By Annabel Brodie-Smith
"The average investment company is up 678% over twenty-five years – don’t forget it!"
Well after this week I think we all need a holiday… Boris has finally resigned (he’s going to have a long holiday after the summer!) and yet again we will have a new Prime Minister. The markets have continued their rollercoaster ride and inflation, the war in Ukraine and the prospect of a recession are still very much with us.
Of course, going on holiday is not so easy with Covid back, flight cancellations, and the possibility of more train strikes. Still, it’s likely that we are taking a trip to the Isle of Wight, spending some time at home at the barn and providing the plane takes off, we are going to a wedding in Poland at the end of August. It’s been a tough first half of the year with the average investment company down 17%. There have been some bright spots with the Renewable Energy Infrastructure sector up 8% and Commodities & Natural Resources up 7% - although the potential of a recession has recently wiped the shine off commodities. The Leasing sector has recovered, up 4% and the Hedge Funds sector is up 3%. But the winners of the pandemic have been hard hit with Growth Capital down 39%, and Technology & Media down 35%. The global sectors have come off badly with Global Smaller Companies down 36% and the Global sector down 32%. It’s really time to take a deep breath and remember your portfolio is for the long term. The average investment company is up 678% over twenty-five years – don’t forget it! Discounts have widened and there are clearly buying opportunities for brave long-term investors. Ian Cowie is on the hunt for opportunities in Europe this month and considering its prospects as the depressing war in Ukraine continues. While there are “plenty of obvious reasons to be pessimistic” he acknowledges the strong long-term returns of the Europe sector up 189% and European Smaller Companies did even better, up 285% over the last decade. He reminds us of Nathan Meyer Rothschild’s words 200 years when he reportedly said: “Buy to the sound of cannons, sell to the sound of trumpets.” Ian concludes that “long-term investors may believe that buying low and selling high remains as good advice today as it was back then.”
Faith Glasgow is examining investing in ships, songs and forestry. Yes, time for something completely different and investment companies with their closed-ended structure are perfectly suited for holding these sorts of esoteric assets. Again, there are some potential bargains. The two shipping trusts “have been going gangbusters” in the post-Covid environment, according to James Carthew at QuotedData. because supply chains are not running efficiently and no one has been building ships. There is also a brand-new forestry investment company launched last November which could appeal to investors looking for strong environmental credentials.
My teenage son is really interested in the investment companies which buy up a music artist’s back catalogue for a lump sum and then collect a share of the royalties. Carthew makes the point that the resurgence of interest in Kate Bush due to the TV programme, Stranger Things means a younger audience is interested in her entire back catalogue and it may be a relatively good time to buy these trusts. (I have to add some inside information that Kate Bush had a rather nice house on the river in the neighbouring village to my rented house in Oxfordshire but sadly I never saw her!). Finally, please do watch the video where I talk to infrastructure managers, Giles Frost of International Public Partnerships, Ed Hunt of HICL Infrastructure and Managing Partner of Impact Healthcare REIT, Andrew Cowley. I find out how their investment companies provide inflation-linked income – critical in the current environment, the risks posed by rising prices, current opportunities and the social impact of their portfolio. Similar topics are covered in our article with extra views from LXi Reit, Target Healthcare REIT and abrdn European Logistics Income.
The managers of International Public Partnerships, Impact Healthcare REIT and HICL infrastructure discuss how their asset classes are protecting investors' returns from inflation
I’d like to wish you all a wonderful summer. Compass is on holiday until our next issue in September. I do hope you have some time to relax and switch off. Annabel Brodie-Smith Communications Director, AIC
