By Annabel Brodie-Smith
Well, it’s been quite a week with a Halloween announcement of the disappointing news that Lockdown 2.0 was on its way. I’m very relieved schools are staying open. I really can’t cope with the challenge of running a school from home while trying to work at the same time, especially with my Mother still hobbling after her accident. We embraced the news with a Halloween ghost walk at Oxford castle and prison which definitely scared us!
And the US election is still going on. Hopefully we will soon know the Americans’ choice of president. We don’t want a repeat of the 2000 Bush versus Gore election. It all came down to Florida and the ‘hanging chads’, the result was delayed by five weeks and it was only resolved by the Supreme Court.
This month we are moving east to explore opportunities in Asia. Half of the population in Vietnam is under 35 and the country has impressively only registered 35 Covid deaths from 1,180 cases. Of course, some deaths may not have been registered but the short lockdown has been effective and the Vietnamese economy is expected to grow this year despite the pandemic.
I have never been to Vietnam but I love the food and had a memorable night at an amazing Vietnamese restaurant in Senegal, West Africa of all places. Vietnam has suspended entry to all foreigners due to Covid so we can’t visit at the moment but we can invest. Read the article to find out more from the managers of the three investment companies investing in Vietnam and discover the other investment companies with Vietnamese exposure. Ian Cowie, our intrepid investment writer, is also in Asia with a “compare and contrast, as the exam papers used to say” of European and Asian governments’ responses to the coronavirus and what it means to investors. Asia’s competent handling of the crisis, including swiftly taking difficult decisions - Vietnam closed its boarders from early March - has clearly helped the region. The AIC’s Asia Pacific sector is up 25% over the past year, despite all of its difficulties, and over ten years it’s up 159% which contrasts sharply with the UK’s performance. Finally, Kyle Caldwell has made his Compass debut with an analysis of the pandemic’s impact on income-seeking investment companies. Overall, investment companies’ income advantages have stood them in very good stead in comparison to the FTSE 100. Kyle also considers whether boards will consider paying dividends out of capital profits if the dividend drought continues next year and he explains the pros and cons of doing so. Recent research we conducted with Research in Finance shows that the pandemic is having a very real impact on investors’ portfolios and lives. A total of 41% of income investors believed that the pandemic had caused a big or considerable impact on their portfolios and 17% of these investors have had to change their lifestyle or plans due to this. What was interesting was the pandemic and income cuts had less of an impact on the portfolios of investment company investors in comparison to investors who did not hold investment companies. Those income advantages, again, came through for investment company investors. Unlike open-ended funds, investment companies have the ability to retain some of the income they receive from investee companies and this is held in their revenue reserves. During tough times, like now, investment companies can use this revenue reserve to boost their dividends to shareholders. Investment companies also have the ideal structure for investing in hard-to-sell income-generating assets like renewable energy infrastructure. Of course, dividends are never guaranteed but these benefits are reassuring for investors in these difficult times.
Well, after this Asian feast, it’s got to be either a Chinese or a curry takeaway tonight.
Hope your month is as good as it can be in lockdown.
Stay safe and keep smiling.
Annabel Brodie-Smith Communications Director, AIC
