CAUTIOUS OPTION
Daniel Lockyer, investment trust analyst at iimia MitonOptimal, suggests that cautious investors stick with one of the stalwarts of the generalist brigade. Shares of Scottish American Investment Trust are ranked second out of six trusts in the Global Growth and Income sector over three years to 31 March 2008. They have returned 29.59 per cent over that period, compared with a sector average of 39.46 per cent.

‘Scottish American Investment Trust is regarded as a Global Growth & Income fund, but it is evolving into a kind of multi-asset trust. Managed by Patrick Edwardson at Baillie Gifford, it has exposure to areas like timber and private equity and a bond portfolio, which includes some more esoteric issues alongside more conventional corporate bonds. The fund has always had an emphasis on generating a rising level of income, which helps to underpin the portfolio during times of stress.’

He adds, ‘If you compare this portfolio to things like funds of hedge funds, it looks attractive, sitting on a 13 per cent discount with this evolving mandate. Our view is that, on the basis of its equity portfolio alone, it should be rerated, but then you have all these other things in the portfolio as well. I like Baillie Gifford because it invests its global funds on a truly global basis. It doesn’t just buy the top ten stocks in the UK and the top ten in the US and so on, but it truly evaluates companies on a global basis.’

BALANCED OPTIONNick Roberts, fund analyst at Williams de Broë, also focuses on a global portfolio for investors prepared to go a little further up the risk scale.

The shares of EP Global Opportunities Trust are ranked 28th out of 30 trusts in the Global Growth sector over three years to 31 March 2008. They have returned
10.48 per cent over that period, compared with a sector average of 42.34 per cent.

‘EP Global Opportunities is run by Edinburgh Partners, little known within the investment community and employing a sensible investment process that has yielded strong performances. We rate the team highly and admire their robust investment process.

‘Recent share price performance has been poor, a result of both the discount widening and weak NAV growth. In a market that has been driven by momentum, the team’s value bias has hurt; however, over the medium to long run we expect strong outperformance.’

He adds, ‘As a result of this weakness, the fund looks attractive as it is on a 10.5 per cent discount – cheap relative to its sector, which has an average 6.5 per cent discount.
‘Not only does it have a deep value portfolio, but most of it is invested outside the UK, so should benefit from any continued sterling weakness. This trust rarely trades at such a discount, and it provides a good opportunity to gain access to the team’s best global ideas.’