Peter Hewitt, who runs about £500m across a range of multi-asset funds at BMO Asset Management, has turned to alternative assets to for higher income.
He said a key reason to invest in alternative assets was to have investments which were relatively uncorrelated to wider equity markets and do not trade on large premiums to net asset value.
Among the assets in his £140m Managed Portfolio Trust, which invests in other trusts, are the BB Biotech investment trust and BB Healthcare trust, the latter being the largest of the income investments in the trust.
He acknowledged biotech investments were more typically associated with growth but said: “Every January BB Biotech pays out 5 per cent of its value as a sort of dividend, making it a very attractive income investment, while BB Healthcare has a yield of 3.5 per cent now, and there is also plenty of capital growth.”
The other alternative area in which he is invested is private equity investment trusts, another segment of the market more typically associated with investing for growth than income.
He has Princess Private Equity among his top 10 income investments, he said the US-based trust invests both in the shares of the companies it acquires, and the debt, providing an income, which means the trust can pay a dividend to shareholders.
The Princess Private Equity trust trades at a discount to net assets of 20 per cent.
Over the past three years the BMO Managed Portfolio Trust has returned 36 per cent, outperforming its sector, the AIC Flexible Investment, which returned 29.8 per cent.
david.thorpe@ft.com
