NOW that we’re into the new financial year your thoughts may well have turned to how best to invest your money over the next 12 months and beyond.
But with Brexit uncertainty still holding back some people from making decisions how do you ensure you stay ahead of the pack when it comes to making the most shrewd investment decisions?
Steve Whiteway, Chartered Financial Adviser and founding partner of The Independent Asset Management Company, said: “It’s encouraging to know that there is selectively good value to be found in the Investment Trust sector.
“Most private investors, and Financial Advisers, concentrate on the open-ended fund sector (OEICS) as funds are simpler to understand and have a much bigger marketing budget.
“The Investment Trust sector may be much smaller and more complex but there are many hidden gems and some investment companies have been around for more than 100 years, something which makes them the envy of the open-ended sector.”
Steve said: “We look for funds that are unfashionable right now so that we can pick them up at a substantial discount to their underlying net asset value – again something that you will never be able to do in the open-ended fund sector.”
Steve highlights five investment ideas to help you make the most of your money in 2019 and beyond.
Two of the funds that Steve highlights - JP Morgan Multi Asset and Law Debenture Corporation - could be used as core holdings, the others are likely to prove more volatile and should be bought as complementary holdings to your portfolio.
1. UK Smaller Companies
North Atlantic Smaller Companies
Managed by Christopher Mills (who owns a £30 million plus shareholding in the trust), this eclectic trust is run on a long-term total return basis and the portfolio has a private equity style feel to it.
Despite the name it has a large percentage of its holdings in UK Smaller Companies but manages its currency exposure entirely separately being largely US$ – not a bad thing in my opinion!
It has a tremendous long term-track record but it is a small Trust and so largely shunned by institutional investors and the shares currently sit on a 22% discount to their underlying asset value. A rare bargain in today’s investment climate given the long-term performance record and the fact that 28% currently sits in US Treasury Bills.
Montanaro UK Smaller Companies
A well-known European investment manager specialising in smaller companies, but a relatively poor long-term performance and a currently unloved sector adds up to a discount to NAV of 17%.
My interest was sparked by a management and strategy change on the fund which is beginning to show up in steadily improving performance; a quality underlying portfolio should underpin a strong return with a medium to long-term time horizon.
This trust would make a good complement to the North Atlantic Smaller Companies Trust.
2. Multi Asset
JP Morgan Multi Asset
This trust only launched in 2018 and is perhaps an odd choice for a new launch from one of the world’s largest and highly-regarded financial institutions.
The portfolio is biased to US Equities but includes bonds and a small percentage in other investments.
The discount has drifted out since launch and is close to 10% at the time of writing – given the quality of the management and the underlying portfolio I think this is an anomaly that will close in time assuming a reasonable investment performance is delivered – potentially providing a strong return on a three-year view with limited downside risk.
3. Emerging Markets
JP Morgan Emerging Markets
A sector often underweighted by investors but likely to perform strongly in the long run; sentiment has improved though the US/China trade ‘war’ is clearly holding strong progress back. This trust is simply the ‘class act’ in the sector and currently sits on a 10% discount to NAV having closed from 13% in the last few months – buy now whilst stocks last!
Law Debenture Corporation
Managed by James Henderson. A good core holding but its value bias means that returns look modest over the last few years relative to its peer group.
Not that the returns have been poor, just that they have been trounced by investors rush to growth stocks.
Nothing lasts forever, however, and at some point value will return and this fund is well positioned to take advantage – while you wait you can enjoy one of the lowest annual management costs around for an active fund (0.30%), unusually deducted from the income account not capital, and it still provides a dividend yield of over 3% per annum.
Uniquely the Trust also owns and operates its own fiduciary business which provides a significant boost to the income account. Current discount to NAV: 9%.
F&C Commercial Property
The granddaddy of the sector run by the esteemed Foreign & Colonial with assets well north of £1 billion.
Does what it says on the tin – buys and holds a portfolio of UK Commercial Properties.
The discount on this fund has now widened to around 14% - it has in fact spent much of its life trading on a small premium so at any other time this would look like a no brainer.
The reason for this apparent largesse? Brexit and, in truth, the Trust’s 22% exposure to UK retail property, a sector arguably as unloved as it is possible to get but with good reason.
The trust is yielding around 5% which looks safe and the much feared hard Brexit scenario now looks very remote.
I think the discount must be nearing its widest point; the portfolio has modest gearing and the quality of its tenants is high – the share price is down from a high of £1.52 only six months ago to around £1.18, so for those who want to diversify away from equities and with that fat yield growing tax free in a Pension or ISA, it’s a good each way bet.
The Independent Asset Management Company serves a wide range of legal and accountancy firms as well as individual clients across the UK.
Steve Whiteway is a founding partner of the business, whose partners have amassed more than eight decades of experience in regulated financial planning.
IAM currently manages portfolios between £50,000 and £10,000,000 with the average investor portfolio being approximately £450,000
Partners pride themselves on offering bespoke advice and recommendations tailored to clients’ own objectives and risk profile.
Headquarters are located in Grange-over-Sands, Cumbria. www.iamcompany.co.uk