Investment trusts – Cautious and adventurous Isa picks – investment advisers give their views

5th March 2014


The Association of Investment Companies (AIC) has collated cautious and adventurous investment company ISA recommendations for this year’s Isa season. We collate their views below.

The AIC spoke to Jason Hollands, Managing Director Business & Communications at Bestinvest, Anna Sofat, Managing Director at Addidi Wealth, Wayne Evans, Financial Planner at Heron House Financial Management and Robin Keyte, Director, Keyte Chartered Financial Planners.

Advisers’ cautious ISA recommendations

Jason Hollands, Managing Director Business & Communications at Bestinvest, said: “Our pick for a more cautious investor looking for a decent return but where capital preservation is a key priority is Personal Assets Trust, managed by Troy Asset Management. This trust has a focus on generating absolute positive returns, rather than trying to beat an abstract market benchmark, through investing across a range of asset classes including quality equities, index-linked bonds, gold and cash. While in the boom times it will tend to lag its wholly equity-focused Global Growth sector peers, it has proven to be more resilient in tough markets and has been a significantly less volatile investment. Unusually Personal Assets Trust generated a negative return last year, after a spectacular rout in gold prices. We see this as a temporary blip on an otherwise exemplary record.”

Wayne Evans, Financial Planner at Heron House Financial Management, recommends RIT Capital Partners. He said: “This trust is the investment vehicle for Lord Rothschild’s family wealth and he still plays a very active role in the trust. It focusses on preserving investors’ capital while also achieving long-term growth. The trust has an experienced in-house team as well as outsourcing funds to third party expertise. It also invests in some very interesting private equity investments and strikes up good alliances with specialist investment groups. Its defensive stance has hit short-term performance and now means the trust can be bought on an 8% discount which is cheap for a trust with an outstanding long-term record.”

Anna SofatManaging Director at Addidi Wealth, recommends Finsbury Growth and Income. She said: “I like the Finsbury Growth & Income for more cautious investors. It has a good track record, is rated well (one of the few investment trusts with a Gold OBSR rating), and it is trading almost at Net Asset Value. This is a good fund for investors wanting active management in the global equity space.”

Robin KeyteDirector at Keyte Chartered Financial Planners, recommends Ruffer Investment Company. He said: “This investment company offers an unconstrained and dynamic asset allocation approach increasing or decreasing exposure to shares and other asset classes as and when the fund manager see fit with a view to generating a return ahead of inflation with limited volatility. This may seem a tall order but they have a good record of achieving this in differing economic circumstances. Their record helps us to overcome the cost of a share price premium of 1.2% over net asset value, the ongoing charge of 1.6% per annum and the low income yield of around 2% which might otherwise be off-putting.”

Advisers’ adventurous ISA recommendations

Jason Hollands, Managing Director Business & Communications at Bestinvest, recommends JP Morgan Emerging Markets. He said: “It takes guts to invest in a market when others are running for the exit but history suggests that “buy low, sell high” leads to better long-term returns than simply following the herd. Recently it has been emerging markets that have had a torrid run as concerns have mounted about the slowdown in China’s growth story and the withdrawal of QE by the US Federal Reserve has sucked assets back into the developed world. However for the truly long-term investor a major sell-off presents a potential buying opportunity and in this respect emerging market shares look like one of the few bargains to be had at the moment, though further short-term volatility can’t be ruled out. Value hunters should note that emerging market investment trusts also offer up discounts to NAV at the moment, unlike their open-ended cousins. One of our favoured trusts is JP Morgan Emerging Markets which is a fraction of the size of its open-ended sister fund, despite the better performance of the investment trust.”

Wayne Evans, Financial Planner at Heron House Financial Management, recommends Aberdeen Asian Smaller Companies. He said: “This trust has an excellent long term track record and is managed by the highly experienced Hugh Young and his team. Due to its outstanding long term performance, the trust frequently trades on a premium. Last year its performance was hit by declining Asian growth and more recently by problems in emerging markets amid concerns regarding American tapering. This trust is now on a 3.3% discount and although there may be further problems in Asia, I see this as a buying opportunity for long term investors.”

Robin KeyteDirector at Keyte Chartered Financial Planners, recommends Scottish Mortgage. He said: “This investment company offers an actively managed global equity portfolio at an incredibly competitive ongoing charge of just 0.51% per annum, undercutting similar OEIC and unit trust funds by an eye-watering 0.25% to 0.50% per annum. It is difficult to find better value for active fund management. I am delighted to say a number of our clients have done extraordinarily well with it, which perhaps explains the share price premium of 1.7% over net asset value. There is a modest gearing of 13% and a low dividend yield of 1.3% implying this fund is most suitable as a growth holding.”

Anna SofatManaging Director at Addidi Wealth, recommends Polar Capital Technology. She said: “The fundprovides exposure to two of the fastest growing sectors, technology and telecoms. It has a good track record and although it is trading at pretty much NAV and the charges are reasonable at around 1.2% per annum, I think there is still value in the sector. Although its specialist and has gearing, the volatility has been just above the equities in general and in 2008, the downside was not as much as might have been expected. It has worked well for clients wanting exposure to this sector.”

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