The Edinburgh Investment Trust has returned 34 per cent over the past three years, compared to 19 per cent for the average trust in the sector in the same time period. He also runs the giant Invesco Perpetual Income and High Income funds, and the Keystone Investment Trust.
Barnett remarked that, ‘it is not always the best companies that make the best investments, sometimes the best investments are those that are being transformed. But we do look for sustainability of revenues, and companies that are not necessarily at the whim of economic cycles.’
Barnett added that, ‘for most of my time managing money, and certainly for most of the past ten years, politics has been a sideshow. The EU referendum result in the UK changed that, it marked a turning point and means that understanding the political backdrop has become of crucial importance. There are questions about how politics will affect the short-term, but also, following the US election result, about the sectors or areas that a government might intervene in.’
Barnett added, ‘it is hard to evaluate the day to day and week to week impact for 2017 of the Brexit negotiations. My job is to look at the medium term prospects and fundamentals for the businesses that I am invested in.’
The veteran investor next turned his thoughts to the outlook for sterling. He commented that, ‘the fall in sterling that we have seen has had a major impact on equity markets in the UK, particularly the FTSE 100 where the majority of earnings come from overseas, and those earnings in say, Dollars, are worth more when translated back.’
Barnett takes the view that, ‘there is a lot of nervousness already priced into sterling. I think on a three year view, a medium term view, the currency could rally from here. Knowing what will happen on a six month view is more difficult, and will depend a lot on how the UK government’s negotiations with the EU go, but on a medium term view, I think the currency could rally.’
Barnett is interested in the financials sector of the market. Amongst the holdings in which he is invested is Provident Financial, ‘this is a company that gives us exposure to the changing face of lending in the UK.’
Provident Financial is a doorstep lender that lends to consumers who may not have been able to borrow from banks as a consequence of the financial crisis.
Barnett is also keen on investing the theme of ageing populations and retirement planning in the UK, and as a result has investments in Legal and General and Aviva for this reason.
Turning his thoughts to the property sector, Barnett commented, ‘we like real estate because the companies can either act as a store of value, as our holding in Shaftsbury does, it is a central London focused property company and those assets should hold value over the long term and if there is turbulence. There are also property companies we like because of the income they generate, companies such as New River Retail, Assura Real Estate and Secura, are companies we like for income.’
The Edinburgh Investment Trust trades at a discount to net assets of 5.5 per cent.