By Annabel Brodie-Smith
This year for Bonfire Night we went to the local village display at Dorchester on Thames. As well as the essential fireworks and bonfire with guy, there was a games tent with a coconut shy and hook the duck, a bar tent manned by friendly locals, homemade cakes and hot dogs. It was completely different from our usual evening with the tens of thousands at Battersea Park and all the better for it!
There have been plenty of fireworks in markets recently, with October being a tough month. Worries including the escalation of the trade war between China and the US, rising interest rates, FAANGs being overvalued, Italy’s budget deficit row with the EU and Brexit resulted in markets heading south. It’s therefore timely this month to look at the investment companies whose aim is to limit volatility and preserve investors’ capital. It’s fascinating that in 2008, the year of the financial crisis, Ruffer Investment Company and Capital Gearing were two of just six investment companies that had a positive return that year. Of course, no-one can second guess the markets’ next move but it’s worth hearing what the managers with an objective of protecting value and limiting market swings have to say.
We’re also taking a look at property investment companies this month. Investment companies give investors access to a wide variety of different property types, ranging from office buildings and shopping malls to social housing and ‘big box’ logistics warehouses. The closed-ended structure makes investment companies particularly well suited to investing in assets like property. This is also demonstrated by their substantial outperformance and higher yields when compared to open-ended property funds. We hear from a number of property fund managers to understand their views on the impact of Brexit, the changes on the high street and the outlook for property.
Our investment expert, Ian Cowie gets under the skin of property investment companies, highlighting the attractive yields, namely, 5.2% in the Property Direct – UK sector but also the opportunities and risks this sector offers. Ian explains the important structural benefit of investment companies when it comes to investing in property in comparison to open-ended funds and why these factors “explain why commercial property investment trusts tend to offer higher yields than their open-ended rivals and, with very few exceptions, have delivered higher total returns over the last year, five and 10-year periods.”
Finally, we have produced an educational animated video to help people new to investment. Perhaps you know someone who would like to watch this video, ‘Your investment journey’, which explains why you might want to invest, how to go about it, and where investment companies fit in.
We have also introduced a series of 10 short animated educational videos which explain key investment terminology such as dividend yield and share prices, and investment company features like gearing, discounts and premiums.
Have a good November.
Annabel Brodie-Smith Communications Director, AIC
