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The good, the bad, and the ugly: 10 trusts on Sandham's radar

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by David Sandham on Mar 14, 2012 at 12:54

I have been keeping a close eye on investment trusts in order to pep up my portfolio for the New Model Adviser® Investment Trust Challenge. Here are some of the companies I have looked at but not invested in … yet.

Alliance Trust

This is the largest investment trust by capitalisation (almost £2.2 billion), but I am not a big fan. Performance has been nothing special: the shares have underperformed the FTSE World index over the past five years. On the plus side, the Total Expense Ratio is not too bad at 0.81%.

British Empire Securities

This is a large investment trust that uses a value investing approach. It selects shares of companies trading at a discount to their asset value. It is itself currently at a discount of 8% to its own NAV, and this could be a good buying opportunity. It was one of the early picks of Heron House’s Wayne Evans, who is the current leader in our competition.

Edinburgh Worldwide

Investors often overlook this medium-sized (£143 million market cap) trust in favour of the giant Scottish Mortgage, also managed at Baillie Gifford. But the shares have done better than Scottish Mortgage over recent months. Currently at a discount of 12%, it looks attractive.

Miton Worldwide Growth

Despite the name this investment trust has an Absolute Return mandate. Managed by Nick Greenwood, it invests in other investment trusts, for example those on very large discounts. For specialists only, and one would want to be careful about liquidity as its market cap is only £33 million.

Scottish Mortgage

One of the giants of the investment trust world (market cap £1.8 billion) this is also one of the cheapest in terms of management fees. Managed by James Anderson at Baillie Gifford, it has done well from stocks like Amazon and Chinese web company Baidu. The shares are currently at a 10.6% discount.

Foreign & Colonial

Managed by Jeremy Tigue, this is another giant (market cap £1.8 billion) investment trust. In addition to its listed investments (Vodafone, GlaxoSmithKline, BP) the company also holds private equity: this led to some hiccups last year, when a stake in unlisted Caithness Petroleum went wrong.

Pantheon International Participations

This investment trust is a fund of funds, where the underlying funds invest in private equity. I looked at it but preferred another private equity company - Princess Private Equity - because the latter is moving from a of fund of funds approach to a direct approach, which should offer more potential upside. The heavy discount (35%) is typical of the private equity sector.

Fidelity China Special Situations

I interviewed the manager of this fund, Anthony Bolton, recently, and was impressed by his candour and in facing up to the problems he has experienced. Currently at 85p, below the issue price of 100p, performance has disappointed its legions of private investors. However, Bolton could very well turn things around.

JP Morgan Japan Smaller Companies

This relatively small (£55 million market cap) investment trust, specialises not only in Japan but in smaller companies in the country. It’s an underperformer, the shares falling 11% over the last year, while the benchmark fell only 2%. It recently cut its management fee from 1.25% to 1%. I would not buy this until a clear sign of a turnaround.

BlackRock World Mining Trust

Managed by the widely-respected Evy Hambro, this company is a good way to play commodities. It has outperformed the HSBC Global Mining Index both in good times (three years and five years) and bad (last year). I think this company is a reliable way to get commodities exposure into a portfolio.

Find out more about the Investment Trust Challenge here

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  • Edinburgh Worldwide (Ordinary Share)
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  • Miton Worldwide Growth (Ordinary Share)
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  • Scottish Mortgage (Ordinary Share)
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  • Foreign & Colonial Investment Trust (Ordinary Share)
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  • Pantheon International (Ordinary Share)
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  • Fidelity China Special (Ordinary Share)
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  • JPMorgan Japan Smaller Cos (Ordinary Share)
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  • BlackRock World Mining Trust (Ordinary Share)
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