For investors that prefer the closed ended structure of investment trusts over open ended funds, Ryan Hughes, head of active portfolios at AJ Bell, looks at four investment trusts they could consider for their portfolios in 2020:
Cautious – Personal Assets
“For cautious investors, 2019 has turned into a very positive year with lower risk assets such as bonds performing strongly. Looking forwards, I think it is fair to assume returns for 2020 are likely to be more muted and therefore looking for a trust that has preservation of capital at the forefront of its thinking could be a useful starting point. The Personal Assets Trust, managed by Troy’s Sebastian Lyon operates with an absolute return mind set and operates with a diversified portfolio that includes high quality equities such as Microsoft, Nestle and Unilever, short dated government bonds, cash and gold. Avoiding loss of capital is a primary consideration and therefore this trust makes for an interesting first holding for a cautious investor just making their way with investments, not least because it gives an instantly diversified portfolio in just one holding.”
Balanced – Temple Bar
“Balanced investors have been well rewarded this year with equities doing well but the UK has been a laggard given concerns over Brexit and slowing growth. As the end of the year approaches, we may be moving closer to a resolution and this could help UK equities regain some of the ground against their overseas counterparts. Tempe Bar is managed by Alistair Mundy of Investec and operates with a contrarian investment approach, focusing on companies that are very much out of favour. Domestically focused companies in the UK have been left behind over the past three years as overseas earners have benefited from a weakening currency but this could reverse in 2020. The trust has a solid yield of over 4% and an OCF of 0.48% making it a relative low cost way of gaining actively managed UK equity exposure.”
Adventurous – Coupland Cardiff Japan Income & Growth
“Japan continues to be a market that is seemingly in a constant struggle to rise out of the doldrums. However, beneath the headline weakness, there is significant corporate change occurring which is making companies more focused on delivering shareholders returns. The Coupland Cardiff Japan Income & Growth Trust looks to capitalise on this changing dynamic with a focus on those companies that offer stable or growing yields. With a strong bottom up process, overseen by an experienced manager in Richard Ashton, this trust has a well-developed philosophy and process in place that is comfortable investing away from the benchmark and taking a long term view. The trust has an above market yield and sits at a small discount at the time of writing.”
Income seekers – City of London
“The UK market has always had a strong dividend culture and this has resulted in an excellent range of choices for income seeking investors. City of London is one of the most famous investment trusts in the UK, tracing its pedigree back to 1891 with current manager Job Curtis in place since 1991. With the UK having been out of favour, solid yields are now available with the trust yielding 4.5% from a dividend which is paid quarterly making it useful for income seekers. Combine this with a hugely experienced manager, a track record of increasing dividends for 52 years and one of the lowest OCFs in the market at 0.39% and you have a trust that is well placed for income seekers and also those who want to reinvest that income over time.”