I have read this thread with great interest. I started typing this post to recommend one IT but it has 'grown' into my investment thesis! I will post it, as it will be a record of the stage that I am at just now in my investing life. I also think that it might be useful for the OP and others - to stimulate thought and debate, if nothing else. Hopefully I will not look back on the post in years to come and cringe.Luni has done marvellous work on his various baskets. I have read and admired his posts - and responses from others. I am not yet looking from income and so I have not invested in any of the B15, B-lite etc.My portfolio is mainly based on investment trusts. I am looking for growth as I have 32 years to retirement - assuming that I retire at 65. I like low TER (mostly), large discounts (especially if they are large compared to the average for the particular trust) and a reasonable long-term record.I do not believe that you can predict tomorrow's winners from past records, though if a past record was really bad I would probably steer clear. One investment trust that has not (I think) been mentioned is the Independent Investment Trust (iit). This was the original reason for the post.I hold the Independent trust along with Alliance Trust, British Empire, Hansa Trust, Monks, Scottish Investment Trust and Aberdeen Asian Smaller Companies. The Independent Investment Trust has a low TER (0.36%). It is placed in the IMA global growth category. However, it is more an Anglo-American Fund. According to last update as at 28 February 2011, the assets were 78% in UK companies, 15% in US Companies and 7% cash. It has a great long-term record. It suffered in the recent bear market. It lost a lot of value, having been heavily invested in banks and housebuilders, retail and other sectors that did not perform well. Notwithstanding this it has more than doubled in value in the 10 years that it has been in existence - and that includes both recent bear markets! It (now) has an absolute return focus. It has a very good short-term record. What is particularly interesting is that the trust is self-managed and the Directors hold a very large portion of the shares. The Managing Director is Max Ward - he ran Scottish Mortgage for many years. He holds (held) according to the Annual Financial Report 5,000,000 shares. At current share value, that equates to just over £10,000,000. I guess if he has that amount of money at stake he is going to take good care of it! One other Director is Douglas McDougall. There was an RNS today stating that he and A&OT Investments now own 30.1% of the shares. Douglas McDougall owns 13.9% of the company. A&OT owns 16.2% of the company. Douglas McDougall is a director (and sometimes Chairman) on several Investment Trust Boards. He is highly respected in the fund management industry. The trust is currently on around a 15% discount, though it has traded at a premium in the past. It invest in many HYP type shares (British American Tobacco, Imperial Tobacco, Scottish and Southern, National Grid), many growth type shares (Aggreko and Supergroup - which were picked up for $5) and it has insurers, recruitment companies, oil and gas, other investment trusts and some special situations (investing in Robert Wiseman, and re-investing in persimmon) after the falls (and hopefully for the recovery). Banks have not came back in to the portfolio as yet - and I am not sure that they ever will. It has been my best performer in terms of capital growth over the last 6 months. Given the TER, the discount and the experience, the question that I asked myself prior to investing, was whether given my knowledge and experience would I be able to outperform this trust - and my answer was no - unless it was down to pure dumb luck. Rationale - Mostly equity - absolute return focus (though does not short) from equity. My other investments - not the original reason for this post -so please feel free to skip to the last paragraph if you would rather not read about them, and my investment rationale in each case.Alliance trust I see as giving good growth prospects, similar to, but capable of outperforming, the FTSE 100 / World Tracker. It has good internal diversifaction, holding shares, fixed interest, private equity, a little property and cash. It is on a low TER (of around 0.7%) and has a large discount. While many think that the discount will stay around 15 - 20% there is a chance that it will narrow. Laxey Partners (who are activist shareholders) have been trying to shake thing up. Alliance bought and cancelled 3,200,000 shares on 18 March 2011. It will enhance NAV per share. It is unlikely to be the presage to a discount control mechanism, as the Chairman of the Board (Lesley Knox), and the MD (Katherine Garrett-Cox) have in the past been vocal against a discount control mechanism in the past. Even if the discount does not narrow significantly, I guess that if you buy £1 worth of assets now for about 80p, when you come to sell you will be able to sell at around the same discount. It also runs an asset management business, having launched a handful of funds in the last two years or so, and runs investment services for SIPPS, ISAS and dealing accounts, for which it has been making a loss - but has recently changes its charging structure - so hopefully these 'sidelines' might become profitable for them too. Rationale - large global generalist, with large discount, low charges and reasonable prospects - with prospects for revenue growth through the two additional businesses.British Empire, I recall, has been described as a 'class act' by Lootman - who I think brings a lot to these boards and I respect most of his views. I recall he said he 'loved' personal assets and it was his biggest holding. Lootman, if you read this you should never fall in love with a share - no matter how well it has done! British Empire has a low TER (of around 0.8%) but there is also a performance fee element that can make the TER higher in years where there is outperformance. From memory, the total fee payable to the manager is capped at 1.5% even if there is significant outperformance. It has a really good long-term record. It has not got the best short-term record. It stands on an attractive discount (relevant to its own average discount) and is a play on discounts. Most of its holdings are other investment companies (mostly in Europe - Far East) standing on large discounts or companies that stand at a discount to their value - such as Vivendi (French media conglomerate). It has some property exposure and fixed interest at present. Rationale - low TER, discount on discount play.Hansa trust stands on a large discount. It has a low TER of around 1%. Though it is classified in the UK growth sector, it behaves more like a global growth fund given the nature of its holdings. Hansa Trust has one large holding that is about 40% of its asset value. Its main investment is Ocean Wilsons - this business is split in to two parts. There is a Latin American shipping vessel business (that does business with Petrobras) and an investment business (mostly emerging markets, some debt) which itself stands on a discount. I read (not sure who posted) that as you can buy Ocean Wilsons directly, if you wanted the discount, why not buy it? However, my take is that you get a discount on a discount. Plus the manager of Hansa Trust, has a number of "special situations" - BG, Cape, Herald Investment Trust are in the top 10. Hansa also has exposure to property and non-discretionary (utility type) investments. Rationale - low TER, interesting holdings of 'special situations'.Monks is a trust that is managed by Baillie Gifford. It has a low TER (0.64%) and has a mix of shares, bonds and other investments. Currently it has a lot on oil and gas companies and gold companies. It has recently taken on extra gearing (hopefully at the right time) and invested in a basket of high yielding shares with 'secure' dividends - vodafone, national grid etc. It is less exposed to the direction of the stock market movements than Scottish Mortgage (because of its multi-asset approach) and has a very good long term record. Rationale - low ter, multi-asset approach and large discount.Scottish Investment Trust is like Alliance in many ways. Its TER is low (around 0,79%). It has an active discount control mechanism - targetting a discount of 9% or less in normal market conditions. I think it will behave like a World Tracker, but will have the potential to outperform. Currenly around 8% is in Latin America - which I find attractive, from a long-term perspective. It buys other ITs, for example, to get private equity exposure it holds (or at least held according to latest annual report) HG Capital (and others / some funds) and to get Indian exposure it holds (or held) JP Morgan Indian Investment Trust. It holds some fixed interest and some cash too. Rationale - diversifier from Alliance Trust, useful to compare discount control mechanism v no discount control mechanism on long term returns.Aberdeen Asian Smaller Companies investment trust has a TER of 1.2% - which though higher than all the others is significantly less than an OIEC or UT would likely have. The benefit of the investment trust structure being closed ended means that Aberdeen will not need to sell holdings to meet redemptions if there is a downturn. Aberdeen have a good record in emerging markets, and the trust has grown around 7 times in the last 10 years despite the two bear markets. I have not held it that long (unfortunately) but recently bought it to see it fall in value by 10% - hey ho -that's investing for you. I buy in to the story that economic power is shifting from West to East. This IT holds many companies that will rely on the growth of the Asian consumer, and will benefit from that, if it happens. This is my 'risky' pure play to sit alongside the global growth/UK growth funds. Rationale - tap in to the fast growing emerging markets via small companies. I have been really impressed by Robin Angus of Personal Assets and his writing. I would recommend that if anyone is thinking about investing in investment trusts (or for themselves) that they should read three of his quarterly reports: 27,28 and 29 when he talks about the benefits of investment trusts for the private investor.These can be accessed at http://www.patplc.co.uk/Qreport.php I think they make a lot of sense - but then I may be easily impressed as a novice investor who has been burnt buying shares in Yell! That said, I am hopeful of recovery and my average buy in price is 10.2p - though they now sit at 6p. Great timing again!For completeness my other investments are:Lloyds 9.25% preference shares (LLPC) where dividends are currently suspended but should (hopefully) resume in 2012 and at today's prices offer a 10% return per annum once thd dividends resume.Psource Structured debt - bought for the very large discount (about 70%), the diversification and the chance that if PetroAlgae its largest is a success (though loads of negative views in the US) at IPO (planned for later this year) then there will be a re-rating of the shares and a large gain. If the IPO is not a success, the discount effectively means that PetroAlgae could go to 0 and the remainder of the portfolio would be at around NAV. Quite a number of activist investors hold the shares - so I am hopeful that my small position might come good even though I am down 14% on my original investment - my market timing again! One difficulty of holding Alliance, Monks and others is that it is very difficult to to a top-down asset allocation. I know roughly that Alliance will hold about 5% fixed interest. I know that British Empire might hold 20% in government bonds or if conditions are good go to all equity. I know that Independent has will hold a lot of cash when conditions are uncertain. 7% cash is the lowest cash weighting the trust has been at for some time. Further, even if I hold large companies who is to say what they will do with their funds. They could conserve cash. They could buy out another company. They could issue bonds. They could do all sorts, and I would have little control of what actually goes under the bonnet. My view on this is that by holding these trusts, I am actually protecting against myself, and my possibly poor asset allocation. This is borrowed/paraphrased from Robin Angus - who recommended holding half a dozen global generalists rather than one as even the late, and highly respected, Ian Rushbrook, who managed Personal Assets, could not get it right every (single) time.I hope that some find my ramblings useful, but if not, sorry for the length of the post. If anyone has any questions please ask - though I am a novice investor and might not be able to answer them. If anyone disagrees, please do so - I like to debate and if I am wrong in my approach, I would like to think that I would be able to admit it, and remedy any problems, before they cause financial harm. One last thing, I think that the AIC site is great (Trustnet is good too) for most investment trust info - but not all trust subscribe to one or both sites. Accordingly, I always think that you should go to the individual investment trust site and read information from there. While you have to be aware of bias, and positive spin, there is no substitute for reading the reports, and factsheets, and getting a 'feel' for the investment, before you take the plunge (and if like me almost always lose 10%!)march77
© Copyright 1998-2013, The Motley Fool Limited. All rights reserved. This material is for personal use only.The Motley Fool, Fool, and the "Fool" logo are registered trademarks of The Motley Fool, Inc.Place of Reg: England & Wales. Company Reg No: 3736872. VAT Reg No: 945 6990 68. Registered Office: 5th Floor, 60 Charlotte Street London W1T 2NU.
Page load time and server: