By Annabel Brodie-Smith
No-one will forget 2020 in a hurry. The pandemic has ruled the year, impacted all our lives and sadly has been devastating for many people. Brexit is continuing to be a cliffhanger but deal or no deal it’s finally coming to some sort of conclusion. Despite this, there’s still plenty of good news for investment company investors which may contribute some much-needed festive cheer as 2020 draws to a close.
The investment company industry has risen to the challenges of the coronavirus crisis with its dividend advantages and suitability to invest in less liquid assets coming to the fore. The average investment company has returned 8% in 2020 to the end of November despite the breath-taking twists and turns of markets this year and the industry’s assets have recently reached a record high of £221bn. Both considerable achievements in a tough year. Hedge Funds were the top-performing investment company sector of the year in the 11 months to November up 56%. The sector performed remarkably well with volatile markets being helpful to many of their strategies. And recently, Pershing Square Holdings, an investment company from that sector, was promoted to the FTSE 100. Less surprisingly, considering technology has been a lifeline this year, Technology & Media achieved the second-highest return of 42%. This was followed by the Global sector with 36%, Japanese Smaller Companies with 32% and Japan with 28%, reflecting strong rebounds from the pandemic lows. The key question is what happens next? Where do fund managers think the future opportunities lie? On Tuesday I had the pleasure of talking online to Job Curtis, manager of City of London, Charles Plowden, manager of Monks and Simon Barnard, co-manager of Smithson Investment Trust. Do watch our conversation as it’s a fascinating insight into how these managers have positioned their portfolios post-COVID, where they think they may find the future winners and most importantly why. From healthcare and supermarkets to internet subscription services, travel and mining companies, the managers have their eagle eye on a diverse range of opportunities.
Investment company managers share their views on the past year and give an outlook for 2021
Talking of what happens next, our annual fund manager poll on predictions for 2021 and beyond is always a must-read. Of course, the pandemic’s dominance of 2020 demonstrates that no-one can predict what will happen in the future. As ever, investors need to focus on creating a balanced long-term portfolio which meets their needs but all the same it’s useful to read managers’ views. With a vaccination program underway, investment company managers are optimistic about the threat of COVID diminishing, and over two-thirds believe markets are set to rise next year. Healthcare is tipped to perform best in 2021 but the much longed-for return to normal is influencing managers’ thinking over five years, with travel and leisure predicted to be the top sector. I do hope they are right – the prospect of a holiday abroad makes me feel positively giddy with excitement! Ian Cowie, our investment expert, takes a look back at the winners and losers in his portfolio last year. He has some positive returns to celebrate with his “Big Three” winners and good news from his new income investment companies, JPMorgan Japan Smaller Companies and Ecofin Global Utilities & Infrastructure. However, as ever, it doesn’t all go to plan and it’s great Ian is so frank as I always love hearing about the ones that got away… Finally, Faith Glasgow has a really helpful article on buying investment companies that trade on a persistent premium and what you need to consider before doing so. It’s a very relevant topic with 88 investment companies, nearly a quarter of the industry, currently trading at a premium to the value of their assets. As ever there is way too much to do at this time of the year... It’s going to be a busy weekend. I need to buy and decorate the tree, write my cards and track down the most enormous Nerf gun for my 10-year-old son.
I’m sure it will be a different Christmas for many of us this year but I do hope you have a jolly and fun time and also get an opportunity to relax. I’m so ready for the relaxing part!
Wishing you a Merry Christmas and a Happier New Year.
Annabel Brodie-Smith Communications Director, AIC
