Foreword
By Annabel Brodie-Smith
March has been a challenging month for us all. Compass usually looks on the bright side of life, but last month I was spluttering for weeks and completely lost my voice - miserable. Two courses of antibiotics later, I am feeling much better.
With the conflict in the Middle East continuing, all eyes have been on the rising oil price and its impact on inflation. This week markets have rallied on hopes of de-escalation of the conflict but as ever, no-one knows when this will end.
With the conflict in the Middle East continuing, all eyes have been on the rising oil price and its impact on inflation.
So, it’s a timely moment to hear from our longest serving managers about the lessons learned from investing in conflicts and crises. Matthew Oakeshott who has been managing Value and Indexed Property Income Trust for almost forty years wisely said: “There is only one sure way to win for long-term investors in shares and property, buy from the frightened and sell to the greedy.”
Georgina Brittain who has managed JPMorgan UK Small Cap Growth & Income for 28 years reminds us: “the most important lesson is to stay calm and keep things in perspective.” She reassures us that “markets do adjust, and well-run, resilient businesses tend to come through difficult periods better than most. These moments can also create opportunities, allowing us to build positions in high-quality companies at attractive valuations.”
James Henderson who has been at the helm of Lowland Investment Company for 36 years and at Law Debenture Corporation for 22 years said crises “tended to trigger an immediate knee-jerk reaction which is then followed by a recovery.” He gives the example of the 2003 Iraq war when the market recovered swiftly. James argues “the strength of the market before the trigger is key” and “the attractive valuation of the UK market going into this situation is on our side.”
This month our investment guru, Ian Cowie, considers the conflict’s impact and as ever there are winners and losers. For example, the UK Equity Income sector has delivered an average total return of 13% over the last year because these trusts “benefit from exposure to energy shares, where restricted supplies of oil and LNG have squeezed prices higher.” Ian analyses two trusts from this sector - top performer over the last year, Temple Bar and dividend hero, City of London Investment Trust which has raised its dividends every year for 59 years. And for investors who fear there is more negative news to come, Ian suggests the more defensive investment trusts - Capital Gearing Trust, Personal Assets Trust and Ruffer Investment Company.
…the UK Equity Income sector has delivered an average total return of 13% over the last year because these trusts “benefit from exposure to energy shares, where restricted supplies of oil and LNG have squeezed prices higher.”
Last week I talked to property managers Laura Elkin of AEW UK REIT, Richard Shepherd-Cross of Custodian Property Income REIT and Bjorn Hobart of Tritax Big Box REIT. Do watch their response to my question on the impact of the war on property. Richard Sheperd-Cross said confidence in British real estate has been “sideswiped” by the conflict in Iran but “property is a good place to hide out in turbulent markets.”
Tritax invests in large warehouses which Bjorn Hobart explains are “mission-critical for their customers which they need to operate for their businesses to survive.” This means capital returns may be affected, but they believe the income is secure. Laura Elkin reminds us that “in the last eleven years there have been times of worrying geo-political unrest and they have been able to generate some standout returns.” She continues, “Times of political unrest can create more opportunities for us value investors.”
Finally, take a look at the article which will help you research income-focused investment trusts on our website. For income seekers, the 20 dividend hero trusts and 30 next generation of dividend heroes are featured and the changes we have made to Income finder and the Dividend diary are explained.
Don’t forget there are currently critical votes for shareholders in Edinburgh Worldwide and Impax Environmental Markets. The boards of each trust are offering a clean break and an escape from Saba. Please see our release on this as you need to vote for the tender offer and tender your shares to avoid being trapped in a Saba-controlled vehicle. We are lobbying the FCA for changes to the Listing Rules to ensure minority shareholders can’t trample over the rights of other shareholders in the future.
Don't forget there are currently critical votes for shareholders in Edinburgh Worldwide and Impax Environmental Markets.
Do come and talk to us at the Master Investor show in London on 25 April. I will be moderating an investment trust panel on smaller companies, ‘Small is beautiful’. To find out more please visit their website. Compass readers can get a free standard ticket with the code AIC when they register here.
April’s arrival has brought a bridal froth of blackthorn blossom to the hedges and my cherry tree is just coming into flower. My son, Alex is coming home from university tonight and I am off next week. No going away as his younger brother, Fabian is revising for the dreaded GCSEs. We will be celebrating Easter with our legendary Easter egg hunt and a big Sunday lunch.
Wishing you a Happy Easter!
Annabel Brodie-SmithCommunications Director, AIC
