By Annabel Brodie-Smith
The mornings are getting lighter, the village is full of daffodils and Easter is in three weeks’ time. Bring on spring! I’m getting ready for our famous family Easter egg hunt. All sorts of eggs – chocolate, mini, scrambled, boiled and ISA eggs will be consumed. Yes ISA eggs do really exist and they are apparently strong shelled, good quality eggs.
“The mornings are getting lighter, the village is full of daffodils and Easter is in three weeks’ time. Bring on Spring!”
ISAs
Wednesday’s Budget brought news of a new UK ISA which “aims to give people the opportunity to invest in and benefit from the UK’s vibrant capital markets.” The proposals were an extra £5,000 to invest in the UK ISA above the current £20,000 ISA allowance.
A consultation paper has been launched which sets out a number of ways that investments in this new ISA could be defined. One was that all UK-listed companies including investment trusts should be eligible for inclusion. We agree with this simple proposal which would support the UK’s markets and give investors access to over 350 listed investment trusts.
Another was that there should be a definition of a British investment, with 75% invested in UK qualifying companies proposed. We are less keen on this proposal because defining what is a British investment is difficult in this increasingly international world. Lots of the biggest FTSE companies invest internationally and gain their income internationally. But I’d be keen to hear your views on the UK ISA and whether you think it sounds attractive.
“There are 32 investment trusts that would have made their investors millionaires if they had invested the full ISA limit every year from 6 April 1999”
With the end of the tax year approaching, this month Ian Cowie dives into how to become an ISA millionaire. There are 32 investment trusts that would have made their investors millionaires if they had invested the full ISA limit every year from 6 April 1999 to the end of January this year, a total of £306,560. And two of these trusts, HgCapital and Allianz Technology would have ended the period worth more than £2 million – impressive stuff. There’s a wide variety of sectors in the millionaire trusts and Ian explains “…the composition of the ISA millionaires list makes a powerful case for building a diverse global portfolio, with exposure to different companies, countries and currencies. That way, we can build exposure to wealth wherever it is created.”
If you’re looking for more ISA inspiration we have asked advisers and wealth managers to recommend investment trust ISA investments for younger, middle-aged and retired investors. Yet again there’s a broad range of sectors in the mix. For example, for middle-aged investors (yes I’m optimistically putting myself in this category!) the choices include: Polar Capital Global Healthcare Trust, Utilico Emerging Markets Trust, JPMorgan Global Growth & Income, Ashoka India Equity and JPMorgan American.
Merger mania
In our last story this month, Faith Glasgow is exploring investment trust mergers and what they mean for investors. They are on the rise, with two completed this year and a further four in the pipeline. Mergers have benefits for shareholders as they result in bigger, more cost-effective trusts which are hopefully easy to trade and capable of performing well.
It’s interesting to hear boards’ views on why they initiated a merger and what were the benefits. For Rosemary Morgan, chair of Nippon Active Value, which last year merged with Atlantis Japan Growth and abrdn Japan, the opportunity to grow in size and increase their retail investor base was important. But a key message from boards is it’s really important that private investors vote their shares when there’s a merger and have their say in the future direction of the company. To find out more about how to vote your shares see here.
And for those who like buying at discounts, there’s some interesting research that my colleague, Nick Britton, has done which shows that investing when discounts are more than 10% can lead to better returns in the following years. The difference based on historic data is quite significant – annualised returns of 13.6% over the next five years when investing at a double-digit discount, compared to 9.3% when investing at a discount narrower than 5%. That’s more than four percentage points difference!
“I’d like to give a big shout out to all the women in the investment trust industry and all the female readers of Compass.”
Finally, as it’s International Women’s Day today I’d like to give a big shout out to all the women in the investment trust industry and all the female readers of Compass. We have made great progress on gender diversity when it comes to directorships with 41% now being held by women but when it comes to female fund managers there’s still more work to do. Only 12% of investment trust managers are women, in line with the global asset management average. If you are interested in my views and the views of some of our leading female fund managers on this issue, please read here.
So the spring equinox is on March 20th – and it’s not long until we go to Istanbul for a quick trip before Easter. It’s the first time I’ve been to Turkey and I can’t wait!
I’d like to wish you all a Happy Easter.
Kind regards
Annabel Brodie-SmithCommunications Director, AIC
