Five wealth managers reveal their top investment trust picks
Nigel Chapman, senior research analyst, James Brearley, Preston
‘Our top pick is RIT Capital Partners. We believe the current environment plays to the strengths of the trust’s pragmatic investment approach and focus on capital preservation.
‘Since Ron Tabbouche took the helm two years ago, the fund has become more focused, and recent performance has been encouraging after being held back by its cautious approach as markets rebounded in 2012.
‘The buoyant equity market is providing opportunities for realisations from private equity assets, which are back-ended. The trust also continues to benefit from the experience of chair Lord Rothschild, and can take advantage of opportunities not available to the majority of private investors.
‘With the discount now in line with the peer group for the first time in a decade, and greatly encouraged by more recent performance, we are confident in the trust’s return to form.’
Peter Askew, senior fund manager, T Bailey Asset Management, Nottingham
‘At a time when most fixed income investments are at artificially low yields due to quantitative easing (QE), the multi-asset investor must look beyond the conventional to find assets that can deliver the appropriate yield without undue duration or credit risk.
‘The SQN Asset Finance Income fund has a targeted yield of 7.25% and minimal interest rate risk, as returns are secured by hard, business-essential assets on equipment leases. The assets leased out typically have a high residual value and a long economic life, giving further security to SQN’s investors.
‘It offers predictable cashflows, collateral and an implicit inflation link, all with a low correlation to other asset classes.’
Tim Wishart, senior investment director, PSigma, Edinburgh
‘Templeton Emerging Markets is our top investment trust pick. We believe emerging markets are incredibly attractive at present but we remain conscious of the risks that remain.
‘Those include a slowing growth trajectory, withdrawal of capital as the developed world concludes its QE programme, and the risk of a hard landing in China. However, these risks are now largely factored into markets.
‘The Templeton Emerging Markets team has one of the most distinguished long-term track records in the asset class, and has been an excellent steward of our capital for a number of years.
‘The fund remains well diversified, both regionally and at a sector level, and also trades at an attractive discount of 9.5%, in excess of the 6.7% average during the past five years.
‘Finally, we are comforted by the size of the trust, just shy of $2 billion (£1.17 billion), providing us with ample liquidity to purchase and sell shares as we see fit.’
Carl Baxter, investment manager, Redmayne-Bentley, Leeds
‘Murray International trust, run by Bruce Stout at Aberdeen, has long been a favoured investment to gain global equity exposure with a healthy dividend yield. It has around 70 investments, comprising predominantly global equities, but also 10% of the assets invested in fixed interest.
‘The trust has a combined weighting of 40% towards Asia-Pacific, Latin America and emerging markets, and consequently the underweight position in the UK and US has hurt recent performance. However, it has one of the better long-term track records in the Investment Companies sector.
‘The shares have traded at a premium since early 2008 and the premium has hit 12-13% on a couple of occasions during the past five years.
‘With the premium now down to 6% and a fully covered dividend yield of 4%, we believe the current valuation is an attractive entry point.’
Anthony Leatham, fund selection specialist, Investec Wealth & Investment, London
‘In the Global Growth sector, the Bankers Investment trust provides a pragmatic value-based approach with an emphasis on quality companies and income.
‘The trust is yielding around 2.5%, having just had its 47th year-on-year dividend increase. The ongoing charges are competitive at 0.47%, gearing is modest at 3% and the trust currently trades on a 2% discount.
‘We like this trust because of its consistency and all-weather resilience. It is well diversified and sensibly managed, and presents a dependable core holding for client portfolios over the longer term.’