Midas Investment Management’s Simon Reeks explains why he has moved heavily into investment trusts and is expecting good things from Thailand and India.
Last year, the Midas Balanced Portfolio was positioned with 25% in direct equities and 75% in investment trusts. Reeks held mostly blue chip stocks, including Burberry, Schroders, Siemens and Honeywell, but in recent months he has slowly moved out of direct equities and topped up his investment trust holdings to 95%.
‘You get diversification while you are waiting around for something to happen,’ he said, adding that the decent yields on offer from many investment trusts was also a factor.
However, Reeks believes some are now starting to look expensive so has begun trimming positions, slowly topping up cash reserves instead.
‘The BlackRock Greater Europe trust has 20% invested in Switzerland and 18% in Germany. Northern Europe is offering pretty good value, so that’s why we went into that fund. In some respects we were right, because the Dax rallied heavily last year,’ he said. ‘But we have been selling that off now the discount has narrowed.’
The portfolio has returned 21.2% including dividends over the year to 31 December 2012, compared to the FTSE All Share’s 12.3% return.
‘People want safety and you can get that here. And you can still outperform if you are in the right investment trust,’ he said.
A holding in BG Group was a dampener on performance, as the stock has fallen around 27%, but Reeks maintains the company was unfairly penalised after announcing a flat production forecast. ‘Ultimately we think it’s about the assets as opposed to the production figures, which was the reason for the initial drop.’
The portfolio has around 20% exposure to emerging markets and Reeks is especially positive on the outlook for Thailand this year.
He is looking at taking a position in Aberdeen New Thai and while he considers it too expensive at the moment, he is hoping Thailand’s complicated politics will provide attractive trading opportunities.
‘We think the country will probably go from strength to strength. The Aberdeen one would be quite a good investment trust to trade because the good thing about Thailand is there’s quite a big political divide – so there are bumps in the road and plenty of good entry points.’
Reeks is bullish on the outlook for India, although he does have reservations about the country’s corporate governance culture.
He has a holding in the JP Morgan Indian trust and expects to add to this if there are signs of commitment to a culture change.
‘We still believe in the Indian growth story,’ Reeks said.
‘All of the hallmarks are there for what should be a good place to invest but [India] needs to sort out the corporate governance issues.’