By Annabel Brodie-Smith
Welcome back - I hope you had a good Christmas and New Year.
My Christmas was – when we got there – just what I wanted. A relaxing time with my family – eating a lot, sleeping a lot and going for long dog walks, even if they were rather wet and soggy. The cat attacked the tree, the dog destroyed his toy giraffe present and was way too interested in stockings – he could smell the chocolate…
New Year was lovely and quiet. After last year’s Covid-interrupted celebrations we have all decided that we prefer celebrating New Year in February. By then everyone is ready for a ‘Not New Year’ party.
This month Compass looks back at 2022 – a year many investors would rather forget. After a run of good years, last year was a difficult one for investment companies with the average investment company losing 16.2% over the year. We are very familiar with the problems – the horrible war in Ukraine, rising inflation and interest rates, economic growth turning negative and political turmoil in the UK.
But investment companies are durable and always bounce back strongly when markets recover. The chart below indicates that poor performing years are often followed immediately by strong ones so 2009 after 2008 or 2003 after 2002. Of course, we don’t know what will happen, but we do know that over the long-term investment company investors have been rewarded. The average investment company is up 174% over the last ten years.
This month Ian Cowie analyses what worked well in his portfolio last year and gives some good advice, “bad markets can contain good lessons to help us grow capital and income in the future.” For Ian investment companies’ dividend delivering advantages were a key feature of his portfolio’s success in 2022 and emerging markets and energy were also “winning themes that could continue into 2023”. His top performers were BlackRock Latin American delivering a total return of 18%, Ecofin Global Utilities and Infrastructure – 13% and Gulf Investment Fund – 11% with India Capital Growth and JPMorgan Indian coming fourth and fifth.
Whereas Faith Glasgow takes a look at some of the positive developments that took place in the industry last year. The merger trend that took off in 2021 continued in 2022 with five investment company mergers taking place. Notably JPMorgan Global Growth & Income completed two mergers last year – the first with Scottish Investment Trust and the second with JPMorgan Elect. More merger activity indicates that boards are addressing shareholders’ demands for bigger, more liquid and lower cost investment companies.
Faith also looks at fee changes. Another area where boards are ensuring investment companies provide value for money for their shareholders. Last year there were 27 fee changes to benefit shareholders ranging from the abolition of performance fees to reducing their base fees or introducing tiered fees.
Finally, we are launching a new regular ‘Focus on...’ feature which kicks off this month with ‘Focus on how to compare investment companies’, the most popular area of the website. This series of articles aims to help you get the most out of the AIC website – www.theaic.co.uk – when researching or monitoring investment companies.
We revamped the AIC’s website in October so if you have any thoughts or suggestions, please do email website@theaic.co.uk.
It's easy to get caught up in the doom and gloom at this time of the year and the news has been particularly miserable recently. But the new year brings a fresh perspective and hope and I’ve recently been thinking about a line from Coleridge’s poem ‘Work without Hope.’
"And Winter slumbering in the open air, Wears on his smiling face a dream of Spring!"I’m most definitely dreaming of spring right now!
I would like to wish you a happy, healthy and prosperous year.
Annabel Brodie-SmithCommunications Director, AIC