Here we look at five that may appeal to someone searching for core funds for their 2014 ISA.Foreign & Colonial
The £2.2bn Foreign & Colonial investment trust is a global portfolio with strong retail support and is one of the largest on the market.
The fund is Britain’s oldest trust, having been launched in 1868, and has announced its 43rd annual dividend increase in a row, putting it among the trusts with the longest record of continual dividend increases. It currently yields 2.4 per cent.
Performance has been unexceptional for a number of years, although the fund remains slightly ahead of its benchmark over five years.
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
This week the trust announced that Jeremy Tigue will be replaced by manager Paul Niven after 17 years in the role. Tigue is retiring.
Ewan Lovett-Turner, analyst at Numis Securities, said: “It remains to be seen whether the appointment of Paul Niven as manager in place of Jeremy Tigue will have any material impact on the company’s investment strategy.”
“NAV performance in recent years has been solid, but not sufficient to stand out within the Global Growth sector or against market indices.”
“Given the strong demand for yield in a low interest rate environment, we believe that F&C IT’s policy to prioritise its dividend makes sense.”
“Given the new manager’s role as head of multi-asset investment, we believe that there may be a role in the future for alternative assets that are able to produce a stable income.”
Foreign & Colonial has ongoing charges of 0.5 per cent.
Witan
Witan is a £1.3bn trust with a fund of funds structure. Like Foreign & Colonial it has suffered a period of sluggish performance, but this appears to have turned around in recent years.
The fund outperformed the average global trust in 2012 and again in 2013.
Last year it returned 36.05 per cent in share price terms as the average trust in the sector made 20.98 per cent.
Performance of fund vs sector and benchmark over 3yrs
Source: FE Analytics
In share price terms the fund is now significantly ahead of the sector and benchmark over three years, returning 40.98 per cent.
The trust is another with a long history of increasing its dividend each year, having managed to do so for the last 39 years.
The yield is currently 2.2 per cent.
The trust is one of broker Winterflood’s picks this year for global equity exposure.
“Following the appointment of Andrew Bell as chief executive in 2010, this fund has seen a greater emphasis on active management,” Winterflood said.
“The enhanced index trackers have disappeared from the portfolio and only three of the 11 current managers pre-date 2010.”
“In our view, the list of external managers is now very strong and this has coincided with a pick-up in performance.”
Ongoing charges are 0.73 per cent prior to the imposition of a performance fee.
In total, charges were 1.01 per cent in 2012, according to the AIC.
It is on a discount of 6.3 per cent compared with a one-year average of 8.2 per cent.
Personal Assets
Mick Gilligan, head of research at Killik and Co, says that Sebastian Lyon’s Personal Assets Trust is a good one-stop shop for the retail investor.
The manager makes capital preservation his main aim and is bearish on the future for the world economy and equity markets. As a consequence, he has been keeping his fund defensively positioned.
He says that current valuations are too expensive for him to be willing to increase his equity exposure.
Data from FE Analytics shows the fund is down 7 per cent in share price terms this year, having been weighed down by exposure to gold and defensive equities.
Performance of fund vs sector and index over 3yrs
Source: FE Analytics
“Although it has been a little bit lacklustre over the last 12 months, it’s a very balanced portfolio and one you can buy and hold for the long-term and not worry too much about one year to the next,” he said.
“Where it will really start motoring would be if there’s a pick-up in inflation at some point, thanks to its holdings in gold and inflation-linked bonds.”
Personal Assets trust issues or buys back shares to keep its share price trading around NAV, therefore rarely deviates from the latter value.
Ongoing charges are 0.95 per cent.
RIT Capital Partners
Gilligan says that RIT Capital Partners is another good diversified fund to have seen performance struggle a bit in recent years.
“This one is balanced overall, but more exposed to equity markets,” Gilligan said.
“What it offers is, you have good management teams, they have got access to some very good private equity funds and hedge funds, too.”
“At the moment it is trading on a discount, having been on a premium for some years.”
Data from FE Analytics shows it has made just 5.68 per cent in share price terms over the past three years while the MSCI World index has risen 29.63 per cent.
The trust brought Ron Tabbouche on board to head up the management team in 2012. He outlined the changes he has been making in a recent FE Trustnet article.
Wayne Evans, financial planner at Heron House Financial Management, said: “This trust is the investment vehicle for Lord Rothschild’s family wealth and he still plays a very active role in the trust. It focuses on preserving investors’ capital while also achieving long-term growth.”
“The trust has an experienced in-house team, as well as outsourcing funds to third party expertise. It also invests in some very interesting private equity investments and strikes up good alliances with specialist investment groups.”
“Its defensive stance has hit short-term performance and now means the trust can be bought on an 8 per cent discount, which is cheap for a trust with an outstanding long-term record.”
The trust has ongoing charges of 0.65 per cent, inclusive of a performance fee.
Law Debenture
Gilligan also likes the £636m Law Debenture Corporation, managed by FE Alpha Manager James Henderson.
However, investors will have to pay a 10.1 per cent premium to buy it.
The premium derives in part from the fact that the investment trust also runs a profitable corporate advisory business.
It has a strong performance record, having made 69.72 per cent in share price terms over three years as the FTSE All Share has made 24.45 per cent.
“You get global exposure,” Gilligan said.
“The bias of that portfolio is that it’s very much geared to industrial sectors, so long-term themes such as air travel, and the proliferation of cars in Asia are things it should benefit from, mainly from UK companies.”
It has ongoing charges of just 0.45 per cent.
