Investment Trusts

StellaN
StellaN Posts: 354 Forumite
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in Savings & investments
I would like to diversify my mainstream global investments. I currently hold Artemis Global Income, Newton Global Income and Fundsmith in my portfolio.

I am looking to include a global Investment Trust and was looking at 2 options - a) Scottish Mortgage or b) Witan. Obviously, most people are aware of SMIT and its track record but the Trustnet risk score is around 135 whereas Witan is around 85 - why is there such a difference in risk exposure between these two trusts?

Also, is there any other global trusts that anybody has invested in and experienced?
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Comments

  • Apodemus
    Apodemus Posts: 3,384 Forumite
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    I've had Murray International (in various guises) since about 1968, not regretted it yet!
  • JohnRo
    JohnRo Posts: 2,887 Forumite
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    SMT is a US tech oriented trust with little UK exposure.
    Witan is more varied in sector terms and relatively UK focused.

    The reason for the different scores on trustnet is because they're very different trusts. If you're using trustnet then why not look at the breakdown tab for each trust and see for yourself.

    I use LSLI, MYI & ADIG for global equity income exposure. ADIG was BIST and a bit of a mistake, with hindsight. I'm contemplating a JPGI replacement of ADIG in a year or so if things don't start to improve, much less income though.

    If you're interested in IT investment, bookmark the AIC website. It has a good IT screener with a fair amount of detail.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
  • StellaN
    StellaN Posts: 354 Forumite
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    Apodemus wrote: »
    I've had Murray International (in various guises) since about 1968, not regretted it yet!

    I did consider Murray International but decided it was too biased to Asia Pacific ex Japan and EM for my liking.

    Witan at the moment seems to be more to my liking with the asset class allocation, however, you cannot ignore the pretty consistent track record of Scottish Mortgage!

    As mentioned in my OP I already hold global funds in my portfolio so does it merit holding a global investment trust alongside these?
  • masonic
    masonic Posts: 23,245 Forumite
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    edited 26 February 2017 at 1:32PM
    StellaN wrote: »
    As mentioned in my OP I already hold global funds in my portfolio so does it merit holding a global investment trust alongside these?
    It's probably best to invest in just one global fund that has approximately the weightings you are looking for, then supplement it with other holdings that give you exposure to the areas you feel the global fund does not adequately cover. It becomes quite difficult to arrive at a sensible result if you have lots of overlap across your portfolio.

    Edit: the exception to this is when you are trying to create a monthly income stream and you are selecting partly on the basis of dividend payment dates.
  • Rollinghome
    Rollinghome Posts: 2,676 Forumite
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    edited 26 February 2017 at 2:45PM
    If you haven't found it yet you can get a lot more information on specific trusts from the Association of Investment Companies site http://www.theaic.co.uk/ . Look under the 'Find and compare..' tab.

    When buying ITs it's important to understand the difference between them and UT/OEICs. Principal difference is that ITs are companies with shares that can sell at a premium or discount to the company's net asset value (NAV).

    Look at Lindsell Train IT for an extreme example of how that can work. http://www.hl.co.uk/shares/shares-search-results/l/lindsell-train-investment-trust-ord-75p/share-charts . A couple of years back it could be bought at around par. This year the premium has touched 70% and more. Equally, when ITs fall out of favour the discount can fall to 20% and much more. Obviously the movement of discounts/premiums can have a very big effect on returns.

    Some trusts, for example Finsbury, also managed by Lindsell Train, have discount/premium management policies to keep the d/p stable by buying in or releasing shares. Alliance Trust recently introduced a policy to close the discount on their shares and Foreign and Colonial have long had a policy to keep the discount in a narrow band.

    The ideal is to buy at a discount and sell at a premium but as ITs have become more popular in recent years finding good discounts has become trickier. Discounts also tend to close in bull markets, as we've had for for some years, and widen, some times alarmingly, when markets fall. That will exagerate both rises and falls. Whether buying at a discount or premium it's important to know the reason. ITs investing in volatile shares or with concentrated pfs, like SMT, tend to have volatile discounts/premiums and need to be bought at the right point.

    Buying an unloved IT can be very profitable if it comes back into favour. Witan could be bought at a 15% discount a few years ago, went to a premium and now back to a 7ish% discount.

    Also most, but not all, ITs are leveraged, borrowing money to invest, and you can see how much for each on the AIC website. This is one of the reasons ITs tend to outperform UT/OEICs. Can be a two edge sword obviously for, as well as improving returns in a rising market, it can exaggerate losses in a falling market.

    So ITs need a fair bit of research and important to look at recent company reports or better still attend the AGM to meet the managers and ask questions (and often get a decent free lunch).

    When ITs get lots of recommendations on internet sites it can mean they're overly popular so you pay too high a price relative to NAV. The premium/disount is a vote on an IT's current popularity, but investors can be fickle.

    Witan, you mentioned, is now a sort of fund of funds with different areas contracted out to different managers, which improved the previously poor perfomance and so shrunk the discount. The venerable self-managed Alliance Trust recently announced it is about to do the same.
  • atush
    atush Posts: 18,726 Forumite
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    I hve been very happy with the performance of my witan investments over the years.

    It helped put my 3 boys thru Uni.
  • StellaN
    StellaN Posts: 354 Forumite
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    masonic wrote: »
    It's probably best to invest in just one global fund that has approximately the weightings you are looking for, then supplement it with other holdings that give you exposure to the areas you feel the global fund does not adequately cover. It becomes quite difficult to arrive at a sensible result if you have lots of overlap across your portfolio. /QUOTE]

    I do hold funds in most other sectors but my global holdings are the highest. I just thought it might be good to spread my global assets over several funds that have different asset allocations and top 10 holdings - or is this not a good way of diversifying my global assets?
  • masonic
    masonic Posts: 23,245 Forumite
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    StellaN wrote: »
    I do hold funds in most other sectors but my global holdings are the highest. I just thought it might be good to spread my global assets over several funds that have different asset allocations and top 10 holdings - or is this not a good way of diversifying my global assets?
    It's sometimes called 'diworsification'. By investing in several funds that pick stocks from the same markets, you are paying each fund manager a premium price for active management, but those active management decisions get watered down and what you end up with tends to be an expensive closet tracker, or worse, you end up over-concentrated in some minor constituents each fund manager coincidentally picked as a small part of the fund, but never intended to be a significant holding. If you are finding you need to buy three or more funds in the same sector to get sufficient diversification, it would probably be worth looking to see if there is an index tracker or ETF that will do the same job for a lower management charge.

    There are a couple of more rational approaches to getting the right spread of investments. On the one hand, you could pick funds that each target different sectors, geographies or markets (so there is no/little overlap), which combined will give a balanced portfolio. On the other hand, you could adopt a 'core and satellite' approach, which seems closer to what you are attempting, where you pick a core fund that gives you most of what you want, around which you add more focused funds targeting the sectors or geographies you feel are underrepresented in your core fund.
  • ColdIron
    ColdIron Posts: 9,016 Forumite
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    Disregarding the wisdom of mixing ITs/global funds, if you like Witan maybe have a look at Bankers IT (BNKR). Less UK which is a plus in an international equity fund and similarly low OCF
  • StellaN
    StellaN Posts: 354 Forumite
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    masonic wrote: »
    It's sometimes called 'diworsification'. By investing in several funds that pick stocks from the same markets, you are paying each fund manager a premium price for active management, but those active management decisions get watered down and what you end up with tends to be an expensive closet tracker, or worse, you end up over-concentrated in some minor constituents each fund manager coincidentally picked as a small part of the fund, but never intended to be a significant holding. If you are finding you need to buy three or more funds in the same sector to get sufficient diversification, it would probably be worth looking to see if there is an index tracker or ETF that will do the same job for a lower management charge.

    There are a couple of more rational approaches to getting the right spread of investments. On the one hand, you could pick funds that each target different sectors, geographies or markets (so there is no/little overlap), which combined will give a balanced portfolio. On the other hand, you could adopt a 'core and satellite' approach, which seems closer to what you are attempting, where you pick a core fund that gives you most of what you want, around which you add more focused funds targeting the sectors or geographies you feel are underrepresented in your core fund.

    I have only one fund in every other sector in. EM, Asia ex Japan, UK, Europe, Japan and Property all active funds and one US Tracker fund so it appears my weakness is the Global funds I hold?

    So basically, you feel I should also only have one fund in this sector instead of three and thinking of adding an additional IT as well? Makes sense to me I just can't understand my logic in holding three global funds in the first place when I only have 1,fund in every other sector?
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