The Woodford Patient Capital Trust, Edinburgh IT and JPM Claverhouse Trust are among the portfolios FE Trustnet readers are looking to buy this year.
We are just one trading day into the New Year and worst of last year has partly re-emerged to investors’ dismay.
Yesterday brought more woe with Chinese authorities suspending trading in stock markets due to rapid price falls following weak economic data. The news hit markets with the FTSE 100 index closing more than 2 per cent down at time when tension is also escalating between the Middle East’s two major powers Saudi Arabia and Iran.
However, in accordance with tradition we continue to look at what investment vehicles readers are eyeing up for the year ahead. In this article we take a second look at what you are looking to buy to over the coming 12 months but this time focusing particularly on the closed-ended space.
The £330m JP Morgan Claverhouse Investment Trust is one such vehicle that cropped up among our readers, perhaps partly due to its current discount and well-regarded dividend history.
It is co-managed by William Meadon and Sarah Emly together since 2012 with Emly having previously been listed as manager since 2006.
Over the past three years the fund has returned 37.87 per cent compared to 26.37 per cent from the average trust in the sector and 11.34 per cent gain from the FTSE All Share.
Performance of trust, sector and index over 3yrs
Source: FE Analytics
Simon Elliott (pictured), head of research at Winterflood Securities says JP Morgan Claverhouse is a relatively mainstream UK Equity Income investment trust and is one of the cheapest constituents of its peer group, with a discount of 6 per cent.
As such, Elliott says it may be a good option for those who want core exposure to the UK dividend paying market.
“The average discount for the UK Equity Income sector is just 1 per cent at present. The fund has a market cap of £330m and an attractive yield of 3.6 per cent, which is in line with the average for its peer group.”
He says also investors benefit from a strong management team with Meadon an “experienced investor” and well placed given he is head of the JP Morgan Asset Management European Equity team.
The trust has an ongoing charges figure [OCF] of 0.68 per cent but also charges a performance fee. It is 13 per cent geared.
Woodford Patient Capital Trust
Perhaps unsurprisingly, this much vaunted trust was also flagged by several readers.
It has been a tough time for Neil Woodford’s latest trust which is less than one year old having launched back in May last year. Particularly so since it published its first quarterly results in August.
At that stage it was up 19.3 per cent whereas now it is up just 1 per cent. The trust is on a premium of 4.3 per cent today.
However, according to our data, it is beating FTSE All Share’s loss of 9.47 per cent but not the IT UK All Companies sector’s average return of 2.83 per cent.
Performance of trust, sector and index over 5yrs
Source: FE Analytics
Woodford manages the trust through his firm Woodford Investment Management, the company he founded after his exit from Invesco Perpetual last year, where he had worked for more than 25 years.
While still in its early stages and having a long-term strategy Charles Cade (pictured), head of investment companies research at Numis Securities, says the trust could see further pressure from investors selling this year.
“I put it at a sell when it got up to 14 per cent premium. It is an interesting mandate longer term but it is still unproven to a large degree. It does, however, have a very attractive fee structure,” he said.
“However, I do think the risk is there and the net asset value is down slightly since launch and for people who bought on higher levels they have lost money.”
"You tend to find that retail investors look after a year and think if something has not made money they don't hold on to it. They might start to lose patience. Albeit the mandate is very clear.
The fund has an innovative fee structure with no base fee and a performance fee of 15 per cent of any excess returns over a 10 per cent cumulative hurdle rate per annum, subject to a high watermark.
Perpetual Income & Growth, Edinburgh, Keystone or Invesco Perpetual Select UK Equity
Last up regular reader dlp6666 says he is impressed by the performance of Woodford’s successor at Invesco Perpetual FE Alpha Manager Mark Barnett and is looking to consolidate his holdings in these three trusts which are all managed by Barnett into one.
The manager has run Perpetual Income & Growth since 1999, Keystone since 2003, Invesco Perpetual Select UK Equity since 2006 and all have performed strongly against their sectors and the FTSE All Share consistently.
Barnett took over the Edinburgh IT in January 2014 following Woodford’s departure. According to FE Analytics, since this date it has been the best performer – although all have outperformed the FTSE All Share.
Performance of trusts NAV since January 2014
Source: FE Analytics
Cade says he’d opt for the Edinburgh IT despite it having the shortest period as Barnett being manager.
“Partly because it is the largest but also it has the lowest fee structure.”
He also says there is a generally a great similarity between the individual holdings within the portfolios.
“In theory Edinburgh is meant to be slightly larger cap versus Perpetual Income & Growth that has a bit more mid and small cap but it in practice they are pretty similar.”
“Also with Edinburgh you have a significant fee advantage. The fees were reduced after Woodford left and while they were reduced in Perpetual Income & Growth they didn’t come down by as much and there is a performance fee on that one whereas there isn’t on Edinburgh.”
Edinburgh charges an OCF of 0.61 per cent 0.87 per cent, Perpetual Income & Growth 0.65 per cent and Invesco Perpetual Select UK Equity 0.95 per cent. However, the latter three all also have performance fees.
