A get-rich slow scheme
PLENTY has changed in the world of investing since the Queen ascended to the throne 70 years ago, but like our monarch, one investment has shown plenty of staying power.
Investment trusts are a type of collective fund open to private investors that are traded on the stock market just like companies.
The oldest of them all, Foreign & Colonial (now called the F&C Investment Trust), was launched way back in 1868, when Queenvictoria was on the throne.
It remains hugely popular today, investing £4.3billion across more than 450 global companies.
In total, 35 investment trusts currently holding £55billion existed when Elizabeth II ascended to the throne in February 1952, and have been doing a right royal job for investors ever since.
Investment trusts have been overshadowed by the better-known unit trusts, but they tend to deliver better performance with lower charges.
They are also more flexible, because when disgruntled investors want to exit a trust, they simply sell its shares.
With a unit trust, the manager has to offload the underlying assets to meet redemptions, whether it is a good time to sell or not.
Gill Nott, chair of the Premier Miton
Global Renewables Trust, said this allows investment trusts to weather financial storms better: “When sentiment turns against a trust, it does not face a downward spiral of withdrawals.”
Stock markets are incredibly volatile but the best investment trusts have shown that they can deliver consistency in troubled times, said James de Sausmarez, head of investment trusts at Janus Henderson Investors.
He highlights equity income fund The City of London Investment Trust, launched in 1891, which invests in blue-chip UK stocks and has increased its dividend every year for the last 55 years.
City of London has withstood the three-day week, the 1974 crash, the
Winter of Discontent, the 1987 crash, the dot-com boom and bust, the 2007-08 financial crisis, Brexit, the Covid pandemic and the Russian invasion of Ukraine, and De Sausmarez said: “It should continue to look after the wealth of many private investors for generations to come.”
One of the best known investment trusts, Scottish Mortgage, has delivered an impressive total return of 3,480 per cent over the last 30 years, with dividends reinvested.
This trust invests in relatively risky high growth stocks, including US tech giants Amazon and Tesla, and has now fallen sharply after a stellar decade, said Adrian Lowery, investments and markets analyst at Bestinvest: “Its long-term track record is outstanding and its fees are low, so do not give up on it yet.”
Lowery rates five other top investment trusts that investors should consider today. Many are trading at a discount, following recent stock market volatility.
Mercantile Investment Trust invests in smaller and medium-sized UK companies, and Lowery said now is a good time to buy it at a big discount.
Henderson Smaller Companies is also trading at a big discount, as is TR Property, which invests in the shares of property companies.
Finsbury Growth & Income, run by high-profile fund manager Nick Train, has underperformed but now could be a good time to buy a fund with proven pedigree, Lowery said. He also rates income-generating trust Temple Bar.
The Queen has shown the value of ploughing on through good times and bad, and so have investment trusts.