Six investment trusts to consider for your ISA29 February 2016
Six investment trusts to consider for your ISA
With the end of tax year little more than five weeks away, investors mulling choices for their ISAs and SIPPs should certainly have investment companies on their radar as well as open-ended funds. They can have distinct advantages over their more popular OEIC and unit trust cousins but are too often ignored by execution-only platforms in their lists of rated investments.
The advantages investment companies have include independent Boards looking out for the interests of shareholders (and with the ultimate sanction of changing the fund management company), the ability to access illiquid asset classes such as property or private equity without having to hold large cash buffers, and the ability to borrow money – known as gearing – to make further investments. Trusts also come into their own during volatile markets, such as we have seen so far in 2016, as the managers don’t have to battle with potential outflows of cash from investors while managing their portfolios.
With that in mind, Tilney Bestinvest’s Managing Director Jason Hollands provides some of his top investment company picks for the ISA season.
1. Scottish Mortgage Investment Trust – high convictions but low fees
“If you are looking for a one-stop shop approach to invest in global stock markets, then Scottish Mortgage Investment Trust has long been one our favoured trusts. Managed by James Anderson, a veteran stock picker at Baillie Gifford, this may sound like a dull old investment trust but it actually takes a guns blazing, high conviction approach to international investing focused on growth companies from across the globe. Around 47% of the portfolio is invested in US companies, 24.6% in Europe, 7.6% in the UK and 18.3% in Asia. There are 70 stocks in the portfolio, with large holdings including the likes of US firms Amazon and Facebook, Illumina a leader in genomics, electric car firm Tesla Motors and Baidu which is known as China’s “Google”. Unusually for an investment trust Scottish Mortgage IT usually trades at a small premium to net asset value and is currently trading at a 0.8% premium but this is a small price to pay for those with a long-term horizon and investors can console themselves with the fact that the trust has very low annual costs, totalling 0.48%.”
2. Henderson European Focus – Europe is our favoured developed market
“Europe is our preferred developed market at the moment, as Western Europe is a net importer of energy so is a beneficiary of low oil and gas prices and the European Central Bank is providing vast amounts of liquidity that should support stock markets and may eventually ratchet up its Quantitative Easing stimulus programme. The Henderson European Focus trust, managed by Jon Bennett, is trading at a small -0.9% discount to NAV. Bennett takes an unconstrained approach to investing, holding 54 shares in the portfolio. Healthcare continues to be a major theme at 20.6% of the portfolio, with top ten positions in Roche, Novartis, Bayer and Novo Nordisk.”
3. Standard Life Equity Income– invests across the full bandwidth of the UK market
“The Standard Life Equity Income trust is managed by rising star Thomas Moore with a similar approach to his UK Equity Income Unconstrained fund. This approach is a high conviction one, investing across the whole UK bandwidth of the market and is not heavily biased to larger companies like most equity income funds. Indeed, currently the trust has just 34.8% invested in FSTE 100 companies, with 46.4% in mid-caps and the remainder in smaller company shares. With the outlook for dividends deteriorating, we think an approach that provides maximum flexibility make sense. Examples of holdings include accountancy and payroll software firm Sage, data firm RELX and property website Rightmove. The shares can currently be purchased at 1.3% discount to net asset value.”
4. F&C Commercial Property – diversify your sources of income
“Having regularly traded at a big premium to net asset value, you can now snap up this high quality “bricks and mortar” trust at a 4.2% discount to net asset value. The trust holds a high quality portfolio of offices (37.9%), retail sites (26.8%), warehouses (17.6%) and industrial locations (15%), with a bias towards London and the South East. These include St. Christopher’s Place, a development of diverse shops and restaurants off Oxford Street, London and office block Cassini House in St. James’s Street, London. The average lease is the portfolio is 7 years long and the portfolio is yielding 4.6%, with dividends paid monthly.”
5. Personal Assets Trust – built for turbulent times
“Cautious investors, unnerved by recent stock market volatility might consider Personal Assets Trust, which is managed with an approach that places a high emphasis on capital preservation. The trust takes a multi-asset approach, investing in mostly US and UK shares (45.2%), index linked bonds (22.9%), gold bullion (10.3%) and cash and short-dated bonds (21.5%). This is not the type of investment to hold if you are super bullish on markets but in tough times, it will help protect capital and the managers have large amounts of cash at their disposal to move into shares if and when they believe it is attractive to do so. For now they remain cautious, citing the twin possibilities of Brexit and a possible President Trump as the potential source of more market jitters. Personal Assets Trust is trading at a 0.6% discount to NAV.”
6. Pacific Assets Trust – the “wild card”
“Followers of our missives will be aware that we have been cautious and emerging markets for some time now, but the complete outbreak of bearishness fills us with a little more cheer that the risks and challenges facing these markets are now well reflected in share prices. These parts of the world have suffered much negative sentiment from the marked slowdown in China and also expectations of rising US interest rates pushing the Dollar higher, making life painful for those countries and companies that have borrowed heavily in Dollars. However, with the US economy now stalling, expectations of a “normal” cycle of US rate rises are evaporating and this has led to some recent weakening in the US Dollar, providing some respite for Asia. Pacific Assets Trust is managed by David Gait at Stewart Investors, a leading manager of Asia equities. Like other Stewart Investors portfolios, it currently has a big overweight to India which represents 33.4% of the portfolio (compared to a 10% index weighting) and is very lightly exposed to China at 2.9% (versus a 28.4% index position).”
- ENDS -
The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested.
Past performance is not a guide to future performance.
Investment trusts are similar to funds in that they provide a means of pooling your money but they are publicly listed companies whose shares are traded on the London Stock Exchange. The price of their shares will fluctuate according to investor demand and changes in the value of their underlying assets.
Different funds carry varying levels of risk depending on the geographical region and industry sector in which they invest. You should make yourself aware of these specific risks prior to investing. We aim to provide investors with information to help them make their own investment decisions although this should not be construed as advice or an investment recommendation. If you are unsure about the suitability of an investment or if you need advice on your specific requirements, we strongly suggest that you consider professional financial advice.
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About Tilney Bestinvest
Tilney Bestinvest is a leading investment and financial planning firm that builds on a heritage of more than 150 years. We look after more than £9 billion of assets on our clients’ behalf and pride ourselves on offering the very highest levels of professional client service with transparent, competitive pricing across our entire range of solutions.
We offer a range of services for clients whether they would like to have their investments managed by us, require the support of a highly qualified adviser, prefer to make their own investment decisions or want to take more than one approach. We also have a nationwide team of expert financial planners to help clients with all aspects of financial planning, including retirement planning.
We have won numerous awards including Stockbroker of the Year, Execution-only Stockbroker of the Year and Self-select ISA Provider of the Year 2015, as voted by readers of the Financial Times and Investors Chronicle. We are pleased that our greatest source of new business is personal referrals from existing clients.
Headquartered in Mayfair, London, Tilney Bestinvest employs over 400 staff across our network of offices, giving us full UK coverage, and we combine our award-winning research and expertise to provide a personalised service to clients whatever their investment needs.
The Tilney Bestinvest Group of Companies comprises the firms Bestinvest (Brokers) Ltd (Reg. No. 2830297), Tilney Investment Management (Reg. No. 02010520), Bestinvest (Consultants) Ltd (Reg. No. 1550116) and HW Financial Services Ltd (Reg. No. 02030706) all of which are authorised and regulated by the Financial Conduct Authority. Registered office: 6 Chesterfield Gardens, Mayfair, W1J 5BQ.
For further information, please visit: www.tilneybestinvest.co.uk
Tilney is a leading investment and financial planning group that builds on a heritage of more than 180 years. Our clients are private investors, charities and professional intermediaries who trust us with over £23 billion of their assets. We offer a range of services including financial planning, investment management and advice and, through our Bestinvest service, a leading online platform for those who prefer to manage their own investments.
We have won numerous awards. Tilney has been awarded Best Conventional Advisory Service at the 2018 City of London Wealth Management Awards, Best Advisory Service in the 2015 City of London Wealth Management Awards; Investment Award – Cautious category in the Private Asset Management Awards; and Stockbroker of the Year, Execution-only Stockbroker of the Year and Self-select ISA Provider of the Year 2015, as voted by readers of the Financial Times and Investors Chronicle. Bestinvest was voted Best SIPP Provider and Best Fund Platform at the 2017 City of London Wealth Management Awards, Best Direct SIPP Provider at the YourMoney.com Awards 2017, Best Stocks & Shares ISA Provider at the 2017 Shares Awards, as well as Best Self Select ISA Provider, Best Online/Execution-only Stockbroker and Best Investment Platform 2017 at the FT and Investors Chronicle Investment and Wealth Management Awards, as voted by readers of the FT and Investors Chronicle.
Headquartered in Mayfair, London, the Tilney Group employs over 1,000 staff across our network of 30 offices, enabling us to support clients with a local service throughout the UK.