Taking a long-term approach to investing is commonly viewed as the best possible strategy, as chopping and changing a portfolio regularly is likely to be extremely costly and the chances of timing those trades correctly, in regard to market peak and troughs, are very low.
As such, investors are usually advised to take a buy, hold and forget about approach within their portfolio.
However, buying and holding funds for the long term is no guarantee that they will end up in positive territory.
Our data shows that many funds in the Investment Association universe are still down by a significant amount – up to 65 per cent- over the past 10 years such as the MFM Junior Oils Trust, Schroder ISF Global Energy and HSBC GIF Brazil Equity.
However, for the likes of Candriam Equities Biotechnology and MFM Slater Growth funds, hanging on has been very profitable over this same period.
Performance of funds over 10yrs
Source: FE Analytics
As Adrian Lowcock, head of investing at AXA Wealth, points out: “The statistics demonstrate that time in the market is more important than timing the market. Investing for the long term is the wisest course of action and as we have seen this week markets can swing back just as quickly as they fall.”
“Only if you had bought during the dot com bubble and subsequently sold at the lowest point of the financial crisis 10 years later you would have lost money. This fact highlights the importance of staying calm and not selling after markets have fallen.”
In this article we ask three professional fund pickers about which portfolios – they happen to all be investment trusts - they back for a 10-year time horizon.
Ben Conway, co-manager of the Hawksmoor Vanbrugh, says the £800m Monks Investment Trust has a very attractive current discount and investment process for a 10-year time horizon.
“If you are prepared to ride out the volatility it is a good vehicle for 10 or even 15-year time horizons if you are looking for long term growth and are not to wary of valuations,” he said.
“More broadly Baillie Gifford have an excellent long term track of growth equity investing. Monks has recently been taken over by the team who run their extremely successful Global Alpha franchise which is closed so it is a good way to access that team who run billions of pounds of institutional money.”
“Not many in the market yet realise what this means and what it means to start at a discount on this type of trust. You have a really good entry point because the market has fallen a bit recently and it is on a decent discount that should close.”
The major revamp of Monks took place in March 2015 including a refresh of its management, strategy and portfolio. Charles Plowden is now lead portfolio manager, supported by FE Alpha Manager Spencer Adair and Malcolm MacColl who are deputy portfolio managers.
Since then the trust has lost 13.01 per cent compared to an IT Global sector average loss of 9.02 per cent and a fall in the FTSE World index of 8.09 per cent
Performance of trust, sector and index since March 2015
Source: FE Analytics
Top 10 holdings include Royal Caribbean Cruises, Amazon, Alphabet (Google) and CRH.
The trust has a clean ongoing charges figure [OCF] of 1.42 per cent. It is on a discount of 0.58 per cent and 2 per cent gearing.
Premier’s Simon Evan-Cook says he tends to buy individual holdings for his funds, such as the £800m Premier Multi-Asset Distribution fund, for a ten-year time horizon at least.
The Fidelity Asian Values investment trust is one such fund he has bought for the longer term recently for his portfolio.
“We like Asia because valuations are at attractive levels, particularly relative to developed markets. An active approach is particularly well suited to this region, given their inefficiencies and wide valuations dispersals, and this small-cap focused trust is as nimble as it gets.”
The trust’s new manager, Nitin Bajaj who took over in April 2015, is also a factor for Evan-Cook.
“He is a talented value manager in the mould of Anthony Bolton. He was only appointed manager in April last year, creating a level of doubt that partly explains the discount the trust is now on, but we have confidence he is made of the right stuff. Attractive valuations and a talented, highly active manager are the main ingredients of outstanding long-term returns, and this trust has both of those.”
Performance of trust, sector and index since April 2015
Source: FE Analytics
The trust has an OCF of 1.42 per cent. It is on a discount of 11.7 per cent and no gearing.
Scottish Mortgage Investment Trust
Last up Charles Stanley Direct’s Rob Morgan says the Scottish Mortgage investment trust is looking very attractive following a recent fall in price and fall in its premium to close to zero.
“There is no longer a significant premium attached to the shares and I think over a 10-year view manager James Anderson’s highly focused strategy on the should continue to do well – a disciplined and high-conviction approach, exploiting key themes such as technological advances and how they can disrupt established business. One to buy and hold and ignore the inevitable volatility!”
This highly popular trust sits in the IT Global sector and invests in some of the most touted high growth stocks around, such as Amazon, Tesla Motors, Illumina, Google and Facebook.
The £2.9bn portfolio has been managed by James Anderson since 2000 since which, according to FE Analytics, it has gained 219.42 per cent over time, vastly more than its sector average and index. It is also top decile over three, five and 10 years in the IT Global sector.
Performance of trust, sector and index since 2000
Source: FE Analytics
Anderson was joined by Tom Slater in 2009, who is now co-manager. The two mangers use a largely thematic approach to their portfolio, which ignores quantitative methods of picking stocks more popular with many funds and trusts.
The trust is prone to greater volatility than both the index and its peers and 2015 was a difficult year for the strategy, with the portfolio down 16.39 per cent since June.
Scottish Mortgage has an OCF of 0.48 per cent. The trust is 10 per cent geared and is currently on a premium of 0.7 per cent.
