CAUTIOUS OPTION

Charles Cade, head of investment trust research at WINS Research, points cautious investors in the direction of a well-run generalist trust. The shares of Bankers Investment Trust are ranked 20th out of 29 trusts in the Global Growth sector over three years to 28 February 2007. They have returned 66.59 per cent over that period, compared to a sector average of 74.69 per cent.

‘One generalist trust that we are recommending at the moment is Bankers. Alex Crooke, who runs the portfolio, is a very sensible manager with a very good track record, running a fund with an income growth bias. Crooke has done very well since he took over from Michael Moule nearly four years ago, generating strong performance from a combination of good stock selection and a value approach that sets Bankers apart from its peer group.’

He adds: ‘In addition, the trust’s shares are still on an attractive discount, supported by a buy-back programme that means volatility should be kept under control. The key thing about this trust for cautious investors is that although it is mainly invested in equities, it maintains a broadly diversified international portfolio and has an excellent long-term record of growing its dividend, which provides a degree of security for investors. It is a solid core holding that should provide a degree of protection if markets continue to be unsettled in the short term.’

Contact Henderson Global Investors
Tel: 020 7818 1818

BALANCED OPTION

Tim Cockerill, head of research at Rowan & Co, also highlights the attractions of a generalist trust for investors seeking a balance of risk and reward. The shares of Scottish Mortgage are ranked 12th out of 29 trusts in the Global Growth sector over three years to 28 February 2007. They have returned 80.23 per cent over that period, compared to a sector average of 74.69 per cent.

‘Scottish Mortgage is a global growth trust managed by James Anderson of Baillie Gifford. Currently, the two largest country weightings are the UK at 34 per cent and the US at 25 per cent, but James Anderson is looking for the best stocks irrespective of where they are geographically. For example, his second-largest stock is Petrobras of Brazil. This gives the trust a slightly eclectic feel, but the portfolio holds over 90 stocks. Baillie Gifford believes in long-term investment and looks for long-term opportunities, and it is this long-term view that drives the stock selection. Consequently, the focus is on 3-5 year forecasts and growth prospects are of key interest.’

Cockerill adds: ‘At the heart of this process is an emphasis on detailed fundamental research. Large-cap and mid-cap stocks dominate the portfolio. The trust is one of the largest in the sector, at £1.5 billion, which means it is unlikely to be disrupted by arbitrageurs and therefore very suited to investors who have a long time horizon.

‘It is also trading on a 14 per cent discount, which makes it attractive, and there is a share buy-back policy to control the discount.’

Contact Baillie Gifford & Co
Tel: 0800 917 2112



AGGRESSIVE OPTION

Paul Craig, fund manager at New Star Asset Management, points investors who are prepared to take a higher level of risk in the direction of a split capital trust. The shares of Jupiter Second Split are ranked 11th out of 14 trusts in the Split Capital â“ Packaged Units sector over one year to 28 February 2007. They have returned 12.07 per cent over that period, compared to a sector average of 14.48 per cent.

‘Split-capital trusts may not be everybody’s cup of tea, for obvious reasons, but for the less risk-averse investor the sector is certainly worth a look. I would highlight this trust because it provides a high-octane structure linked to a portfolio run by a focused manager with a high reputation, and all at a discount to NAV.’

‘The manager, Philip Gibbs, is well established and has a good track record; he manages money according to where he sees value and is not anchored to a benchmark. This gives Jupiter Second Split a more distinctive investment story than many split-capital trusts, and if he continues to deliver strong performance between now and the trust’s scheduled wind-up date of October 2009 then â“ given the fact that it is effectively two times geared â“ the returns could be very impressive. Of course, there are risks attaching to the split-capital structure; but when the dust settles, Jupiter Second Split could provide the strongest returns for those unafraid of split-capital investment trusts.’

Contact Jupiter Asset Management
Tel: 020 7412 0703

This article is from the April 2007 issue of What Investment.