Foreword

By Annabel Brodie-Smith

Well, we’ve moved on from the beautiful but freezing frosts of January. The snowdrops are coming out and today the temperature is in double digits. In the next two weeks the boys are in two school productions. Tonight I’ll be watching Alex sing and dance along to Summer Nights at Grease and next week it’s Fabian’s turn in the thriller, The Thirty-Nine Steps. This month we are taking a look at the UK which remains out of favour. This week the IMF were the harbinger of doom with their forecast that the UK’s economy would contract by 0.6% in 2023. This would make it the worst-performing big economy this year and they predicted it would even lag Russia. The Bank of England yesterday said the recession would be shorter and shallower, but its prediction was even gloomier than the IMF with GDP falling by 0.7% by the end of 2023 and stagnation predicted for next year. On inflation there was better news with the Old Lady saying inflation had probably peaked and should fall to 4% by the end of the year. Despite the economic doom, markets are as ever looking forward and are betting that we are close to interest rates peaking. We will have to see how this all plays out but the FTSE 100 is nudging closer towards a record high of 7,903 seen in 2018 – it’s currently 7,820 at time of writing. Of course, it has benefited from high energy and commodity prices and the global nature of these companies. On a hopeful note, Stifel the investment trust analysts wrote in their research this week: “With 2023 P/E multiples of 10.5x on the FTSE All Share and 3.5% yield, in a contrarian view, we think the UK may be quite a good market to continue to invest in this year, with the gloomsters disappointed.” Ok they are not overly excited, “quite a good market” but it’s definitely a start… So with this in mind, Faith Glasgow has examined the prospects for UK investment companies speaking to a number of managers including Stuart Widdowson at Odyssean Investment Trust, Guy Anderson at Mercantile Investment Trust, James Henderson at Henderson Opportunities Trust and Alex Wright at Fidelity Special Values. She also spoke to Nick Train, who has been busy buying more than a million pounds of his trust, Finsbury Growth & Income, in the last three months. It’s good to see a manager who’s ‘eating their own cooking’ and he usually captures the zeitgeist: “Work on the assumption that the worse it feels, the better the value. The All-Share is up barely 30% since the start of 2000, yet it contains many substantive, world-class businesses. You really don’t have to look very far to find bargains.”Venture capital trusts (VCTs) also invest in the UK but they invest in small ambitious and fast-growing companies. The companies they invest in are high risk so there are generous tax breaks for private investors - 30% up-front tax relief on newly issued shares, providing you hold the shares for five years, tax-free dividends and no capital gains tax. This week I very much enjoyed talking about VCTs with Ewan MacKinnon from Maven Capital Partners which manages the Maven VCTs, Stuart Veale who manages the ProVen VCTs and Richard Moore who manages Calculus VCT. Watch the video to find out where they are investing, the economic and social benefits and how their investee companies are performing in these challenging times. There’s also a press release on this topic which includes comments from VCT managers, Albion Capital and Foresight. Ian Cowie this month analyses investment companies in the Biotechnology & Healthcare sector which “hit the headlines during the coronavirus crisis and continue to offer investors important opportunities to do well by doing good.” There are seven companies in this sector and Ian focuses on the best performer over one and five years, Polar Capital Global Healthcare and his holdings, International Biotechnology and Worldwide Healthcare. But don’t forget there are other companies which are worth considering. Bellevue Healthcare over five years is up 70.2% and yielding 3.9%. Biotech Growth is up 197% over ten years and there’s the relatively new RTW Venture which launched in October 2019.Finally, we are continuing with our regular ‘Focus on …’ feature which aims to help you get the most out of the AIC website - www.theaic.co.uk - when researching or monitoring investment companies. This month’s piece explains the wealth of data the profile pages contain. On the profile pages of each member investment company is information giving an overview of the trust, the performance data, portfolio data, ESG policy, dividends, charges, gearing details, research including videos, the management’s details, documents like factsheets and annual reports, how to go about investing and AGM details if relevant. Just about everything you need to research an investment company is here!I hope you enjoy the rest of the month. Half-term and a couple of days off are approaching and before we know it the daffodils will be out. Annabel Brodie-Smith
Communications Director, AIC