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Emma Wall, Head of Investment Analysis, shares five investment trust ideas that could be worth keeping an eye on.
This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.
Investing in these investment trusts isn’t right for everyone. You should only invest if the trust’s objectives are aligned with your own, and there’s a specific need for the type of investment being made.
Closed-ended funds can trade at a discount or premium to the net asset value (NAV).
You should understand the specific risks of a trust before investing, and make sure any new investment forms part of a diversified portfolio.
You’d be forgiven for feeling a little apprehensive about the outlook for 2021. Rewind 12 months ago, and few could’ve predicted what 2020 would hold.
January last year was an optimistic month. The International Monetary Fund was predicting the global economy to grow by 3.3% in 2020 and the FTSE 100 was within touching distance of an all-time high .
And then, just a few months later, the coronavirus pandemic devastated both global stock markets and the economic outlook.
However, successful investing is about time in the market, not timing the market. There will always be a reason not to invest, but with a long-term view and a well-diversified portfolio, you should be equipped to weather any market storms.
In this article, we look at five investment trusts that have different objectives and could be considered for a variety of portfolios.
These investment trusts aren’t just for 2021. If you are thinking about investing you should think about these ideas as potential building blocks for portfolios invested for the long-term. We think a sensible time horizon for investing is at least five years. All the investment trusts below have the flexibility to use gearing (borrowing to invest), which can add risk.
This article isn’t personal advice or a recommendation to invest, and remember all investments and any income they produce can fall as well as rise in value – you could get back less than you invest. If you’re not sure an investment is right for you, please seek advice.
Personal Assets is managed by Sebastian Lyon, founder of Troy Asset Management. Lyon follows the Troy investment process for this mixed-asset trust, which is focused on trying to retain value over the long term.
He invests in quality stocks blended with bonds, cash and gold with the aim of growing shareholder’s investments through the market cycle. Typically the trust has lagged a market rally, but offered some shelter in a downturn. As with any investment, this is not guaranteed.
The trust has the flexibility to use gearing (borrowing to invest), but hasn’t at any point as the manager believes it goes against the core principle of sheltering assets. It can also use derivatives, which could increase risk.
This trust is known as one of the Association of Investment Companies (AIC) Dividend Heroes – it’s managed to grow its dividend for more than 50 years, but this isn’t a guide to future income.
While manager Job Curtis hasn’t been at the helm for quite that long, he does boast a long track record. He’s managed the trust since July 1991.
The process favours quality, well-managed companies, chosen because Curtis believes they’ll regularly add to the trust’s income pay-out. Though income, like returns, aren’t guaranteed and past performance is not a guide to the future. The manager can also use derivatives, which can add risk.
He looks for companies that make plenty of cash, and are conservatively run, in his view. This trust could be considered for a portfolio designed for income, looking to add investment to UK companies.
Another of the Association of Investment Companies (AIC) Dividend Heroes, Bankers 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. Most of those are from developed countries like the US, the UK and Japan. He also invests in some from emerging markets, as well as some smaller companies, both of which add risk.
The income focus of the trust means that it looks quite different from the average global investment trust. It has less investments in North America, and a higher amount invested in the UK and Japan.
Because of this, the trust could add some global diversification for an income-focused portfolio, or balance well with a more growth-focused global trust.
The manager has the flexibility to use derivatives to help him invest, and gearing (borrowing to invest) which could increase returns but also adds risk as it could magnify losses.
This global equity trust is run by Paul Niven, head of BMO’s Multi-Asset Portfolio Management. It’s invested with the aim of delivering long-term growth. The portfolio is set up to meet that goal with 20% in tech stocks, and a further 15% in consumer companies.
Around 60% of the portfolio is invested in the US, with Europe and Asia making up a further 13% and 12% respectively. This trust could be used to add international investments to a UK-focused portfolio.
The modest investment in private companies could also boost growth potential and provide different returns to the stock market, as long as investors understand the risks.
The manager can use derivatives and has the flexibility to invest in smaller companies and emerging markets, all of which add risk.
Aberdeen Asia Focus is run by industry stalwart Hugh Young, helped by one of the most experienced teams investing in Asian companies. Young and the team look for ‘long-term quality’ stocks.
The trust aims to boost long-term growth through investing in smaller businesses across a wide range of Asian markets. These include both established and less-developed economies such as Thailand, India, Taiwan and Singapore.
The trust could help diversify a global portfolio, or the Asian part of a portfolio that is focused on larger businesses. A combination of younger, smaller businesses in emerging markets makes the trust a higher-risk option. It’s likely to go through times where prices swing sharply – a long-term investment horizon is essential.
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