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So a Memestock was my first Stock. What Now?
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Some further thoughts on Investment Trusts and Trust Managers.
Recently it was announced that the investment manager of Scottish Mortgage, James Anderson, is retiring next year. With ITs it is vital to keep an eye on the manager, and who managed it in the past. IT managers can have their own style (and luck!) that can massively affect the performance of the trust. When you are looking at past performance of an IT, you have to account for the manager - if a new one was appointed last year, the IT performance 3 years ago is of limited use. But if the manager has been in charge, and successful, for a long time then past performance is useful. Of course, past performance does not guarantee anything, but if a manager consistently beats his index it does mean something.
That said, a change in manager might not result in a significant change in philosophy and performance, particularly if an assistant from the same firm is taking over. This is the case with SMT, Baille Gifford remain in charge, and an experienced deputy is taking over. The same is happening with Monks. This is the ideal form of transfer, if the manager has been successful. A change in manager can also be a massive shot in the arm for an under-performing trust, case in point is Temple Bar.
Trust investment managers differ wildly: James Anderson is a dedicated (and wildly successful) Growth style investor. Peter Spiller, manager of CGT for coming up on 40 years is a far more conservative, Value style investor (also extremely successful). Some managers are also "active" managers. Take Christopher Mills of North Atlantic Smaller Companies, he specializes in getting positions in companies, then actually going in and forcing changes, forcing out and replacing company managers etc. He has been fantastically successful for decades and has a "value" style philosophy.
North Atlantic Smaller Companies (NAS)
This trust, ran by the aforementioned Mills, has been extremely successful for a long time, consistently beating the GBP adjusted S&P500. It is focused on small caps around the north Atlantic - basically the UK and some in America. It holds shares in other companies and investment vehicles, but it also takes some companies private. This trust can be hard to get data on (hence me not mentioning it earlier until I did my research) as it is not registered with trustnet or the AIC. This initially made me a bit wary of it, but having read up a lot on it I think it is a good buy, so it is my 9th stock.
Another useful indicator regarding managers and trusts, is the amount of shares in the trust they own, or "skin in the game". The theory is that if they own a substantial amount of it they will be careful and prudent with the trust. Mills owns about 25%. Mills is in his late sixties, so what will happen when he retires? Well, all indications are that he will go on for a while yet. It is suspected that when he does call it a day the trust will be liquidated in an orderly fashion with investors getting paid out, all going to plan, something approaching the NAV. It is worth noting that it currently trades at a discount of around 28%. The largest institutional holder of shares in NAS is the aforementioned CGT who are big fans of it.
Anyway I could go on, but the annual reports and such are all there to read... Tl:dr NAS is a buy because of the managers great record, the attractive discount, because I think there is lots of value in the UK in general.
Finally, I would say again that I could be wrong on everything, and I would be sympathetic with any suggestion that splitting such a small initial sum over 9 stocks is not the best idea, especially with the commissions, but I have explained why previously, and as the sums grow (hopefully), both the size of the portfolio and the amount invested regularly, over time it will balance out. We will see!
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Great report e.l.r.
Did you do any investigation I to the Real Estate trusts ?0 -
Great report e.l.r.
Did you do any investigation I to the Real Estate trusts ?
Regarding real estate, the first thing to decide is what type you want to invest in, or do you just want to invest in real estate in general? My feeling is to pick a sector of real estate and back it, decide whether retail, commercial (offices), residential or industrial will do better.
Commercial is a bit of an unknown, many people are saying that wfh will cause a big change in office practice, and reduce the demand for office space. I am not convinced. I work in a large organization and this is something I know a bit about, and while people want to stay working from home, the general consensus is to have at least one day a week in the office, in practice probably two to three. For there to be any net reduction in required office space there will have to be "hot-desking". Once you get above entry to lower mid level employees this will not work. Giving up your office to share one with god knows who? Squabbling over desk space when too many come in on the one day? No chance. So I am not convinced the bearish projections on prime office space are at all warranted. I can see the appeal for places like call centers, if they can supervise properly with people wfh, but I'm not convinced, because younger and poorer people who are housesharing do not have the space to effectively work from home. I think, in the long term, offices are to stay. But I don't know really, too many unknowns.
Retail, rents from shops, you would think will decline as more people move online, but again I'm not too sure.
Residential, again I am not sure. We will have to see how it plays out. Some are saying wfh will see a big exodus from city apartments, I'm not too sure. You would think that people have fallen behind on rent due to job losses from Covid. In Ireland people will be screwed when PUP runs out and they have no job to go back to.
If I were to pick one type, it would be industrial/warehousing. In theory, warehouse leasing is good, as tenants spend loads of money kitting them out (so they won't move at the drop of a hat) and they have decade plus long leases, usually linked to inflation. Online shopping will presumably increase, so demand for warehouse space is going nowhere. Even if everyone is at home working in their living room, warehouse workers are not. The trust that is head of my list if I ever invest in a real estate trust is Tritax Big Box (I have some small exposure to this through CGT, it is 2% of CGTs assets) who specialize in this area, I can see this sector increasing, perhaps substantially. I can't see it totally collapsing, so this is why I think it is the best.0 -
Thanks ex loco for your very detailed posts regarding IT.
what is annoying for me is the £ in all of them. Somehow i see the £ as a weak link. Would love to invest in € IT.
What's your view on this?0 -
Thanks ex loco for your very detailed posts regarding IT.
what is annoying for me is the £ in all of them. Somehow i see the £ as a weak link. Would love to invest in € IT.
What's your view on this?
Whether it is quoted in GBP, USD, EUR, or whatever currency makes no difference in terms of how they are performing for you. What matters is the performance of the underlying equities they are invested in.0 -
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Whether it is quoted in GBP, USD, EUR, or whatever currency makes no difference in terms of how they are performing for you. What matters is the performance of the underlying equities they are invested in.
How is that right? If i strongly believe that GBP will go south if my investment is in GBP am I not affected?0 -
How is that right? If i strongly believe that GBP will go south if my investment is in GBP am I not affected?
Let’s say an IT is 100% invested in US equity, and one share is worth 10 GBP at today’s price.
If next week the US stock market is perfectly stable and the GPB loses half of its value against the dollar, the outcome is that each share of your IT will be worth 20 GBP (the IT is listed in GBP but none of the underlying assets are GBP assets, so if the value of the GBP drops the share price of the IT increases accordingly because the GBP value of those assets is increasing).
So at the end of the day, yes the pound has lost 50% of its value, but it makes no difference to you as your shares are also worth twice as much in pounds (I.e. they have been flat in dollars).
So what should matter to you if you don’t want GBP exposure isn’t the currency in what an IT/ETF/fund is listen, but you should look at the details of their holdings and see if they own many GBP assets or even are holding cash in GBP.
And it is a different discussion, but I personally wouldn’t be so bearish on the pound vs the euro. It looks like the UK are starting to tighten their fiscal and monetary policies while the rest of Europe is going the opposite direction. I won’t be making any strong directional bet and I will just diversify my cash holdings, but this could actually be headwind for the euro.0 -
Let’s say an IT is 100% invested in US equity, and one share is worth 10 GBP at today’s price.
If next week the US stock market is perfectly stable and the GPB loses half of its value against the dollar, the outcome is that each share of your IT will be worth 20 GBP (the IT is listed in GBP but none of the underlying assets are GBP assets, so if the value of the GBP drops the share price of the IT increases accordingly because the GBP value of those assets is increasing).
So at the end of the day, yes the pound has lost 50% of its value, but it makes no difference to you as your shares are also worth twice as much in pounds (I.e. they have been flat in dollars).
And it is a different argument, but I personally wouldn’t be so bearish in the pound vs the euro. It looks like the UK are starting to tighten their fiscal and monetary policies while the rest of Europe is going the opposite direction. I won’t be making any string directional bet and I will just diversify my cash holdings, but this could actually be headwind for the euro.
Do you live in the UK. I dont. So my currency is EUR. Yes what you say is right for the investment's NAV. But not right for my pocket0 -
Do you live in the UK. I dont. So my currency is EUR. Yes what you say is right for the investment's NAV. But not right for my pocket
Why is it bad for your pocket?
What I am saying is that*, if the GBP loses half its value your share prices goes from 10 to 20 GBP (the share price eventually has to follow the NAV).
So the disposal value in euros of each of your share is unaffected (each pound is worth half to as much in euros, but your shares are also worth twice as many pounds so in the end the euro value is the exact same).
* assuming the IT is not invested in GBP assets0 -
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Thanks ex loco for your very detailed posts regarding IT.
what is annoying for me is the £ in all of them. Somehow i see the £ as a weak link. Would love to invest in € IT.
What's your view on this?
As Bob24 has outlined, this only really matters if the trust has invested solely in UK equities. If it owns a load of US equities, the price in pounds would increase if the value of the pound against the dollar decreased (materially).
With the trusts that are focused on the UK (like Temple Bar) currency changes can be an issue. However, I would be inclined to think that the GBP will actually do quite well - I have experienced an increase in the Euro value of my portfolio in the last two weeks solely due to currency gain. Even if it goes the other way at times, in the long run I do not think it will be an issue.
In fact, if the GBP suffers a devaluation/large depreciation, it would be a prime time to hoover up quality UK stocks which will be artificially repressed - when the devaluation crisis resolved itself you could get souped up returns - not only a return via the growth of the stocks from undervalued levels, but this would be turbocharged by an appreciation in the value of the GBP!
But in the long term (10, 15, 20 years) I expect it will all even itself out to be not much of a factor.0 -
I am still undecided on whether to go with ETFs, Investment Trusts, or even just Berkshire Hathaway for decent exposure.
Has anyone come cross any Investment Trusts that are non-dividend paying? I can't seem to find any, yet. Would prefer not to have to deal with the tax implications of dividends at all0 -
I am still undecided on whether to go with ETFs, Investment Trusts, or even just Berkshire Hathaway for decent exposure.
Has anyone come cross any Investment Trusts that are non-dividend paying? I can't seem to find any, yet. Would prefer not to have to deal with the tax implications of dividends at all
Look here for others with zero dividend yield: https://www.theaic.co.uk/aic/find-compare-investment-companies?sortid=NetDivYld&desc=false0 -
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Hi, im trying to buy into a few investment trusts on IB and its saying no trading permissions, any idea what I'm doing wrong?0
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Lamar Thoughtless Napkin wrote: »Go to Manage Account and Trading Experience & Permissions and see what is listed. May have to fill in a few details and apply there.
That’s what I was thinking, silly question but which one applies to investment trusts? I though I had that covered.0 -
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Lamar Thoughtless Napkin wrote: »Stocks, you need to have UK enabled.
That’s what I thought, it’s enabled! I’ll have to do some more digging.0 -
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Lamar Thoughtless Napkin wrote: »Have you been asked to send in ID and such?
Yes, all sorted, allowed me to do some trades after posting. Thanks0 -
An interesting monthly update from Ruffer:Ruffer Investment Company Limited
An alternative to alternative asset management
During March, the net asset value of the Company rose by 3.0% after allowing for the dividend
paid during the month. This compares with a rise of 4.0% in the FTSE All-Share index. Index-linked
gilts and cyclical equities were the main contributors to performance while options, gold and US indexlinked
bonds were a small drag on returns.
Closing the books on the first quarter, we are pleased to be up 7.3%. Global equities also had a good
start – the FTSE All-World was up 4.0% as investors started to visualise what a recovery will feel like.
Meanwhile, most multi-asset strategies and conventional portfolios were either side of breakeven.
Conventional portfolios have become, by design and by default (via benchmarking), wired to the
assets which performed well in the last market regime. That was a period of low economic growth and
falling inflation. In a nutshell, this equated to prioritising conventional bonds over inflation-linked
bonds, a preference for growth over value and for technology over everything. The problem is that in
the new regime these might all be the wrong trades.
Today, we expect an economic boom in the latter half of the year and hopefully into 2022. What is
the recipe? Take one part pent up animal spirits, mix with accumulated lockdown savings, pour on
lashings of stimulus – serve in a supply constrained glass. Even central bankers are in party mood –
they have said they will not take away the punchbowl until we have overshot policy objectives.
In this world, there will be ample opportunity for businesses that have survived covid to grow sales
and earnings – so the premium put on growth stocks will no longer be valid. Expect cyclical and value
stocks to perform best. In the bond market, the US ten year yield has more than tripled from the
August lows and sits at 1.7%, but it is still lower than where it ended 2019. This is where the real
conundrum lies. The Barclays Long Treasury Index is down over 20% since August, its worst fall in 40
years, reminding everyone there is still risk in this supposedly risk-free asset. Rising yields are also
starting to cause stresses elsewhere. The tide going out revealed Archegos and Greensill to be
swimming naked and gold is down 15% from the autumn peak where we were taking profits.
Our Chief Investment Officer, Henry Maxey, expands upon the idea that traditional portfolios are
going to get chomped by ‘Jurassic risk’ in our latest Ruffer Review. Of course, it is possible this is just a
cyclical upswing before disinflationary forces reassert themselves, but we think the game has changed.
For the new regime, investors need to be more creative in their diversification and protections.
Government and corporate bonds are a mathematically bounded asset class offering low returns and
limited protective qualities. We continue to see a competitive advantage in the expertise we have
accumulated in unconventional protections and also think index-linked bonds will become a key asset
class in the future.
As for inflation, as George Soros said “I’m not predicting it, I’m observing it.” Houses, used cars,
microchips, the cost of shipping – it’s happening right now. We have our protections and a game plan
in place.
I believe that CGT and RICA will play an important role in my portfolio. The hope would be that, should there be a crash, they will decline a lot less than my other trusts, or indeed the market in general. This was certainly the case last March. As I have previously stated the money I am investing is "not needed" you might wonder why not put the cash in 'riskier' trusts seen as I aim to ride out the market long term, and only switch into this type of defensive trust when it gets to the stage when I start wanting to extract profits. This is a fair question, and a good point. However, you never know what may happen and I wanted the facility to extract some funds at pretty much any-time, where they would not have to be sold at a low ebb.
So for example, if there is another downturn and my other trusts are very much under-preforming or at the bottom of a downturn and I suddenly need cash for whatever reason, I have the option of selling RICA or CGT which would (hopefully) only be down a little, rather than selling the likes of PCT or Monks which may be way down, and could rebound strongly. All going to plan though I won't be selling anything for a long time, so it may ultimately turn out I could have made more by investing in other trusts instead of RICA or CGT, but that is a price I am willing to pay.0 -
Lamar Thoughtless Napkin wrote: »
I believe that CGT and RICA will play an important role in my portfolio.
For sure in the current situation with regards to currency debasement and market volatility, it makes sense to have a couple of defensive trusts as a core position (and I would add gold or gold related equity).
My 2 choices are Ruffer and Personal Asset Trusts though. I like Ruffer because they are doing rather sophisticated stuff to edge the portfolio and are not afraid to go off the beaten tracks (with strict risk control) when they have strong conviction (for exemple their small Bitcoin exposure). And I like Personal Assets Trust because they have a very clear and tidy traditional defensive portfolio which is easy for anyone to understand and has proven to work fairly well. The reason I left out Capital Gearing is that their portfolio seems untidy to me and I didn't find it performed better than the other 2 so I go for what I understand.
Any reason you picked it over Personal Assets Trust?0 -
For sure in the current situation with regards to currency debasement and market volatility, it makes sense to have a couple of defensive trusts as a core position (and I would add gold or gold related equity).
My 2 choices are Ruffer and Personal Asset Trusts though. I like Ruffer because they are doing rather sophisticated stuff to edge the portfolio and are not afraid to go off the beaten tracks (with strict risk control) when they have strong conviction (for example their small Bitcoin exposure). And I like Personal Assets Trust because they have a very clear and tidy traditional defensive portfolio which is easy for anyone to understand and has proven to work fairly well. The reason I left out Capital Gearing is that their portfolio seems untidy to me and I didn't find it performed better than the other 2 so I go for what I understand.
Any reason you picked it over Personal Assets Trust?
I think the performance of PNL and CGT has been pretty similar over the long term, and CGT's manager has been at it for a very long time. CGTs portfolio is also a bit more diversified - untidy is one way to put it - but to be honest I do not think there is a huge amount to chose between them, particularly as both operate a firm discount/premium control mechanism. I agree on Ruffer, but there is the risk that it could plunge to a significant discount in a crisis (although if you have cash this would be a significant opportunity!)0 -
I suppose these two charts (notwithstanding the legitimate problems with charts like these) sum up CGT strengths:
But as I said PNL is great too, don't get me wrong, CGT just suited me better.0 -
Lamar Thoughtless Napkin wrote: »I agree on Ruffer, but there is the risk that it could plunge to a significant discount in a crisis (although if you have cash this would be a significant opportunity!)
Yeah for me this is a trust for which I trust (no pun intended :-)) the managers to go with tactical and possibly complex techniques to edge against market movement (and I know I am not necessarily fully aware of these as they might be complex and/or be applied at short notice).
There is some level of risk if they get it wrong, but actually in March last year they got their timing/edging perfectly right. The share price remained mostly flat while the market was tanking (while even though to some extend they did their job in the sense that they dampened the move, CGT and PNL did see a price drop at that time).
And yes Personal Asset Trust is around 500 euros a share. But I guess this is only relevant if someone is investing modest amounts and doesn't have access to fractional shares.0 -
Yeah for me this is a trust for which I trust (no pun intended :-)) the managers to go with tactical and possibly complex techniques to edge against market movement (and I know I am not necessarily fully aware of these as they might be complex and/or be applied at short notice).
There is some level of risk if they get it wrong, but actually in March last year they got their timing/edging perfectly right. The share price remained mostly flat while the market was tanking (while even though to some extend they did their job in the sense that they dampened the move, CGT and PNL did see a price drop at that time).
And yes Personal Asset Trust is around 500 euros a share. But I guess this is only relevant if someone is investing modest amounts and doesn't have access to fractional shares.
I don't have fractional shares on IBKR for UK sharesI don't think there is any way to enable it either. If I did I may well have gone for PNL, as I said I do not view them as massively different but the share price ruled PNL out for me and CGT are certainly, if not as good as, the next best thing.
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Speaking of Capital Gearing Trust, interesting interview this week on the Moneyweek Podcast with the manager Peter Spiller.
Podcast (and transcript) is here: https://moneyweek.com/investments/investment-strategy/603110/peter-spiller-how-to-not-lose-money-to-inflation-and
I thought his comments on gold were interesting, he has some in the portfolio but isn't a massive fan:MSW: OK, and we protect ourselves with, as discussed earlier, index-linked bonds, preferably US I think you said. And then should we also be holding large piles of gold?
PS: Not in our view. So we do have 2% in gold, short of 2% in gold, and it’s just worth discussing why that's the case. Why so little, given our views? The reason is that gold is supposed to trade at the same real price over time, it holds its real value over time. So, famously, I always recall being told earlier on in my career, the price of dinner at the Savoy had always cost the same amount of gold.
MSW: How much gold is that?
PS: I feel I don't have it in grammes. Because I'm afraid it's been disproved ever since because gold peaked at $850 in 1981, and then fell continuously, until what's generally known as the Gordon Brown low.
MSW: Poor Gordon Brown.
PS: Yes, it was bad luck wasn't it? It was $250 when he sold a lot of our gold. And it's rebounded enormously since. So whatever, whatever else it is, is not constant.
But more importantly than that, I think, is that the real price which is supposed to hold is calculable. We looked at what the price was in 1973, two years after Nixon closed the gold window. It was a pretty free market then, there was plenty of inflation around. I'm pretty sure that gold was not depressed at that time. And it was actually almost exactly $100 then, in 1973, and we applied the CPI in the United States to that, and you get a number, which is just under $600 per ounce. So it trades a very big premium to that.
Now, the circumstances where paying that premium might seem sensible are essentially where people think they might lose everything. So my favourite example would be something like instability in China, which might cause a lot of Chinese people to put maybe just 5% of their money into gold. And that would induce a very big price reaction indeed.
MSW: Interesting. So while, right now, in the past, you might have held gold as a hedge against inflation right now, you should probably be holding at least a small bet as a hedge against political crisis.
PS: Well, yes, because we're pretty convinced that TIPS [Treasury inflation-protected securities, ie, US index-linked bonds] are a much, much better protection against all moderate levels of inflation. So hyperinflation, gold has a role clearly. But against all foreseeable levels of inflation, we think Tips are much better protection.0 -
Lamar Thoughtless Napkin wrote: »Speaking of Capital Gearing Trust, interesting interview this week on the Moneyweek Podcast with the manager Peter Spiller.
Podcast (and transcript) is here: https://moneyweek.com/investments/investment-strategy/603110/peter-spiller-how-to-not-lose-money-to-inflation-and
I thought his comments on gold were interesting, he has some in the portfolio but isn't a massive fan:
I think he's suggesting that Gold etc is a good hedge for people in certain situations:
- Dodgy governments (Venezuela, China, Turkey etc)
- Countries with negative interest rates (Europe, Japan, US)
- Billionaires hedging against inflation.
It's not suitable.neccessary for everyone0 -
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I think he's suggesting that Gold etc is a good hedge for people in certain situations:
- Dodgy governments (Venezuela, China, Turkey etc)
- Countries with negative interest rates (Europe, Japan, US)
- Billionaires hedging against inflation.
It's not suitable.neccessary for everyone
His comments on Bitcoin were interesting, I have heard most of the arguments before (Bitcoin scares me, seems a gamble - I'm not averse to a flutter, but as an investment over 20 years it is far too risky for me) but the ESG one is new to me, and raises a very good point.
The link to the report references is in the Podcast hosts tweet below, it's interesting!
https://twitter.com/MerrynSW/status/13833437723862917200
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