Investments 

Hargreaves turns to cautious trusts for 2019

Hargreaves turns to cautious trusts for 2019

Hargreaves Lansdown's senior analyst has said he favours defensively focused investment trusts for 2019.

Laith Khalaf nominated the £908m Personal Assets investment trust, the £1.6bn Murray International investment trust, run respectively by Sebastian Lyon and Bruce Stout, among his picks for next year.

Both managers have a distinctly cautious outlook for the global economy, with Mr Lyon’s funds having significant investments in gold due to the manager’s view that it moves in the opposite direction to equities and acts as a diversifier.

Mr Stout has significant exposure to emerging market economies as he believes those areas show growth characteristics in excess of those of developed markets.

He believes the central bank policies of low interest rates and quantitative easing have pushed developed market equities to unsustainable valuations.    

Mr Khalaf said: "Personal Assets trust offers something completely different. The aim is to preserve and increase your investment over the long-term. So if you’re worried about Brexit, or wider global issues, it’s the type of trust that might appeal.

"It could protect wealth already built up, but maintain the potential for some growth. There are currently four main elements: the shares of larger companies (often with dominant market positions), some inflation protection from US government bonds, gold bullion as a long-term store of wealth, and almost a quarter held in cash.

"This balanced approach is likely to look dull when stock markets are rising rapidly, but it can come into its own when they fall."

Shares in Murray International Trust slipped from a premium to a discount, currently 3.7 per cent of net asset value, on the back of the volatility seen in Asian and emerging markets this year.

Mr Stout aims to invest in companies he thinks will perform in all conditions and attempts to pay a growing income while increasing capital over the long term.

Mr Khalaf said: "He’s retained a bias to higher-risk Asian, Latin American and emerging markets in recent years, where he sees more attractive valuations than in Western markets such as the US.

"This has been painful recently and it’s been the wrong call to not have much invested in the US over the past few years.

"Stout still thinks many Asian and emerging market companies have better growth prospects that Western counterparts, so he’s happy to keep investing in them.  The trust currently yields 4.8 per cent."

david.thorpe@ft.com