F&C Investment Trust, Temple Bar and Fidelity European Values are among the investment trusts that financial advisers believe investors with one eye on retirement should be considering.
Having already picked out their trusts for millennials at the beginning of their investment journey, the same advisers delve into the closed-ended universe for middle-aged investors.
JP Morgan Claverhouse
First up is JP Morgan Claverhouse recommended by Philippa Maffioli, senior adviser at Blyth-Richmond Investment Managers, who highlighted its strong dividend growth and capital appreciation.
Managed by William Meadon and Callum Abbot the trust aims to provide a combination of capital and income growth by investing in around 60-80 UK stocks.
The trust has the ability to gear the portfolio between 5-20 per cent in cash in ‘normal market conditions’, it currently has 16 per cent gearing.
Performance of trust vs sector & index over 5yrs
Source: FE Analytics
Over five years the £370.3m trust has made a loss of 6.76 per cent, although this is less than the 10.47 per cent fall in the FTSE All Share index and a 17.64 per cent loss for the average IT UK Equity Income peer.
It is currently 16 per cent geared, trading at a 0.1 per cent premium to net asset value (NAV) as of 19 March 2020, has a 6.1 per cent yield, and ongoing charges of 0.75 per cent.
F&C Investment Trust
Maffioli’s second pick is the F&C Investment Trust – the first ever investment trust launched in 1868 – which is a long-term favourite of the adviser.
“I have been recommending F&C Investment Trust for over 20 years,” she said. “Due to its pedigree and the ongoing commitment of the management, I believe it is an essential component of everyone’s portfolio regardless of stage in life.
“I am keen to see it in a middle-aged person’s portfolio because of its sheer size and resulting diversity.
Maffioli added: “With its potential for capital growth and modest dividend, it is good for retirement, saving for school fees and leaving a legacy.”
The £3.7bn trust has been managed by Paul Niven since 2014 and invests in a portfolio of global equities but is also able to invest in unlisted securities and private equity. It has a portfolio comprising more than 500 companies in 35 countries.
F&C Investment Trust has made 15.43 per cent over past five years compared with a 30.03 per cent gain for the FTSE All World benchmark and a 24.71 per cent return for the IT Global sector average.
It is currently trading at an 18.8 per cent discount to NAV, is 13 per cent geared, has a yield of 1.99 per cent and ongoing charges of 0.57 per cent.
Fidelity European Values
Next up is Fidelity European Values chosen by Paul Chilver, associate & financial planning manager at Birkett Long, because of its focus on “an attractive equity region which has generally been out of favour in recent years”.
The £1bn trust is managed by veteran European equity investor Samuel Morse who employs a growth at a reasonable price strategy, choosing companies based on their prospects for producing dividends and delivering dividend growth – an indicator steady structural growth.
Companies are typically identified by their positive fundamentals, cash generation, lack of borrowing, and attractive valuations. He runs a fairly concentrated portfolio of 50-60 stocks with a typical holding period of three-to-five years.
Fidelity European Values made 17.04 per cent over the past five years, outperforming the IT Europe (-1.67 per cent) and the FTSE World Europe ex UK (10.58 per cent).
Performance of trust vs sector and benchmark over 5yrs
Source: FE Analytics
The five FE fundinfo Crown rated trust is currently at a 15.5 per cent discount, is 9 per cent geared, has a 3.4 per cent yield and has ongoing charges of 0.88 per cent.
BlackRock Greater Europe
Chilver’s second pick is another all-cap European equity strategy: the £290.1m BlackRock Greater Europe trust run by Samuel Vecht and Stefan Gries.
Unlike the Fidelity trust, however, the BlackRock Greater Europe trust will also invest in the ‘developing markets of Europe’.
The trust has made 21.77 per cent over the past five years, outperforming the FTSE World Europe ex UK (10.58 per cent) and IT Europe (-1.67 per cent).
It has ongoing charges of 1.08 per cent and is trading at a 12.6 per cent discount to NAV, and is 9 per cent geared.
Temple Bar
The final fund pick is Temple Bar Investment Trust, which Jim Harrison, director at Master Adviser said was ideal for the middle-aged investor with some time before entering retirement “but ought to have an eye on how they might replace their earned income when they do retire”.
“Growth stocks have been in the ascendancy for the past few years, though we have seen signs of that changing; investors with a long horizon would do well to consider Temple Bar, run by the veteran avoider of ‘ninja-grannies’, Alastair Mundy,” he said.
“Temple Bar will spend potentially lengthy periods where the share price suffers, but Mundy pays you handsomely to wait.”
Harrison added: “If the dividend growth rate is maintained, it’s more than possible that by the time you come to retire your yield-to-cost is high enough for you to disregard the day-to-day fluctuations of the share price.”
Mundy aims to outperform the FTSE All Share benchmark through investment in UK stocks. Running a contrarian approach, the manager aims to buy low and take advantage of investors overreaction to negative news creating company pricing anomalies.
However, Mundy’s value style has been out of favour for some time and has sold off heavily in the recent market downturn.
Performance of trust versus sector and index over the past 5yrs
Source: FE Analytics
As such, over the past five years it made a 34.99 per cent loss, falling heavier than the FTSE All Share (down 10.47 per cent) and the average IT UK Equity Income peer (-17.64 per cent).
It is currently trading at a discount of 7.5 per cent, is 19 per cent geared, a yield of 8.3 per cent and ongoing charges of 0.49 per cent.