We speak to four sub-35 wealth managers and analysts about an investment trust that has been a long-term favourite
JAYNA RANA
QUOTEDDATA
Former journalist Jayna Rana became an analyst less than a year ago when she joined QuotedData in May 2021. However, she has liked global equities proposition Alliance Trust (ATST) since she started writing about it for Investment Week six years ago.
“Formed in 1888, it’s survived countless recessions, two world wars and, when I first stumbled upon it as a fresh-faced investment journalist in 2015, the onslaught of an activist investor,” she said.
Since switching from an in-house investment team to an externally managed multi-manager approach on 1 April 2017, its share price rise of 62% has lagged its MSCI ACWI benchmark (67.3%) and the AIC global sector average (69.1%). However, Rana says the approach has borne the fruits of diversification: “It quickly made back the losses it suffered at the height of the Covid-19 pandemic.”
More recently, Alliance Trust has been using its investment clout for the greater good. It set a target to transition the portfolio to net zero greenhouse gas emissions by 2050 and excluding companies with significant exposure to thermal coal and tar sands. “This is the kind of company I’d invest in and one which sets an example for others,” added Rana.
KAMAL WARRAICH
CANACCORD GENUITY WEALTH MANAGEMENT
One of the longstanding stalwarts in portfolios run by Canaccord Genuity Wealth Management – held for around 15 years – is Finsbury Growth & Income Trust (FGT).
“It’s managed by Nick Train, who probably needs little introduction,” said investment analyst Kamal Warraich. “The trust has been a very efficient way to inject a healthy dose of quality into a portfolio. It’s competitively priced, has a great dividend track record and boasts stellar risk-adjusted returns over the long term.”
Over five years, its shares have risen 60.4%, significantly outperforming the AIC UK equity income sector average (39.8%) and the FTSE All-Share index (33.8%).
It is a punchy proposition. Train holds up to 30 stocks with the top ten accounting for 79.2% of assets at the end of October. Warraich warns that such a high level of concentration and focus on quality means there are times when stock-specific issues crop up or a market rotation to cyclicals or value stocks leaves performance lagging.
“We’re experiencing this today with Train’s style of investing being out of favour,” he said. “But history has taught us to be patient and look through these volatile periods for the potential of long-term rewards.”
STEVEN BEANEY
WH IRELAND
Steven Beaney has held other trusts for longer than the two years he has held Montanaro European Smaller Companies (MTE) but it is fast becoming a favourite.
The WH Ireland investment manager uses the continental European small-cap trusts as a complement to other European holdings, which are primarily invested in large caps.
Run by George Cooke, the trust has a bias towards ‘quality growth’ and held 57 investments at the end of October. Holdings included Swedish web-based accountancy platform Fortnox (a web based accountancy platform) and German laboratory equipment supplier Sartorius Stedim Biotech.
“The closed-end nature of investment trusts complements a small-cap strategy, as it can mitigate some of the issues that arise when dealing with less liquid stocks, protecting both the investor and manager,” said Beaney.
The small-cap universe in Europe has historically been a good hunting ground for active managers and Cooke has a stellar record. The trust is up 273.1% over five years, almost double a sector average of 141.2%.
“Perhaps my favouritism for this fund has come from this exceptional performance, but George’s ability to find dynamic businesses means I see myself holding this trust for many years to come,” added Beaney.
RYAN LIGHTFOOT-AMINOFF
CHELSEA FINANCIAL SERVICES
Ryan Lightfoot-Aminoff’s favourite investment trust is TR Property (TRY).It predominantly invests in pan European real estate equities.
“The property sector may not be the most popular right now, but the long-term returns of this vehicle have been exceptional,” said the senior research analyst at Chelsea Financial Services.
“Manager Marcus Phayre-Mudge is the definition of a star manager, almost systematically beating his benchmark time after time. His returns dominate not only this benchmark, but also the FTSE 100 and MSCI World indices over multiple time periods.”
Over five years the shares are up 102.8% versus an AIC property securities sector average of 62.9%.
Lightfoot-Aminoff believes the trust is particularly well positioned at present. Not only does real estate offer some much-vaunted inflation protection, but the trust is also well positioned structurally.
“There is a considerable weight to industrials, including exposure to the logistics space which has seen a strong boost from lockdown, accelerating established long-term trends,” he said.
The trust has a small allocation to physical property in the UK, too. “This means Marcus can have direct holdings where he sees opportunity, with a trust structure much more suited to this type of asset,” added Lightfoot-Aminoff.
BEN JOHNSON
CHARLES STANLEY
Charles Stanley is a strong advocate of investment trusts and has a number of longstanding recommendations. One that it has used since 2014 is HICL Infrastructure (HICL).
“It and the wider infrastructure trust sector have become essential tools for low- and medium-risk income accounts where investors struggle to get enough juice out of bond markets,” said collectives analyst Ben Johnson.
It hasn’t all been plain sailing for HICL, however. Its share price came under pressure in 2018 when public-private partnerships and private finance initiative projects were in the Labour Party’s sights.
“Sell-side research gave us reassurance about the resilience of HICL’s contracts, and we felt the market was being unduly pessimistic given its attractive long-term cashflows,” said Johnson.
It had another wobble in the first quarter of 2020 when its demand-based assets suffered during lockdowns and undermined dividend coverage.
“We remained patient and pleasingly these projects appear to be back on track,” said Johnson. “We continue to like the trust’s profile, with a very high degree of inflation linkage, high quality assets with strong counterparties and a well-supported dividend.”
Its shares boast the highest yield in the AIC infrastructure sector at 4.8%, according to Winterflood Securities.
Data source for performance figures is FE Analytics to 06.12.21