Unicorn’s Peter Walls: Three investment trusts I will hold for the next decade

Investing for the long-term is the ideal investment strategy, according to conventional wisdom, but knowing what is worth sticking with and when to cut your losses can be trickier.

FE fundinfo Alpha Manager, Peter Walls, runs the Unicorn Mastertrust, a portfolio of investment trusts, which he has managed since 2008, taking a long-term view on the trusts he holds.

Over his tenure, he has learned how to spot trusts that will be in his portfolio for decades as well as ones that will be a flash in the pan.

This has led to strong returns. Over 10 years it has made 206.4%, the sixth best in the IA Flexible Investment sector, as the below chart shows.

Performance of fund vs sector over 10yrs

Source: FE Analytics

Below, Walls suggests three trusts that he expects to still be holding in 2031.

Henderson Smaller Companies

First is the £899m Janus Henderson Smaller Companies investment trust, run by Neil Hermon.

Hermon looks for quality growth companies in the UK mid and small-cap space, only investing at what he deems is a reasonable price.

“The trust has outperformed its benchmark in all but two years since Hermon’s appointment in 2002,” Walls said.

Indeed over 10 years the trust is the fourth best performer in the IT UK Smaller Companies sector, returning 457.3%

Performance of trust vs sector over 10yrs

Source: FE Analytics

The fund has also increased its dividend every year for the past 18 years, an ideal trait for income seeking investors.

Some of the trusts main holdings fall into current major market themes that are expected to have longevity, such as Impax Asset Management Group, a company that has dedicated itself to the transition to a more sustainable global economy for more than 20 years.

The move to a more environmentally friendly economy is getting a lot of attention at present as government look to push towards a greener future.

Other stocks in the top 10 include housebuilders Bellway which plays into an ongoing demand for housing and video game developers Team17 Group, part of a dominant technology trend combined with at-home entertainment growing in popularity.

HarbourVest Global Private Equity (HVPE)

Another of Walls’ picks is IT Private Equity trust HarbourVest Global Private Equity, “a great private markets solution giving diversified exposure to high-quality private companies,” he said.

Indeed the FTSE 250 member invests in HarbourVest-managed funds, providing exposure to thousands of companies.

The $3bn (£2.2bn) trust is more than a decade old, launched in 2007 and domiciled in Guernsey. It is run by the HarbourVest Advisors team and has a strong long-term track record, generating the third best returns over 10 years.

Near term it has dropped down the performance tables to third quartile over one year, due to its high US allocation and its growth style which has struggled the past 12 months.

Since it launched in 2010 has retuned almost 500%, more than double the FTSE All World index and average IT Private Equity trust.

Performance of trust vs sector and index since launch

Source: FE Analytics

RIT Capital Partners

Walls also chose the £4bn RIT Capital Partners trust, the biggest trust in the IT Flexible Investment sector. Unlike the previous examples this is more of a defensive holding, providing less volatility versus stock market funds, Walls said.

The trust tends to lag in strongly performing markets but will hold up relatively well during market corrections, he noted.

This is evidenced in the 10 year returns. When equity markets have been on an almost constant, steady bull-run, the trust had a middling performance, however, it has made strong gains during times of market strife.

Indeed, last year it was above average compared with its peers and in 2018, when markets wobbled, the fund was a top-quartile performer.

It has also done well this year, when the market swung out of growth and into value during the economic reopening from the Covid pandemic. It has made the fourth best returns in the past 12 months.

Performance of trust vs sector over 10yrs

Source: FE Analytics

The trust invests globally but has a high allocation to North America and emerging markets.

Walls said that the trust is often likened to a ‘Family Office’, a privately held company that handles investment management and wealth for a family “usually one with more that $100m in assets,” Walls said.