How I use Investment Trusts – Holly Mackay's view
Investment Trusts for me are the spice jars in the larder, to add a bit of kick to the main dish.
I have used Investment Trusts in my portfolio to do 2 jobs. Either I buy them because they are big solid super tanker collections of shares, managed with a low annual fee, which have a good pedigree and are run by a credible group. Or because they can offer access to spicier collections of investments from more specific regions, or more niche sectors.
In the super tanker category is the Scottish Mortgage Investment Trust which is arguably more of a cross-channel ferry at the moment, having shrunk in size dramatically since tech stocks blew up. However it’s sitting in my SIPP (Self Invested Personal Pension) and I’m not doing anything with this for at least another 10 years so I just ignore it. I like the company ethos and the people at Baillie Gifford, I think this trust has a good track record, and it’s currently on sale – about 30% less than it was a year ago to buy! I’ve held this for years and it’s still made me money. In the boom times during the pandemic (for this trust) I needed some work done outside so I sold a bit from my ISA, and spent £4k on a patio which is known as the Scottish Mortgage patio. Every dog has its day.
Another spicy holding I’ve had forever is the JPMorgan Emerging Markets trust. I think emerging markets have a compelling long-term story, and this vehicle is a very reputable way to access them. It’s pretty volatile but has had a great three months after a low last November, and many think emerging markets offer a more compelling opportunity at the moment than more established markets. This is another holding in my pension which has been there forever – I don’t fiddle with this one.
I have a very small amount invested in the BlackRock Latin American trust. I sat next to the manager at dinner one night and it was fascinating to hear him talk about the region and the difficulties of finding investible companies in some countries – 67% is in Brazil and 27% is in Mexico. Let’s just say corporate governance isn’t what it might be in all markets. I also hadn’t appreciated quite how much Latin America is a commodities play too. Super interesting and a good diversifier. Returns have been a bit off since I bought it but again I’m in no rush.
Another spicy holding I have is the Fidelity China Special Situations trust. I bought this in November last year and it’s had a good run since then. I find China fascinating to watch but again – this is not for the faint-hearted or short-termers. It’s in the SIPP and I’ll leave it there.
I definitely use Investment Trusts to access less liquid, less well-researched markets, as well as just sit tight in the big old juggernaut that is Scottish Mortgage. I should say that the majority of my investments are in more boring things! Investment Trusts for me are the spice jars in the larder, to add a bit of kick to the main dish.
P.S. Just because I use Investment Trusts this way, doesn’t mean you have to. Plenty of people use them for ‘capital preservation’ – where the main job is to keep the value of what you have, rather than try and shoot the lights out. Personal Assets Trust, Ruffer Investment Company and RIT Capital Partners are some of the well-regarded trusts in this space, which will offer investors a much smoother ride than my selection!
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