCT) is a little further down the list at -0.77 (so not technically cheap at the moment). Monks Investment Trust (LON:MNKS) and Biotech Growth Trust (LON:BIOG) look worth monitoring. Bh Macro (LON:BHMG) and Bh Macro (LON:BHMU) are the same trust - just different listing currencies - and is merging with the sister BM Gloval trust. Pacific Horizon Investment Trust (LON:PHI) is another than I hold that has come off from the highs and also recently lost its fund manager. Scottish Mortgage Investment Trust (LON:SMT) also there. £iEM and Martin Currie Global Portfolio Trust (LON:MNP) and Montanaro European Smaller Companies Trust (LON:MTE) also there - but not technically cheap.
M.
Mello is hosting an Investment Trusts and Funds Show next Tuesday....
https://melloevents.com/trustsandfunds/
It will start earlier than our regular Monday event at 4pm with some fab speakers, presenters & panelists so do not miss it. Use this code for 70% off your ticket....TF70OFF Hope you enjoy our Bonus Tuesday
Surely manager research is very much the raison d'etre of the major investment consultancies - AON, Mercer, WTW etc? Though they tend to focus on the process, mandate construction, risk controls etc within investment houses rather than on specific investment trusts, which often operate under a more 'maverick' style. I expect the 'cult of the manager' has diminished somewhat in institutional circles. Naturally none of this paid-for research will be available to Jo Public unless you can somehow pick a few scraps from the table.
Simply a thought but is there any authoritative research on the individuals actually managing these investment trusts on a day-to-day basis? It strikes me that a change in personnel is quite likely to result in a change in performance.
Hi LongValue.
It’s a perfectly good question. So far as I’m aware there isn’t a resource dedicated to the palmarés of IT managers. Over time certain individuals build up a reputation - for better or worse - based on the success of their Trust’s performance and public utterances although as we found with Mr Woodford a decent historic track record is no guarantee of future success.
One thing to bear in mind is that ITs, as listed companies, have a Board of Directors that oversee the activities of the investment manager(s) checking their adherence to the rules of the company and dealing with matters like succession in the event of a manager retiring/leaving. This is arguably a better defence than for a regular OEIC fund which doesn’t require quite the same corporate governance structure. Generally, my experience with ITs is that most investment managers tend to have skin in the game with their vehicles and stick around long term but there is no guarantee of this and as with any company there is key personnel risk.
Gus.
Another useful and free source of information on ITs is the Master Investor website:
https://masterinvestor.co.uk/category/funds-and-investment-trusts/
The monthly "Investment Trusts Newsletter", published by the McHattie Group, is a tipsheet on ITs which costs £120 a year. Paper or electronic copies can be ordered from this website:
https://www.tipsheets.co.uk/
A sample issue can be downloaded from:
https://www.tipsheets.co.uk/download/itn-may19-min.pdf
Update and commentary on Canadian General Investments (LON:CGI) provided after hours this evening. I know it is held by a few of us here.
https://www.investegate.co.uk/....
Still trading at a steep discount to NAV of about 31.3% as of 31st May. Nice slice of North American assets, reasonable debt leverage of 15.6% and a good historic track re-record. So where’s the catch?
Gus.
RE: CGI
Still trading at a steep discount to NAV of about 31.3% as of 31st May. Nice slice of North American assets, reasonable debt leverage of 15.6% and a good historic track re-record. So where’s the catch?
Massive insider holdings - over 50%. Basically the fund manager has total control and can't be displaced through outsider actions (last time I looked the fees looked on the higher side). Plus under Canadian tax rules it can't repurchase its own shares to force the discount down.
Other factors might be that the spread in London is typically a lot higher than in Toronto and there are pref shares in issue as well, although not tradeable in London.
None of which makes it a bad option, but there's no obvious route to narrow the discount which seems to be consistently high. The double positive whammy for IT's of improving performance leading to a narrowing discount seems, therefore, unlikely for CGI.
timarr
Hi timarr.
Fair comments about £CGI. The management fee is 1% of funds and the AIC is quoted at 1.49% so not the lowest but I’ve seen much higher for less consistent performance. The management company/managers (Morgan husband and wife) combined hold over 50% of the shares so dominant control although you could argue they have so much invested skin in the game their interests should be closely aligned with fellow shareholders. Happy to Tag a few thousand of my pounds with their many millions! Fully accept the discount is unlikely to shrink anytime soon under current Canadian tax regime.
Gus.
RE: CGI
Fully accept the discount is unlikely to shrink anytime soon under current Canadian tax regime.
Yes. It is what it is. Personally I like to buy generalist IT's when the discounts are likely to narrow, such as after a major market reversal. I don't see much likelihood of that happening with CGI.
I also don't see much alignment with shareholders. Morgan Meighan don't need to narrow the discount in order to keep making money. You can get alignment with management if their stakes are appropriately sized but when they hold an outright majority they can - and often do - exactly what they want.
timarr
Canadian General Investments (CGI) is "Still trading at a steep discount to NAV of about 31.3% as of 31st May. Nice slice of North American assets, reasonable debt leverage of 15.6% and a good historic track re-record. So where’s the catch?"
For me, the catch is its bid-offer spread of 2100 to 2180 at the time of writing, which is 3.7% of its share price. So if I bought its shares and sold them immediately afterwards, I would lose over 4% after paying 0.5% stamp duty and fees. I am not a "buy and hold forever" investor, so I try to restrict myself to ITs with bid-offer spreads below 1%.
Thanks for setting up this thread. Whilst I find research on individual trusts from the likes of Edison, Kepler, Morningstar and Trustnet very useful, another blog I follow is IT Investor, which covers the portfolio thoughts of a long-term investor in ITs. He seems to know what he is talking about.
https://www.itinvestor.co.uk/
For what it is worth my top 10 IT holdings in order of size are: HVPE, HGT, CGT, BUT, TRY, CLDN, HSL, PNL, OCI and ASL.
I am probably too overweight in private equity trusts (HVPE, HGT and OCI) which have done well over the years, although I often wonder whether it is worth sticking with my long-term holding in CLDN which has never really fired on all cylinders. Personal Assets (PNL) and Capital Gearing Trust (CGT) provide some balance to the more volatile private equity trusts, but if I had to have choose between them my preference would be for CGT which is run by Peter Spiller, one of the real trust industry veterans. I have held TRY for a long time as my main exposure to the property sector and continue to have faith in its manager to navigate the ups and downs of the property markets.
In terms of small cap stocks my investment in HSL has proved its worth over the years, and more recently I was lucky to invest in ASL, which was trading at an above average discount just as the market was switching back towards value stocks.
Brunner (BUT), a mid-sized global investment trust, is my most recent investment. I bought into it because of its above average discount which has now started to narrow following the final exit of a large institutional shareholder whose steady share sales had been depressing its share price.
Monks (MNKS), which I used to own, is on my watch list, and I may eventually sell BUT to switch back into MNKS. I am a big fan of Baillie Gifford’s investment trusts, but am a tad concerned at the premium on which several BG trusts now trade. The firm’s ability to identify highly successful growth stocks around the world has served it well over the last few years, but given current stock market valuations I am cautious about whether BG’s trusts can continue to outperform their peers by such a wide margin as they have in the past. In addition Monks and Scottish Mortgage, its bigger Baillie Gifford global neighbour, have both seen the departure of their lead fund managers who have overseen their recent stellar performance.
The two geographical areas where I would like to expand my IT portfolio are in Europe and the Asia Pacific, as well as adding a couple of specialist trust in tech and healthcare. Any suggestions most welcome.
I would also be interested in knowing how many trusts are needed to give a balanced portfolio for someone who does not want to employ a professional fund manager.
The disappointing long-term performance of my Royal Dutch Shell shares, which I inherited over 20 years ago alongside Monks, has convinced me that investment trusts are the best way to play the stock market long-term if you want to sleep easily at night.
Remember the old stock market adage “Never sell Shell”? For years it was held up as the blue chip investment providing a reliable dividend income. However, that all changed last year when Shell did the unthinkable and slashed its dividend. If only I had sold my Shell many years ago and re-invested the money in a good global investment trust, my investment portfolio would be in much better shape.
Hi DarwantLad
I'm a fan of Baillie Gifford trusts also.
I noted your comment .....
'The two geographical areas where I would like to expand my IT portfolio are in Europe and the Asia Pacific, as well as adding a couple of specialist trust in tech and healthcare. Any suggestions most welcome.'
In particular your point about European IT's.
Perhaps, take a look at Kinnervik Ab (KINV B) from Sweden.
https://www.stockopedia.com/sh...
James Anderson from Baillie Gifford who ran Scottish Mortgage Investment Trust (LON:SMT) and oversaw much of the growth of BG's funds through his passion for investing in innovation and growth will join KINV B once he leaves BG.
KINV B have a good holding in Babylon healthcare which is about to IPO in the US (it's UK based though).
KINV B recently sold and distributed its very large holding Zalando SE (Germany's online fashion retailer). This is a reason for the recent dip in KINV B's share price.
There are several insightful vids on KINV B's website explaining who they are and some of their divested companies (these include other healthcare holdings).
I hold KINV B (you might have guessed :)) It is going to be a five year plus holding for me, even with large drawdowns if they occur.
Regards
Howard
Thanks for setting up this thread. Whilst I find research on individual trusts from the likes of Edison, Kepler, Morningstar and Trustnet very useful, another blog I follow is IT Investor, which covers the portfolio thoughts of a long-term investor in ITs. He seems to know what he is talking about.
https://www.itinvestor.co.uk/
For what it is worth my top 10 IT holdings in order of size are: HVPE, HGT, CGT, BUT, TRY, CLDN, HSL, PNL, OCI and ASL.
I am overweight in private equity trusts (HVPE, HGT and OCI) which have done well over the years, although I often wonder whether it is worth sticking with my long-term holding in CLDN which has never really fired on all cylinders. Personal Assets (PNL) and Capital Gearing Trust (CGT) provide some balance to the more volatile private equity trusts, but if one had to choose between them my preference would be for CGT which is run by one of the real investment trust industry veterans. TRY has provided my main exposure to the property sector and I continue to have faith in its manager to navigate the ups and downs of the property markets.
In terms of small cap stocks my investment in HSL has proved its worth over the years, and more recently I was lucky to invest in ASL, which was trading at an above average discount just as the market was switching back towards value stocks.
Brunner (BUT), a mid-sized global investment trust, is the most recent investment. It had an above average discount which has now started to narrow following the final exit of a large institutional shareholder whose steady share sales had been depressing its share price.
Monks (MNKS), which I used to own, is on my watch list, and I may eventually sell BUT to switch back into MNKS. I am a big fan of Baillie Gifford’s investment trusts, but am a tad concerned at the premium on which several BG trusts now trade. The firm’s ability to identify highly successful growth stocks around the world has served it well over the last few years, but given current stock market valuations I am cautious about whether BG’s trusts can continue to outperform their peers by such a wide margin as they have in the past. In addition Monks and Scottish Mortgage, its bigger Baillie Gifford global neighbour, have both seen the departure of their lead fund managers who have overseen their recent stellar performance.
The two geographical areas where I would like to expand my IT portfolio are in Europe and the Asia Pacific, as well as adding a couple of specialist trusts in tech and healthcare. Any suggestions most welcome.
I would also be interested in knowing how many trusts are needed to give a balanced portfolio for someone who does not want to employ a professional fund manager.
The long-term performance of my Royal Dutch Shell shares, which I inherited over 20 years ago alongside Monks, has convinced me that investment trusts are the best way to play the stock market long-term. Remember the old stock market adage “Never sell Shell”. For years Shell was held up as a blue chip investment providing a good dividend income. However, that all changed last year when Shell did the unthinkable and slashed its dividend. I wish I had sold my Shell many years ago and re-invested the money in a good global investment trust.
If anyone has been considering an investment in Polar Capital Global Financials Trust (LON:PCFT) IT they have just launched a £500m C shares tap issue which includes a tranche available through the PrimaryBid App. I haven’t read through all of the blurb but I think they are being offered at Par whereas the underlying is currently at about a 3.2% premium so the offer is at a discount to the shares already in the market and is free of brokerage and stamp duty (anyone more familiar with the terms please correct me).
https://documentscdn.financial...
Offer due to close on or before June 16th.
Gus.
for a decent 20min overview, the managers explain the specific opportunity they see for the financial sector here:
https://www.polarcapitalglobal...
I have held for a few years and have topped up during the March lows - as a result I am at my preferred holding size and thus still a bit undecided re the current offer.
Just a note on the timing/date for any existing holders wanting to take part in the C share issue ... the corporate action message in my HL account has this:
Act by noon Friday 11 June 2021
What you are buying here are C shares - not ordinary shares. The norm in such situations is that the C shares will, at some stage, be converted to ordinary shares and then become fungible. But the conversion is not necessarily 1 for 1 (otherwise why bother creating a separate share class in the first case). If the ordinary shares are still trading at a premium, then expect the C shares to be converted at a premium too. However, the end result should be that the premium (for all shareholders) should be lower than that currently shown by the ordinary shares, because the funds raised via the C shares (minus fees) is invested at par.
The market appears to agree with this, otherwise holders would sell the ordinary shares and buy C shares to lock in a free 3.5%.
Hi cmpeckham.
Apologies, l should have updated from my original post. Having waded through the documentation, I agree with your interpretation of what is proposed, i.e. no discount to new subscribers to the class C subscribers upon conversion into ordinary shares. I recall this is due to take place on August 6th after payment of the interim dividend.
Gus.
Another free source of information on investment trusts is Edison Investment Research, which provides detailed reports on a large number of ITs:
https://www.edisongroup.com/
You can subscribe here to receive emails about their latest reports on ITs:
https://pages.edisongroup.com/subscribe
One should, though, bear in mind that these reports are paid for by the ITs themselves, so Edison's research is not independent.
Hi timarr
I think you’ve misunderstood me. I was just pointing out the reason for that big Lindsell Train Premium in case you and others didn’t know. I wasn’t making any comparisons with Electra other than that for both Trusts the stated premium was not allowing for possible value in Lindsell itself, and for Electra in Hotter Shoes and TGI Fridays,
And I agree with all your comment on Lindsell Train Trust, and with everything else in your post.
I think you’ve misunderstood me. I was just pointing out the reason for that big Lindsell Train Premium in case you and others didn’t know. I wasn’t making any comparisons with Electra other than that for both Trusts the stated premium was not allowing for possible value in Lindsell itself, and for Electra in Hotter Shoes and TGI Fridays.
Hi ken
Ah, ok. Soz.
timarr
The free Lemon Fool website has a discussion forum on investment trusts and unit trusts:
https://www.lemonfool.co.uk/viewforum.php?f=54
Most of the discussions are about investment trusts rather than OEICs.
Another useful free source of information on ITs is Citywire's Investment Trust Insider website:
https://citywire.co.uk/investment-trust-insider
I receive a daily email from them with links to their latest articles on ITs, but unfortunately I haven't been able to find a link on their website to subscribe to this service and I don't remember how I did it originally.
Hi pka & others
I have also (recently) subscribed to Citywire and find their daily emails and links to articles useful.
Regards
Howard
I only hold one OEIC. Guess which one? :)
For me, if you're going for a managed collective investment, it's all about the manager and the investment approach. I want them to be focussed too - what's the point of a collective investment that has 100 holdings? And if you want exposure to the likes of Terry Smith and Keith Ashworth-Lord, there is no IT.
All the best, Si
Great thread! I have been investing for over 20 years but am a relative newbie to ITs and still very much learning. I currently own 8 ITs and use them primarily for diversified quarterly income (5 large cap global equities, 2 REITs and 1 property related debt). These are also areas that I do not have the inclination to invest in directly which enables me to have a more focused portfolio of direct equities (in my case, UK listed small and mid caps). I wasn’t sufficiently well researched to take advantage of the March 2020 lows in ITs that Ken mentions (what an opportunity!) but I have spent much of the last six months correcting that shortfall. I will contribute if I can add anything, otherwise I shall remain a curious lurker.
Cheers
Simon
After the off topic ramble in the first 2 short paragraphs is a post I did on Mike Walters site aimed at newcomers to Investment Trusts, and pointing out advantages, compared with imo the way inferior, but far more popular with investors, Unit Trusts. . I’ve pasted it below in case it’s helpful for newcomers here. Some of it has already been covered and debated here. It is very basic.
I agree this is potentially a great thread, and could be very useful at one level for newcomers to Investment Trusts, and then for all of us, for suggestions and reasoning on Trusts well worth checking out.
The main snag is that only the SCVR discussion threads have multiple readers and contributors. and with lead articles on other threads by specialists like Jack Brumby and Roland Head, not getting, imo, enough recognition to justify their efforts. Hope this IT thread does get wider appeal. Posts so far are superb, with several posters really going to town!
Here’s that post:-
“1. INVESTMENT TRUSTS and UNIT TRUSTS both invest in a portfolio similar to ours, run by an investment team or sometimes a star fund manager. There are also specialist areas like Property. Then they also invest in physical properties as well.
2. THERE ARE THOUSANDS of Unit Trusts to choose from but only around 300 Investment Trusts. Financial Advisers mostly recommend Unit Trusts. That's partly because they are a bit easier to understand (and some individual financial advisers know nothing about Investment Trusts). But the key reason why is because their own financial reward is better with Unit Trusts.
I THINK INVESTMENTS TRUSTS ARE GENERALLY FAR BETTER THAN UNIT TRUSTS.
(Obviously there is the odd exception).
WHY ARE THEY BETTER?
1. Unit Trusts are usually traded once a day at a fixed time. Miss that slot and your buy or sell will have to wait 24 hours or longer sometimes.
So risk in markets like this one of being stuck in while very fast one day falls. OR buy price you get ending up a lot higher than when you decided to buy.
INVESTMENT TRUSTS are traded on the stock market exactly the same as shares. So unlike with UNIT TRUSTS investors can buy and sell in seconds during market hours, at the price there and then. SO much easier and less stress too.
Epic code the same as shares and my Investment Trusts and shares are all lumped together in my ISA accounts.
2. SELLING.
UNIT TRUSTS have either to have a big cash pile to use when their investors want to sell (and this often happens when markets fall fast and many investors panic sell)or they HAVE TO SELL INVESTMENTS to raise the funds to pay investors out.
This can badly affect performance if there is very heavy selling as so much of their portfolio has to be sold!
Sometimes if the selling gets too severe Unit Trusts BAN ALL SELLING and their investors are locked in to possibly continuing heavy falls!!
This happened with Neil Woodford and has happened right now with some Unit Trust Property funds where the fund managers just can't suddenly sell real properties in order to pay out. So they ban ALL selling!!
INVESTMENT TRUSTS RARELY IF EVER HAVE TO DO THAT!
If investors want out of an Investment Trust they can usually sell immediately just as with a share they want to sell.
Unlike Unit Trusts Investment Trusts continue to allow their clients to sell out of their property trusts... but heavy selling means the share price drops way way way below NAV. That means a lousy price for the seller BUT A SCREAMING BARGAIN price if wanting to buy!!!
3. THE HUGE HUGE INVESTMENT TRUST PLUS POINT!
Unit Trusts always trade at NET ASSET VALUE. i.e if the value of all their portfolio added up comes to £1 a share then the Unit Trust price will be £1.
BUT Investment Trusts trade at the price investors are willing to buy or sell at.
SO INVESTMENT TRUSTS can trade WELL BELOW NET ASSET VALUE.
eg when Investment Trust NAV is £1 a lot of investors selling out might cause Investment Trust share price to fall to, say, 60p EVEN THOUGH THE PRICE SHOULD STILL BE £1.
So investors keen to buy instead of sell can buy at bargain price WAY BELOW what they KNOW the share price really should be AND WOULD BE IF if it was a Unit Trust.
AND it gets better still!
If believing that the best time to buy is after big market falls then this applies doubly so to Investment Trusts! That's because whenever there are big market or sector falls that is when the DISCSOUNTS TO NAV are at their largest!
In extreme examples in extreme bear markets Investment Trusts can even go to 50% NAV discounts. i.e we can buy £1 worth of that Investment Trust for just 50p.
WHICH MEANS even if NAV stayed stuck at £1 the IT price could double, if heavy buying lead to that big 50% discount dwindling to near zero.
A FEW OTHER PLUS POINTS.
1. INVESTMENT TRUSTS can borrow to invest. The technical term used is GEARING. GEARING means BORROWING.
So Investment Trusts can buy more when shares are cheap while Unit Trusts usually have to sell investments when markets are cheap.
(Meanwhile Unit Trusts are having to sell to pay investors wanting out. SO Unit Trusts often HAVE TO SELL when they would rather be buying! Investment Trusts CAN buy whenever they want to and can borrow at low interest rates to do that too).
2. WHERE THERE ARE SIMILAR UNIT TRUSTS AND INVESTMENT TRUSTS investing in the same shares and with the same Manager the Investment Trust usually performs much better.
One key reason why is for the reason just explained! That fund manager might be forced to sell some of his Unit Trust shares ... and he/she can buy those same shares back in his/her parallel Investment Trust!!
FINALLY.
ONE Investment Trust negative.
VERY successful and popular with investors Investment Trusts can trade at a PREMIUM to NAV.
i.e instead of those bargain DISCOUNT TO NAV buy opportunities explained above investors might have to pay £1.40 when NAV is only £1. THEN a similar UNIT TRUST would be the better choice.
Here’s another of my posts on Mike Walters site from late March last year, written soon after the markets had bottomed. If only we had known that was the start of a big worldwide bull market!!
The post covered 14 Trusts that were well worth checking out then. What I/we didn’t know was that it was almost THE time to get in! And as can be seen, some of those Trusts had already bounced well off the bottom.
Rather than post details of the sometimes very big Investment Trust share price gains since then for all 14, an idea is to use this thread to search each one out and the Country, region or sector they are in, so as to bring up the other relevant Trusts. Also to check share price gains since, and current discounts to see how some have narrowed a lot and even gone to premiums!
https://www.theaic.co.uk/aic/find-compare-investment-companies?sortid=Name&desc=false
Also it’s easy using that link and the various headings to search out latest news and the vital monthly fact sheets. Another MUST is to check out the top 10 holdings. I much prefer conviction portfolios because a Trust with over 100 holdings and only a tiny amount invested in en in their top 10 is likely to perform like a trackervfund.
.......
“Investment Trusts are a great way to invest all round the world. Few of us have the skills to pick the best, say, Japanese shares, so we have to put our trust in the fund managers.
Bear markets are a good time to buy Investment Trusts as selling causes some of them to go to very big discounts to NAV.
(If any requests I'm happy to do a brief post explaining Investment Trust plus points and why they are so often better than Unit Trusts/Investment Funds. This is well covered on the web but sometimes with too much jargon)
Unfortunately a lot of Investment Trusts have soared during this surprise big rally. It really is better to buy on big dips as the gains are much better and the risk of losses lower.Also discounts to NAV are often wider if able to get in on a big dip.
For this post I've mostly gone for Trusts with good dividend yields and trading at big NAV discounts. BUT some dividend cuts are inevitable and also NAV is not that reliable at present while so many of the shares these Trusts hold are not trading.
Another key factor checked was performance record.
Here are the 14. Prices include the 12 month low and the 12 month high. Most of them hit the lows very recently, but some have rocketed this week unfortunately. I’ve also posted the supposed dividend yield and discount to NAV.
1. THE CITY OF LONDON IT. (CTY)
This is (I think) the oldest Investment Trust on the market and it has been trading since the 1860s!
AND it has the proud record of increasing the dividend every year for 53 years in a row! In a bad bear market year they (and other Trusts) can pay out dividends from reserves/cash built up in the good times.
330p today. Recent low 270p and 12 month high 448p.
Dividend around 5%. WAS (unusually) at a big NAV discount recently but now around NAV thanks to fast 20% rise.
2. BARING EMERGING EUROPE. BEE 524p Recent low 448p. High 930p.
Dividend 6.7% and 20% discount to NAV.
3. BLACK ROCK WORLD MINING.BRWM 275p Recent low 218p. Year high 397p.
Dividend 8.3% and 15% discount.
Recent update was good.
2 Alternative mining trusts are:-
4. CITY NATURAL RESOURCES. CYN. 54p. Recent low 50p.
Year high 92p.
Dividend 10.5% and they hope to maintain it. 22% discount.
5. BLACK ROCK ENERGY AND RESOURCES. BERI. 44p. Recent low 36p
Year high 79p.
Dividend 8% and 12% discount.
6. BLACK ROCK LATIN AMERICA BRLA 293p. Recent low 253p Year high 544p
Dividend 10%. 23% discount
7.EUROPEAN ASSETS TRUST. EAT. 76p. Recent low 62p. Year high 115p.
Dividend 8.3% and 12% discount.
8. INDIA CAPITAL GROWTH. IGC. 36p. Recent low 35p. SO THIS ONE HASN'T BOUNCED AT ALL. Year high 93p.
No dividend but very big 36% discount.
9. J P MORGAN JAPAN SMALLER COMPANIES. JPS. 331p Recent low 279p.
Year high 451p.
Dividend 5.5%. 12% discount.
10.J P MORGAN RUSSIA. JRS. 484p Recent low 422p. Year high 804p.
Dividend 7.4% and 20% discount.
11. NORTH ATLANTIC SMALLER COMPANIES £25.60. Recent low £22.
Year high £35.70.
Dividend 1%. 40% discount.
INTERRUPTION TO CLAP NHS staff on front line!!
12. REGIONAL REIT. RGL 74p. Recent low 56p. Year high 122p.
Dividend 9%. 36% discount.
This is just one of several REITs on very large NAV discounts. I don't follow the sector closely. THE expert on the sector here was SKYSHIP who unfortunately no longer posts here.
It's well worth checking out the properties in each REIT before choosing the one to invest in. e.g those with a lot of retail properties are probably an avoid for now.
A key reason for such huge discounts is the sector is SO out of favour. AND similar Unit Trusts have banned selling altogether so their investors are now locked in.
This is a KEY plus for Investment Trusts. They almost never ban selling. Instead if a huge number of their investors want out the share goes to an ever bigger discount to NAV.... which is great for those looking to buy!!
As camponar posted the Telegraph Questor column also tipped several IT REITS today.
I hold Regional Reit after buying a small stake at 58p. I'm also tempted by AEW UK REIT 62P. 13% Dividend if held and 36% discount and year high 112p.
BUT be wary of my thoughts on these. IF there are any who hold or follow them and who are clued up on them, please post.
13. TEMPLE BAR. TMPL 784P. Recent low 570p... I bought a few just above the low and now wishing I had bought more! Very quick bounce.
Year high £14.95. Dividend 7%. 2% discount..... but discount was around 20% when I bought.
14. VIETNAM HOLDINGS VNH. 122p. AND AT RECENT LOW OF 122p. Year high. 195p.
No dividend but 28% discount.
Vietnam is described by some as the new China. Now could prove a very good time to get in.
Spoilt for choice? Those now the most below recent highs might be worth checking out first.
Also well worth checking out the Trusts own websites and loads of info on Trustnet if that Trust subscribes to Trustnet.. www.trustnet.com
I also check out the top 10 or 20;holdings in each one. I much prefer those with a lot of their investments in their top or 20 in preference to Trusts with over 100 holdings.
I hold mostly small stakes in:
BRWM, CYN, BRLA, CTY BERI IGC JPS REGIONAL REIT TEMPLE BAR AND VNH”
Thanks Ken. Eevn though IT's are perhaps a bit better known than they were, I still think many investors could take more advantage of them. I use them as a core in a core/satellite strategy where I use OEIC's and IT's as a core with individual stocks as satellites to add some personal interest. I have to say the IT's have outperformed both the OEIC's and my stock picks.
BG Shin Nippon Baillie Gifford Shin Nippon (LON:BGS), Worldwide Healthcare Worldwide Healthcare Trust (LON:WWH) and Biotech Growth Biotech Growth Trust (LON:BIOG) have been fantastic investments for me, all purchased at discounts to NAV. I've had a few losers too but the winners have far outweighed them.
They're also very useful for accessing more esoteric asset classes, for which OEIC's and ETF's don't exist.
Hi ken
Buying IT's on the back of an indiscriminate market fall is a good way of getting access to the recovery opportunity - although it often takes a lot longer than last year's. And, of course, there's a big downside.
As markets fall investors sell ITs and their discounts widen (or those at a premium fall to a discount) while the value of the underlying securities also falls - which, of course, is a double whammy for holders. On the downturn losses are magnified. It's a good time to be a buyer but not a holder (or a seller).
Broadly my view is that generalist IT's either need to be bought regularly, so that pound-cost averaging smooths out the returns over long periods, or in the wake of a crash, when discounts have widened. Buying them only when markets have risen and discounts have closed is relatively risky.
However, IT's also offer a good way of accessing off-market, illiquid securities such as property or unquoted equities or those in less liquid overseas markets. These should never be bought through an open ended fund because on the downturn that lack of liquidity destroys returns - we've seen this recently both with unit trust property funds and the Woodford funds, where holders were locked out of trading while the managers engaged in fire sales of the underlying assets.
Even with IT's it's difficult to assess the value of funds that invest in illiquid assets. The valuation of those assets is somewhat arbitrary and subjective, so there's always an element of guesswork involved. I wonder about the popularity of something like Scottish Mortgage Investment Trust (LON:SMT) (which I hold) because investors are simply placing their trust in the managers rather than relying on more fundamental assessments.
Funds - both closed and open - that attract hot money at the top will see it flow out at the bottom. Popular funds always need to viewed with an element of cynicism, especially when they change direction - as, for instance, the Buffetology Fund did when the flow of incoming funds meant it became too large to continue investing in smaller cap stocks.
And, of course, that can be another problem with popularity of open ended funds - the incoming flow of investor funds has to be used and eventually that can overwhelm the available targets to the point where the investments by the fund itself can start to impact the value of the underlying companies. For that reason generalist open ended funds are safer as the range and size of companies they can invest in makes liquidity a non-issue.
Although I always wonder, if an open ended fund is investing in large cap stocks in liquid markets, why people don't do it themselves? Perhaps because it removes the psychological urge to trade? Maybe. Anyway, there are lots of ways to make money or lose it on markets, collective funds are just another example.
timarr
Hi timarr/all
Thanks for the replies and some great posts on this thread.
timarr
Re that massive (90% at one point) Lindsell Train Investment Trust premium. It was, I think, because of the very large stake in (unquoted) Lindsell itself, and (like Electra now) the stated NAV did not account for the likely value. In the crash last year Lindsell did go to a small discount and I was tempted, but they need to do a share split to attract more investors. Their Unit Trust did not have that la be Lindsell stake. That was a rare example of the Unit Trust being he better choice.
Also:-
There was an excellent article in The Times on Saturday about the big Property Unit Trust negatives and Investment Trust REIT pluses. Here it is but non subscribers probably can’t read it:-
https://www.thetimes.co.uk/article/if-you-think-this-is-the-end-for-property-funds-sell-up-now-9q9hht5wc
For readers here who can’t access it; in brief:-
1. It covered Aviva closing their Property Unit Trust. Their investors have been locked in for 16 months and could be for 4 years while they dispose of their Property Holdings.
2. There could be a ban on Property Unit Trusts being held in ISAs. AND possibly a ban on Property Unit Trusts full stop! (If that happens there are going to be a lot of property sales at likely bargain prices that some of the Investment Trust REITS can cash in by buying.
3. How can financial advisers look their clients in the face when putting them on to these so unsuitable Unit Trusts.
4. The plus points for Investment Trust REITs already covered by posters on this thread.
5. They listed current Unit Trust and Investment Trust Property yields.
Out in front were the IT REITS with AEWU at 8.3%, Ediston 7% SREI 5.3% Custodian 5.1% Standard Life 5.1% and BMO Property at 5.1%.
Best yielding Property Unit Trust was Aegon at 4.2%.
Note that the IT REIT yields were much higher when shares were near multi year lows and on discounts as high as 45%. The yields on my AEWU buy is 13% paid quarterly and Ediston 11% paid monthly.
Unfortunately discounts have narrowed and AEWU not far off par but some are still on 10% to 20% discounts, excluding riskier ones with too many voids and poor rent collection that don’t appeal, on higher discounts. You get what you pay for sometimes.
btw when buying Property and other Investment Trusts on very big discounts soon after the crash last year, I concur with timarr. It could have taken a lot longer before excellent share price gains. That they came SO soon and were so big was a bonus. Could anyone have predicted one of the biggest ever market bull runs when lockdowns and business disruption were widespread?
Finally. The following are not tips but perhaps the best of the few Investment Trusts still on big discounts and so worth checking out. All have excellent performance records.
Vietnam Holding (LON:VNH) 18% discount. (New covid variant a concern but Indian market has held up well with rampant covid.
HarbourVest Global Private Equity (LON:HVPE) 22% discount. Very solid record.
North American Income Trust (LON:NAIT) 26% discount.
Canadian General Investments (LON:CGI) 33% discount
Re that massive (90% at one point) Lindsell Train Investment Trust premium. It was, I think, because of the very large stake in (unquoted) Lindsell itself, and (like Electra now) the stated NAV did not account for the likely value.
Hi ken
I don't think you can compare the obviously marketable holdings and short term realisation opportunity of Electra Private Equity (LON:ELTA) with the hard to value and uncertain future of the Lindsell Train Investment Trust (LON:LTI) stake in LTL. In the case of the former putting a value on Hotter Shoes and TGI Fridays is relatively easy. In the latter, you're placing a value on the aging heads of Michael Lindsell and Nick Train. The Chairman of LTI addressed this directly in the Annual Report in 2018:
https://www.investegate.co.uk/...
"The Board recognise that some shareholders view the monetary value of the Company's share price premium over the NAV as equivalent of the Board's undervaluation of LTL. I have asserted before that the Board view the premium as unwarranted and do so again today with particular reference to my comments above about succession."
The report directly addresses the valuation of LTL and the succession issues as well as offering another warning on buying the stock at a significant premium to NAV.
The premium on LTI has been creeping up again, there's no obvious value there, while the value in ELTA has been well publicised by Paul Scott here on Stockopedia. Not all unlisted assets are the same, which is why valuation anomalies such as ELTA occur from time to time.
timarr
Gus wrote:
"Inspired by Paul Scott’s top 10 list posting today, here’s my current top IT holdings (as loosely defined above) by value (out of about 30 in total):-"
In case anyone is interested, here is a list of my actual top ten investment trust holdings at present (as opposed to those in my fantasy portfolios on Stockopedia):
Ruffer Investment Company, Capital Gearing, Personal Assets, TR European Growth, RIT Capital Partners, Blackrock World Mining, AVI Global, Aberforth Smaller Companies Trust, Scottish Mortgage, Herald.
The first three in that list are multi-asset ITs which I keep permanently in my portfolio in the hope that they will reduce drawdowns of the portfolio's total value in bear markets. The remaining ITs in my portfolio are liable to change occasionally, depending on their past performances and their discounts or premiums to Net Asset Value at the time, with a view to keeping a reasonably diversified portfolio overall.
Here's a link to an article I wrote last year about a fantasy Stockopedia portfolio I set up on 28/11/2018 with a notional initial investment of £100,000. It invests in the 10 largest conventional investment trusts and has some very simple rules:
https://www.stockopedia.com/content/a-fantasy-portfolio-comprising-the-10-largest-conventional-investment-trusts-680238/
There’s a virtual Investment Trust portfolio on Mike Walters site that’s been running since March 2016.
There are 21 current holdings, covering many parts of the World as well as sectors like Mining and Property. All the holdings are in profit and the gain since inception is 91%. The portfolio has way outperformed the FTSE 100 and FTSE250 and by a much smaller margin, the AIM index.
But here’s the thing. So it should. The UK market has lagged other markets ever since the Brexit vote (but is now making up for lost time). So if a totally different selection of Investment Trust had been made the performance is very likely to have been just as good or even better.
There’s a strong case for including Investment Trusts in our portfolios. So many portfolios are UK only. The ideal time to buy them is on sector, Country/region and market dips and when discounts are wider than normal. Including them in our portfolios can really enhance performance.
It would be good if more Investment Trust enthusiasts find this thread and contribute to it, including Trusts that still look well worth checking out. But it could be Investment Trusts are such a minority interest that it won’t happen. After all even the genius Paul Scott (the key reason some subscribe to Stockopedia) admits to not being clued up on Investment Trusts. It didn’t stop him from posting on that excellent Electra Investment Trust opportunity though!
Adding to your plus points for Investment Trusts Howard.
They can borrow to invest. As long as that’s done sensibly and gearing kept to sensible levels it often enables enhanced performance.
A HUGE plus is the ability to buy and sell at once exactly the same as shares. Unit Trusts sells and buys are usually at one time point once in a day. That can be a big negative in fast rising and fast falling markets.
Once available cash has been used up Unit Trusts have to sell shares to pay investors who want out. Investment Trusts don’t. And when is selling heaviest? In fast falling markets like March last year. So Unit Trusts are sometimes forced to sell investments at the wrong time, and arguably when they would prefer to be buying, simply because so many want out, also arguably at the wrong time.
AND if too many investors want out (e.g Woodford’s awful Unit Trust) then that Unit Trust has to ban all selling and lock their investors in. That’s a terrible negative when markets are falling.
So what happens to Investment Trusts in fast falling markets when many of their investors want out too? Simple. They sell and the selling sends that Trusts’ share price way lower than NAV sometimes. That provides wonderful buy opportunities. E,g if, as happened in March last year, heavy selling causes the NAV discount to widen to 50%, the share would double when the market or sector recovered just by that 50% discount narrowing back to par.
Unit Trusts always trade at NAV so investors cannot cash in by buying for less than the share is worth.
So some of us who realised all this cashed in near the lows last year by buying Investment Trusts then and some Trusts have tripled since then.
AND note that Woodford also ran an equally disastrous Patient Capital Investment Trust. Investors in that Trust were not locked in and Patient Capital went to a deserved massive discount as investors escaped. How the many Woodford Unit Trust investors must have wished they too could have escaped!
Compare Property Unit Trusts and Property Investment Trusts.
The Property Unit Trusts were forced last year to lock their investors in because they can’t sell property at the drop of a hat to pay investors who want to sell. An M&G Property Unit Trust locked Investors in for over a year!
The Property Investment Trusts fell heavily and went to huge discounts. The dividend yield when I bought AEWU (a Property Investment Trust) was 13%! They managed to hold that dividend and now the share price has risen a lot, helped by a narrowing of that big discount. The dividend yield is still nearly 9% but the easy share price gain has been had now.
Unit Trusts are an inappropriate way to invest in Property.
The ability to get in and out of Investment Trusts at once and being able to buy at discounts ; those 2 reasons alone are enough to favour Investment Trusts.
Hi ken
AND note that Woodford also ran an equally disastrous Patient Capital Investment Trust. Investors in that Trust were not locked in and Patient Capital went to a deserved massive discount as investors escaped. How the many Woodford Unit Trust investors must have wished they too could have escaped!
Excellent thread. Well done gus.
Patient Capital Investment Trust has morphed into Schroder Uk Public Private Trust (LON:SUPP) for which there is another thread on Stockopedia. The difference between this and what happened with the equivalent Unit Trust is revealing.
On the UT investors fleeing the fund meant that it had to sell holdings to return funds. The managers had to sell their best holdings because they were the most liquid - but they also had no control over when they sold them, so they ended up selling their best stocks at a massive discount, while also locking customers out of their funds. As part of this the holding in Oxford Nanopore was, quite literally, given away.
On the IT investors fleeing the fund sold their shares at whatever the current price was. The managers were under no direct pressure to sell any holdings, although because the company had taken on debt (which an IT can do but a UT cannot) they were unable to invest in a number of good opportunities and had, eventually, to negitiate a sale of assets at a discount to real value.
So - the fact an IT can take on debt but a UT can't is not always a good thing. However, for illiquid holdings - off-market stocks and property for instance - ITs are always better than UTs because they can ride out the volatility without forced redemptions.
Anyway, Schroder Uk Public Private Trust (LON:SUPP) has started to recover, it still holds its decent stake in Oxford Nanopore, which will hopefully lead to outsized returns later this year and the new managers are finally able to invest in new opportunities having paid down the debt. The IT was able to survive until better times arrived, the UT wasn't.
Personally I would never invest in a UT - just as I'd never invest in property. I want control of my money and the ability to sell when I want, even if I have to take a massive loss in so doing. Other people may feel differently but ITs, properly analysed, can offer significant upside whereas UTs never can.
timarr
Hi Timarr,
What about REITs? I’ve gotten into these recently to get exposure to warehouses partly cos the hostile environment to buy-to-let makes it very unappealing to buy individual properties. e.g. If I want to move now I have to pay an extra 3% stamp duty on next house - no thanks.
If inflation (and interest rates) take off then an entire generation of heavily mortgaged homeowners will be wiped out. Recent stamp duty holiday is a desperate attempt to prop up the 2 decade old property bubble but it has to end in tears.
Hi MM
What about REITs? I’ve gotten into these recently to get exposure to warehouses partly cos the hostile environment to buy-to-let makes it very unappealing to buy individual properties.
Agreed, I wouldn't invest in individual properties because of the illiquidity (plus, of course, stocks don't complain to their landlord about the plumbing) but REITs are often excellent value. On the warehouse theme last year I bought Londonmetric Property (LON:LMP), Tritax Eurobox (LON:BOXE), Urban Logistics Reit (LON:SHED) and Warehouse Reit (LON:WHR) . They're all now trading at a premium to NAV but the shortage of ecommerce fulfillment capability probably means they have further to rise.
In fact Tritax Eurobox (LON:BOXE) raised five year debt this week on a coupon of 0.5% - basically free money to invest, which tells us something about the demand for warehousing at the moment. I think it's currently the most interesting of these companies with its European focus, still only trading just above book value.
If you scan down the REIT sector there are plenty of companies at discounts to book value but which ones offer value and which ones simply haven't accounted for the collapse in the underlying property values is hard to say. You'd need to be very brave - or very knowledegable - to invest in commercial property right now.
timarr
There probably are some bargains in the wider commercial property REITs at the moment, especially those with retail parks rather than high st/shopping centres and offices but I agree that it's risky to try to pick them as there's probably a lot more NAV writedowns to come.
I'm particularly keen on "last mile" smaller warehouses which certain REITs like Urban Logistics Reit (LON:SHED) specialize in. Supply of these are tight and difficult to build due to planning and cost. I think there is a risk that larger warehouses may become over-supplied if there is too much speculative (not pre-tenanted) building.
Hi Timarr,
You wrote: "Personally I would never invest in a UT."
There are situations where I might choose a UT over an IT. Some ITs have a UT run by the same manager with almost identical portfolios of easy-to-sell investments. If the IT is on a significant premium to its Net Asset Value at the time, but otherwise seems to me to be an attractive investment, I might buy the corresponding UT instead. I would thereby buy the fund's assets at NAV rather than at a premium, avoid paying 0.5% stamp duty on the purchase of the UT, and possibly buy the UT with a narrower bid-offer spread than on the corresponding IT.
Hi pka
There are situations where I might choose a UT over an IT. Some ITs have a UT run by the same manager with almost identical portfolios of easy-to-sell investments.
My "never" was a strong term, but even in this kind of situation I'd probably avoid. If the IT is at a significant premium then the corresponding UT is probably attracting hot money. The typical flow is that the dumb money buys at the top (when the underlying assets are expensive) and then sells at the bottom (when the assets are cheap) and puts a drag on the UT performance.
But you're right, sometimes valuations of IT's go crazy. At one point Lindsell Train Investment Trust (LON:LTI) was trading at double its book value and the Chairman was warning people not to buy. Investors were, as usual, making up nonsense to justify the price - in this case that the unquoted stake in Lindsell Train Management was worth the difference (the Chairman said it wasn't).
Inevitably gravity took effect and Lindsell Train Investment Trust (LON:LTI) ended up trading below NAV at one point last year - in fact the price halved in nine months. And this for a company that primarily invests in stuff like Diageo and Unilever.
Investing in one of the Lindsell Train open ended funds would have been a better way of getting access to the managers' expertise - but, on the other hand, why would you want to unless you can buy at a discount? Why pay management fees to buy and hold large UK stocks?
On the other hand, if the UT is holding less liquid stuff then if there is a rush for the door there's no guarantee you will be able to get out, or at what price. Personally I'd rather not take the risk, especially given the universe of instantly tradeable ETFs that are now available. Each to their own though.
timarr
Hi gus 1065 and others
I'm a long time holder of ITs and UTs (Unit Trusts).
In principle I favour ITs over and above UTs because: I can set stops on them, the NAVs are visible and updated daily, they can be traded instantly (online), they can hold unlisted companies (UTs cannot I believe), often ITs have a much more defined thematic/sectoral/market focus than UTs seem able to offer, (I'm sure there are several other features which could be listed).
That noted, I do use UTs for certain types of investment. These UTs tend to be trusts which invest globally (but often heavily biased towards US) and have a well regarded managers.
In recent months I have found that the Baillie Gifford stable of ITs (and some UTs) really do seem to be stand out performers across so many themes, sectors or markets. Also they are now frequently providing informative YouTube vids explaining the different ITs, the investing styles, investments and performances. I have found these resources to be useful in augmenting my own research (I know other investment managers do this, but the BG vids certainly offer a broad coverage of many of their funds).
Obviously I hold several BG funds. Below are some links I have used recently for those who might be interested.
The BG site, well worth a digging into .... https://www.bailliegifford.com...
An example of one of their vids. This is for the Scottish Mortgage Investment Trust (LON:SMT) (if you search YouTube using a trust name many others will show up.
I hold a number of ITs in my SIPP, and can highly recommend the John Baron portfolios for anyone looking to build a balanced portfolio to match their investment objectives. This is a subscription service, but there is s trial available, and well worth the money imho
https://www.johnbaronportfolio...
Thanks for starting this thread Gus. Hope it generates some interest and some interesting Investment Trusts well worth checking out. I’ll post my top IT holdings another time and hope others do too.
I’m a big fan of Investment Trust REITs and bought them at exceptionally big discounts at the time Property Unit Trusts were locking their investors in. They had no choice as they can’t suddenly sell properties to provide the funds for a lot of investors whom suddenly want out. Investment Trusts don’t have that problem.
I hold the following Investment Trust REITS:-
Ediston Property Investment (LON:EPIC) AEW UK REIT (LON:AEWU) Alternative Income REIT (LON:AIRE) Schroder Real Estate Investment Trust (LON:SREI) Schroder European Real Estate Investment Trust (LON:SERE) and also Regional REIT (LON:RGL) and Newriver Reit (LON:NRR)
One big plus for the IT REITS is that even after shares having risen a lot the dividends are exce.
I agree about AIC being an excellent site for Investment Trusts, including this link for each Trust and to compare with all the others in the sector:-
https://www.theaic.co.uk/aic/find-compare-investment-companies?sortid=Name&desc=false
Most of my personal holdings are individual stocks but for my wider family, who's portfolios I also look after, I just buy IT's and a few specific funds.
I feel this is a good defence against the volatility of individual stocks and they're less likely to get nervous about holdings.
Just to add weight to having a separate post, I am typically about 50/50 individual shares to collectives with 95%+ in ITs. Most, but not all of my shares are UK listed, which is not to say they are UK based companies. I use ITs to get access to sectors and markets I do not (have time to) understand as well as diversification. Having just counted them, I have 19.
As a heads-up to Stockopedia, I am currently on a cheap deal from another platform which, at full price, gives me much more information on them as well as my international shares (& opportunities) for about the same as Stockopedia. So when it comes to renewing my Stockopedia account, hmmm ... ...
You don’t get Paul Scott though...
May I echo that sentiment A Private Investor. Most of my investing and trading is done through ETFs and the information on Stockopedia is scant and leaves out essential data like yield.
Hi - what is the other platform? I’m looking one that cover more ITs. Cheers
Andrew.
I don’t know what post you are replying to, but in case you didn’t see an earlier post, AIC is a must use site.
E.g this link to find specific Trusts and to compare with others in the same sector:-
https://www.theaic.co.uk/aic/find-compare-investment-companies?sortid=Name&desc=false
Also as long as the Trust subscribes to AIC there is a wealth of information under each of the headings. E.g performance heading, portfolio heading etc.
Also this link is for the AIC Home Page:-
https://www.theaic.co.uk/
Inspired by Paul Scott’s top 10 list posting today, here’s my current top IT holdings (as loosely defined above) by value (out of about 30 in total):- Jpmorgan China Growth & Income (LON:JCGI) , Schroder Uk Public Private Trust (LON:SUPP) , Safestore Holdings (LON:SAFE) ,River And Mercantile Uk Micro Cap Investment (LON:RMMC), Scottish Mortgage Investment Trust (LON:SMT) , Fidelity China Special Situations (LON:FCSS) , Electra Private Equity (LON:ELTA), Blackrock World Mining Trust (LON:BRWM) , Oryx International Growth Fund (LON:OIG) , Witan Investment Trust (LON:WTAN) , Amati Aim Vct (LON:AMAT) , Polar Capital Technology Trust (LON:PCT) , and Hansa Investment (LON:HANA) . Some are recent acquisitions, several I’ve had for a few years. Most are likely to be long term holds.
Gus.
Hello Gus,
I hold a portfolio of investment trust/reits
I have assembled them to gain diversity. So I have Healthcare, commodities, Japanese small cos, European Small Cos, a Uk reit, a battery energy co and so on. I tend to only trade if there is a long term loss in performance of a particular IT against its peers.
My objective is diversity rather than absolute return.
This compliments a more active share portfolio.
Happy to exchange views with fellow investors.
SM
to avoid looking at the prices too often, and
Thanks Gus for creating this thread. It's very interesting to see what you and others are holding. Would be equally interesting to hear whether you would buy some or all of these at their current prices too.