By Annabel Brodie-Smith
Well the much-predicted interest rate rise in May didn’t happen. GDP slowed down to just below 0.3% in the first quarter and we will have to see if it was just down to the ‘beast from the east’ or a wider slowdown. What’s certain is that many income seekers are looking further afield for income and investment companies are high on their list of possible investments.
Last month we looked at the dividend heroes, the 21 investment companies that have increased their dividends for over 20 years by largely investing in equities.
This month we’re looking at investment companies which invest in other assets which generate income including debt, property, infrastructure and more specialist assets. These types of assets do not trade on stock markets and are generally known as alternative assets. Please do see our guide to alternative assets, Something a bit different?
Today alternative assets make up nearly half of the investment company industry, having grown rapidly over the last twenty years. Many alternative assets seek to provide a high level of income and are quite specialist and illiquid, namely difficult to buy or sell. Alternative assets may also require sizeable minimum investments so investment companies enable private investors to access these asset classes more easily.
The closed-ended structure of investment companies is particularly suitable for alternative assets as their shares are traded on the stock market, allowing managers to take a long-term view of their portfolio. In contrast, open-ended managers have to manage their portfolios so they can give investors back their money at any time.
This month our renowned investment reporter, Ian Cowie, is covering alternative investment companies looking specifically at the property sectors, infrastructure and renewable energy infrastructure sectors. Wisely, Ian concludes after nine years of interest rates frozen near historic lows, “an acceptable, sustainable income is hard to find. Alternative assets can provide answers but are not risk-free. Investment companies offer unique advantages, enabling income-seeking investors in infrastructure and property to minimise risks and maximise rewards.”
The AIC takes a look at the Sector Specialist: Debt sector which has one of the highest yields at 6.5% and has grown to become the sixth largest AIC sector, with 29 companies. These
yields have been achieved through a wide range of different strategies including corporate, asset-backed, distressed and peer-to-peer loans. Several managers explain what debt they have in their portfolio and why. We also take a look at some specialist investment companies which include those investing in the uranium industry, shipping, specialist equipment such as helicopters and aircraft leasing.
Finally, we have an article from Colin Godfrey, manager of Tritax Big Box REIT which invests in a fascinating sector of the property market, large logistics buildings for customers like Morrisons and Amazon, known as Big Boxes.
I’m looking forward to embracing spring at Chelsea Flower Show soon.
Hope you have a good month.
Annabel Brodie-Smith Communications Director, AIC
