by Nick Britton
Imagine that a time machine dumps you in 1868 and you are forced to ply your trade as a financial adviser. Whilst you have the immense advantage of knowing how the world is going to turn out, it’s quite a long time before you’ll be able to invest in Microsoft or Google.
You could put your clients into Consols (government bonds) paying around 3%. Or you could go for something more exciting, like railroad stocks. But which ones? Will you go for the Chicago, Milwaukee & St Paul Railroad Company? Or Atchinson, Topeka & Santa Fe?
The idea of a managed fund offering a diversified portfolio of investments, like all the best inventions, seems to be so obvious in hindsight that it is surprising no-one had thought of it earlier. And perhaps they had. But while ideas are valuable, execution is everything, and Foreign & Colonial Government Trust, launched on 19 March 1868, was so well executed that it still survives and thrives today as Foreign & Colonial Investment Trust, with £4 billion in assets under management.
The sesquicentennial of the investment company industry (I know, I looked it up) is an opportunity to celebrate not just that original innovation but all the innovations in the industry over the decades. After all, investment companies would simply not still be around – and certainly not managing record levels of assets – without their remarkable capacity to reinvent themselves. In this edition of Spotlight, the current managers of the oldest investment companies discuss how they have changed to face the future.
A fresh challenge to investment companies – and indeed the whole active fund industry – has been the rise of passive funds. To justify their existence, investment companies must offer something different, and better. An example of a company that has done just that is Capital Gearing, whose manager Peter Spiller is the longest-serving in the industry and has provided a return of 229 times invested capital over the 35 years he has run the investment trust (an annualised return of 16.8%). Peter’s reflections on his ‘half-century in the City’ and the investment philosophy which has driven those spectacular returns can be read here.
Don’t switch off! Please! This is important!
We will be emailing you over the next few weeks to ask if you’d like to keep on receiving Spotlight and training updates from the AIC. I’m sure you know the GDPR drill by now: if we don’t get your tick in the box we won’t be able to send you anything after GDPR comes in during May.
We promise to make it as easy as we possibly can. So please look out for that email.
Those based in or around London might be interested to know that Frostrow Capital is running an investment company seminar on Wednesday 16 May, with speakers including Nick Train of Finsbury Growth & Income Trust, Ben Rogoff of Polar Capital Technology Trust and James Dow of SAINTS (Scottish American).
I’ll be in Plymouth so I can’t attend, unfortunately, but if you want to go you should email Frostrow.
Research firm QuotedData has produced a guide to investment companies offering an hour of structured CPD (endorsed by the CISI). The guide explains how investment companies differ from other funds, the types of investment company, and how to research investment companies. It can be accessed here.
This is old news, I’m afraid, but somehow slipped through the Spotlight net. But it is good news, so worth mentioning. Some of you have emailed or called me before to ask why certain investment companies (namely, offshore companies and REITs) can’t be held in tax-efficient life insurance wrappers, such as offshore bonds. This was due to a completely illogical quirk in tax law that has now been corrected, following successful lobbying by the AIC. From 1 January 2018, it has been possible to hold both REITs and non-UK investment companies in these wrappers. More details can be found on our website.
Nick Britton, Head of Training, AIC
Click on the links for more information and to book 25 April AIC workshop (Preston) Time: 14.00 - 16.15
26 April AIC workshop (Warrington) Time: 09.45 - 12.00
2 May AIC workshop (Bournemouth) Time: 14.00 - 16.15
3 May AIC workshop (Guildford) Time: 14.00 - 16.15
9 May AIC workshop (Lincoln) Time: 14.00 - 16.15
10 May AIC workshop (Leicester) Time: 09.45 - 12.00
16 May AIC workshop (Plymouth) Time: 09.45 - 12.00
16 May Frostrow London Investment Seminar Time: 08.15 (registration) – 09.00 (start) – 13.00 (lunch). The seminar will be held at The Ned, 27 Poultry, London, EC2R 8AJ and speakers include Nick Train, Ben Rogoff and James Dow. To book, email events@frostrow.com.
17 May AIC workshop (Taunton) Time: 09.00 - 11.15
17 May AIC workshop (Bristol) Time: 14.00 - 16.15
22 May AIC workshop (Hemel Hempstead) Time: 14.00 - 16.15
23 May AIC workshop (London) Time: 08.45 - 11.00
24 May AIC workshop (Norwich) Time: 14.00 - 16.15