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Investment Trusts: discount master looks to Europe for value
Peter Walls, manager of the Unicorn Mastertrust, explains how deeply discounted investment trusts can provide buying opportunities in places like Europe.
Markets
Buying into investment trusts can be a tricky business with shares swinging between discounts and premiums and some trusts issuing multiple share classes.
But an ability to see past low sentiment and market swings, driving down share price and widening discounts, can help you pick out some bargains. Peter Walls, fund manager at Unicorn, is constantly on the lookout for discounted quality investment trusts for the Mastertrust portfolio, and says a discount doesn’t always mean a trust is a bad buy.
Walls says: ‘People like to buy things that have already come up and sell things that have gone down which creates discount volatility. It gives me the opportunity to review my positions and forces me to be a contrarian.
‘The link between strong recent performance and discount narrowing tend to encourage me to look to top slice or realise investments where the asset value has been performing well, the discount has narrowed in and recycle that in to more deeply discounted opportunities.’
Investing in Europe
The Mastertrust’s top holdings rack up a few of the areas and sectors investors have been keen to avoid with problems in the eurozone and market volatility. Trusts focusing on Japan, private equity and small companies all feature in the fund's top ten.
‘If I believe in the quality of the fund manager and I think if I can add a bit of spice at the margins of these things it gives me a little more edge and the chance of outperforming but I’m not one to bet the ranch,’ said Walls (pictured).
‘I’m not generally inclined to buy well-known trusts like Foreign & Colonial investment trust and Alliance . I think there’s a lot of wealth managers and individuals, if they like investment trusts they can do that for themselves so I’m trying to get a bit more specialisation funds in the portfolio and really investing for the long term.
One of the much under-loved sectors Wall has been looking to is Europe, which is trading at an average discount of 10.6%, with investments in the Fidelity European Values and the Jupiter European Opportunities trusts.
Walls explains: ‘In both cases these funds are exposed to core Europe rather than the periphery and because of all the travails and problems that we’ve had equity markets have been a tough place to be for a considerable time.’
‘Alexander Darwall at Jupiter, is someone with a really strong but long-term record with a high conviction to what he does. The manager has clearly aligned his interests with shareholders with about £15 million of his own money invested.
‘There are a number of funds on the list where the managers believe in eating their own cooking. That’s true of Acorn Income fund, North Atlantic Smaller companies and the Independent investment trust.’
The Unicorn Mastertrust has returned 91.2% over the past three years compared to the FTSE All Share/Equity Investment Instruments total returns of 70.6%. Electra Private Equity is the trust’s biggest holding making up 6.4% of the portfolio, along with North Atlantic Smaller Companies and BH Global .
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Look up the investment trusts
- British Empire Securities (Ordinary Share)
- Fidelity European Values (Ordinary Share)
- Jupiter European Opportunities (Ordinary Share)
- Acorn Income Fund (Ordinary Share)
- North Atlantic Smaller Cos (Ordinary Share)
- BH Global GBP (Ordinary Share)
- Caledonia Investments (Ordinary Share)
- Foreign & Colonial Investment Trust (Ordinary Share)
- Alliance Trust (Ordinary Share)
- Electra Private Equity (Spl) (Ord Income)
- Independent (Ordinary Share)
Look up the fund managers
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2 comments so far. Why not have your say?
Antonio VIvaldi
May 15, 2012 at 08:27
This counts as expert analysis does it? How about licking your finger, sticking it up in the wind and saying "hmmmmmm"?
report thisJohn Osborne
May 16, 2012 at 19:59
Caelainn, Thanks for reporting this. Peter Walls usually knows what he is talking about. In my opinion, his views are far more valuable than some well known over-rated retail fund group manager just pumping up his (often underperforming) fund.
We do not necessarily agree in the short-term with all his choices, but his job is to follow the sector and spot value and performance so always interesting to hear what he looking at, buying and thinking about.
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