By Annabel Brodie-Smith
I hope you had a good Christmas and New Year and Omicron did not spoil it for you.
Thankfully we were lucky and had a big Christmas at the barn with 16 members of the family around the table for Christmas lunch. It was hard work but great fun with carol singing and mulled wine on Christmas Eve and the infamous family quiz on Boxing Day. The dog managed to consume a quarter of the Christmas cake with no ill effects and the cat enjoyed climbing (and attacking) the Christmas tree. We were not so lucky at New Year as Covid struck our friends so the celebrations have been postponed until February. Looking back at 2021, it was a strong year for the industry with the average investment company up 16%. There was record fundraising, with over £15 billion of new money raised, including £3.8 billion in 16 new launches and £11.3 billion from existing companies. The top fundraising sector was Renewable Energy Infrastructure raising £3.4 billion, including £874 million in new launches. There were also welcome signs of boards demonstrating their independence to make sure that shareholders are getting the best deal. These included five management group changes, five mergers completed and 31 investment companies changing their fees to benefit shareholders. And we already have another confirmed merger taking place in 2022. Ian Cowie has also been looking back at last year, commenting “what a wide variety of winners and losers my modest portfolio of shares saw in 2021”. And he’s expecting more of the same, namely variety and volatility in 2022. It’s always good to hear Ian’s honest assessment of what went wrong and right in his portfolio. Of course, a year is a short time for a long-term investor like Ian but I’m pleased he stressed that diversification remains key in an uncertain world.
Looking forward to 2022, Ian expects innovations in biotechnology and healthcare to remain important and is concerned about tensions between America and China. He expects higher rates of inflation and interest which might make value and yield more important considerations than in the past. This could be good news for UK investment companies.
"Looking back at 2021, it was a strong year for the industry with the average investment company up 16%."
On the topic of inflation, with the Consumer Prices Index (CPI) up by 5.1% in the 12 months to November, it’s timely for Faith Glasgow to look at how investment companies “can work very effectively in an inflationary environment”. She explains how investment companies’ closed-ended structure makes them highly suitable for real assets like infrastructure, renewable energy and property. They can also borrow to invest (gear), taking advantage of the current low interest rates to do so.
Faith also looks at the strengths and vulnerabilities of investment companies investing in equities when inflation is rising – as well as the benefits of some of the companies in the Flexible Investment sector, which aim to preserve the value of your capital whatever the conditions in the wider economy.
If you are a keen user of the AIC website you may already have noticed that we have a new-look guide to investment companies, as well as a raft of new tools and changes. The guide, with pictures of colourful people, is aimed at those who have not invested before, or who are new to investment companies. Please do encourage less experienced investors to take a look.
We have a new “My alerts” function which allows you to opt to be notified about stock exchange announcements for your chosen companies, or when conditions are met, such as a dividend being declared, or a share price or discount reaching a certain level. We also have rolled out our investment company screener to all website users so for the first time you can filter by criteria such as manager, tenure, equity style (values versus growth) and dividend frequency. And there’s improved performance charts too.
Despite the obvious drawbacks, I’m a supporter of January as the new year brings a fresh perspective and new hope. Fingers crossed this year will be better, brighter and more joyful.
Wishing you a happy, healthy and prosperous year. Annabel Brodie-Smith Communications Director, AIC
