Investments  

Russell Taylor: How new trust tools can benefit investors

Russell Taylor: How new trust tools can benefit investors

The bull market rolls on, and the fears of slowing economic growth at the end of 2018 have been forgotten. 

As ever, economic predictions all too often represent a desire to join the consensus rather than stand out from the crowd and be counted, and that is as true of professionals in the International Monetary Fund and World Bank as it is of private sector economists in stockbroking offices.

The MSCI World index is up 10.8 per cent since the start of the year, the FTSE All-Share has gained 12.4 per cent, and the anti-Brexit portfolio – an update on which can be found in Table 1 – has risen by 13.3 per cent. 

Table 1: Anti-Brexit portfolio update

Investment company

Initial investment as at end-December (£)

Share price total return over 2019 to date (%)

Cash value of YTD share price total return (£)

UK exposure – April 30 2019 (%)

Witan

25,000

13.5

28,365

35.5

Alliance

25,000

14.4

28,598

14.3

Personal Assets

15,000

5.2

15,783

11.7

Scottish Mortgage

15,000

15.1

17,271

3

Worldwide Healthcare

10,000

9.3

10,931

0

Polar Capital Technology

10,000

23.3

12,333

2

Total portfolio performance

100,000

13.3

113,281

FTSE All-Share

n/a

12.4

n/a

n/a

MSCI World index

n/a

10.8

n/a

n/a

Source: AIC/Morningstar. Copyright: Money Management

The UK has not yet reflected either the chaos of the Brexit negotiations, or the likely effect of Brexit on the balance of payments. But recent reports on capital investment shows a significant slowing of foreign direct investment, as a result of confusion over Brexit. 

If this is only confusion, well and good, but if it is a reconsideration of the UK as the base for continental investment, that is another matter altogether.

A European history

The UK’s decision to join the EU in 1973 was based on a desire to free the country from the crippling effects of regular balance of payments crises, and the expectation that the larger continental market would transform Britain’s exporting capacity. 

In that it failed, but it solved the problem through direct investment instead; Britain became the preferred base for international companies desiring to enter the continental European market, but without the complexity of continental European labour rules.

If Brexit changes those calculations, then the country is back to the stop-go years of the 1960/70s and, as already predicted by the government, a decline in the exchange rate is likely to follow. This is a major risk not yet reflected in portfolio returns. 

But another risk is the escalating trade war between the world’s two largest economies. This comes at a time when the West needs to accept that we are already living in the Asian century; the Atlantic/European centuries have now passed into history.

Testing ground

So safety first should be the prevailing investment strategy. Fortunately, for those ignorant or frightened of investment trusts, the Association of Investment Companies has just issued a suite of programs that allows intermediaries and investors to test theories and strategies in real time, without any actual investment involved. 

What is truly amazing is that, in what is a highly competitive industry, few commentators have asked why several investment companies have increased their dividends each year for periods of between 20 years to more than 50 years, with capital growth for good measure. What unit trust group or pension fund manager has done as well?

The AIC’s main program aims to make the search for reliable income an easier process. Income Finder enables investors to create a virtual portfolio of income-paying investment companies, track the dividend dates, and observe how much income they could receive over a year.