3 investment trust ideas for a Stocks and Shares ISA

A Stocks and Shares ISA is one of the best ways to help grow your wealth over the long term.

ISAs offer a way to shelter your investments from UK income and capital gains tax. It means you can make the most of your investments.

The deadline to use this tax year’s ISA allowance is 5 April.

If you decide to shelter your money from tax in an ISA, the next decision is how to invest. One way to invest is to use investment trusts.

In this article, we look at three investment trusts that could be considered for a variety of Stocks and Shares ISA portfolios.

These ideas should be thought of as potential building blocks for portfolios invested for the long term. By long term, we mean at least five years.

You don’t need to decide where to invest straight away. You can secure your ISA allowance with cash now and decide when and where to invest when you’re ready.

As long as you add money before midnight on 5 April, it will count towards this year’s allowance.

FIND OUT MORE ABOUT THE HL STOCKS AND SHARES ISA INCLUDING CHARGES

This article isn’t personal advice or a recommendation to invest. Remember all investments and any income they produce can fall as well as rise in value – you could get back less than you invest. Tax rules can change, and the benefits depend on individual circumstances. If you’re not sure an investment is right for you, ask for financial advice.

Investment trusts can sometimes invest in specialist areas like smaller companies, derivatives, and unlisted (private) companies which are higher risk. Investors should only invest in them if they have the time and knowledge to carefully select and monitor them, and as always, they should be held as part of a diversified portfolio.

What is an investment trust?

Personal Assets Trust

Personal Assets Trust is managed by Sebastian Lyon, founder of Troy Asset Management. The trust aims to grow investors' money steadily over the long run, while limiting losses when markets fall.

Lyon does this by investing in a mix of assets. He focuses on the shares of well-established US and UK companies he thinks offer reliable earnings and good growth potential.

The rest of the trust invests in UK government bonds, US inflation-linked bonds – which could provide some shelter from rising inflation – gold and cash. The cash and gold could help provide some stability when economic and stock market conditions are tougher.

Typically, we expect the trust to lag a market rally, but offer some shelter in a downturn. As with any investment, this is not guaranteed.

Although the trust hasn’t had much exposure for several years, the manager does have the freedom to invest in higher-risk smaller companies. The trust has the flexibility to use gearing (borrowing to invest) but doesn’t tend to as the manager believes it goes against the core principle of sheltering assets. The trust has exposure to a relatively small number of investments, meaning each one can have a meaningful impact on performance, but it does add risk.

The trust tries to experience less ups and downs than the broader global stock market or a portfolio that's mainly invested in shares. It could form part of the foundation of a broad investment portfolio, bring some stability to a more adventurous portfolio, or provide some long-term growth potential to a more conservative portfolio.

Find out more about Personal Assets Trust including charges

Personal Assets Trust Key Investor Information

Bankers Investment Trust

Bankers Investment Trust is run by Alex Crooke with the support of an experienced team from Janus Henderson. Crooke aims to deliver growing income and capital by investing in companies worldwide.

The trust is one of the AIC’s (Association of Investment Companies) Dividend Heroes – trusts that have consistently increased their dividends for 20 or more years in a row. Bankers has a long history of increasing dividends, with 55 years of consecutive dividend increases. The trust yields 1.96% as at 21 February 2022. Yields are not a reliable indicator of future income, and the amount of income paid could change over time.

Crooke mainly invests in companies based in developed areas like the US, the UK and Europe. He can invest in some from emerging markets, though these make up a small part of the trust. He can also invest in some smaller companies. Both smaller companies and emerging markets add risk. The trust can also use gearing (borrowing to invest), which adds risk.

The income focus of the trust means that it looks quite different from the average global investment trust. It has fewer investments in North America, where dividends tend to be lower, and a higher amount invested in the UK and Japan. Because of this, the trust could add some global diversification to an income-focused portfolio, or balance well with a more growth-focused global trust.

Find out more about Bankers Investment Trust including charges

Bankers Investment Trust Key Investor Information

Aberdeen Standard Asia Focus

Hugh Young is lead manager of Aberdeen Standard Asia Focus, alongside other experienced fund managers including Flavia Cheong and Gabriel Sacks.

Young is Chairman of Asia Pacific at abrdn (the new name for Aberdeen Standard Investments), and was instrumental in setting up the group's Asian equities strategy in the late 1980s. They also have the input of other team members, who are based across Asia, and the team has one of the longest records of investing in Asia.

This trust mainly invests in small businesses based across Asian markets. Investing in smaller companies can boost long-term growth, but also increases risk and the potential for losses. The trust invests across both established and less-developed economies like Thailand, India, Taiwan and Singapore. The trust can also use gearing (borrowing to invest), which adds risk.

The team aims to find companies that can generate long-term growth, which have been overlooked by others, and hold onto them for many years. They like companies in good financial health, run by robust and trustworthy management teams. The trust has a bias towards businesses that rely on growing consumer wealth, but aims to have at least some exposure to most major sectors.

The trust could help diversify a global investment portfolio, or the Asian part of a portfolio that’s focused on larger businesses. A combination of younger, smaller businesses with exposure to emerging markets makes the trust a higher-risk option. Periods of volatility should be expected, and a long-term investment horizon is essential.

Find out more about Aberdeen Standard Asia Focus including charges

Aberdeen Standard Asia Focus Trust Key Investor Information

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