By Annabel Brodie-Smith
We were getting ready to send Compass last Thursday evening when the sad news of the Queen’s death came through. We are so grateful for her longstanding dedication and devotion to the UK. She represented so much to the British people, calmly carrying on and representing a constant and reassuring presence in an ever changing world.
Once completely by accident I was in the same room as the Queen. We had been invited to a day’s racing at Newbury and as the afternoon wore on a well-known owner of race horses took us to the Royal Box. We had a glass of champagne and were enjoying the excellent view of the races. Suddenly, there was a flurry, “You’re not going to believe this but the Queen’s coming to watch her horse in the last race.” We swiftly retreated to the back of the box and the Queen came in and sweetly said: “Hello everyone” and just sat down for tea (just like the Paddington scene). It was something of a shock. When she left she gave us a cheery wave and that famous wry smile appeared, perhaps due to the inadequacy of my curtsey. I do hope you have enjoyed the long hot summer. We had a lovely trip to the Isle of Wight and then visited the beautiful city of Prague before going to a really fun wedding in Poland. September has arrived and brought storms and lashing rain – no need to worry about watering the garden now. Things have also been stormy for the economy with inflation at 9.9% and the Bank of England predicting a recession lasting five quarters starting in the final quarter of this year. With energy prices rocketing, concern over the cost-of-living crisis has been increasing. However, we had some better news as Liz Truss has announced that a typical household energy bill will be capped at £2,500 annually until 2024. We will be examining the impact of this on investment companies next month. With all this going on, it’s timely that next month we will be hosting an all-day private investor event, The Investment Company Showcase at the Novotel London West in Hammersmith on 28th October. We will be bringing together panels of fund managers to discuss how they are tackling the multiple challenges of today’s markets. This includes the AIC’s longest serving manager, Peter Spiller who will be discussing how to counter inflation and giving his thoughts on the economic outlook. Attendance is free for Compass readers with the promotional code COMP22 so please do book your ticket.
This month we are focusing on the impact of a recession on investment companies and Kyle Caldwell from interactive investor has been out talking to fund managers. They believe some parts of the equity markets have already priced in the impending recession. Some managers think the recession may not be accompanied by a prolonged bear market providing inflation starts to cool once the economic downturn starts to bite. Do read the views of Job Curtis, fund manager of City of London and Peter Hewitt, fund manager of CT Global Managed Portfolio Trust on this. Our investment expert, Ian Cowie reminisces about previous market crashes he has experienced and the lessons learnt. From Black Monday in 1987 to the tech bubble bursting, from the financial crisis to the pandemic, Ian has held fast and continued to accumulate shares when prices were low. Ian has always been a long-term investor with clear objectives including buying his house, wooden boat and cottage on the coast. His wise and sensible strategy to survive a recession is “don’t panic, do diversify and keep focussed on your own individual investment objectives.”
Finally, we take a look at the 44 investment companies with a yield over 3% and a five-year track record of increasing dividends. Of the 44 companies, the highest-yielding is CQS New City High Yield, which invests in high-yield bonds and yields 8.5%. The highest-yielding investment company that invests in equities is Asia Pacific specialist Henderson Far East Income with a yield of 8.46%. You might be interested to know that eight of the high-yielding investment companies are AIC dividend heroes, which means they have consistently increased their dividend for at least 20 years in a row. This is useful information in these difficult times when investors are seeking reliable dividends.
As ever in these uncertain times, investors have to prepare for the worst but let’s hope it’s not as bad as expected. Last weekend I was celebrating harvest festival in our village and I have been out picking blackberries and apples in preparation for crumbles. Crumble and custard season is approaching – now that’s something to look forward to!
Annabel Brodie-Smith Communications Director, AIC
