Investment trusts have had bad press since the split-capital trust debacle
five years ago. Unlike unit trusts, investment trusts are allowed to borrow money to boost returns. This works well when markets are rising, but can damage returns when they’re falling – as the split-cap trusts that were grossly over-leveraged found out to their cost (and that of the 25,000 investors who ended up losing more than £650m in the debacle).
But the sector shouldn’t all be tarred with the split-cap brush, says fund
of funds manager Peter Walls in What Investment. The split-cap managers “stretched the concept (of borrowing to invest) to extremes” – something that managers just aren’t doing anymore. Today, Walls tells the FT, investing in the trust sector is both “interesting and remunerative”.
Walls looks for funds run by managers who have experience and flair, with the aim of achieving sustained, steady results. And it seems he finds them. His fund, Unicorn Mastertrust, has yielded a 72.6% return over the last three years (the sector average is 45%) and, says Citywire, he is now known to be a “highly successful long-term fund picker”.
So what’s he thinking now? That “timing is everything”, he tells What Investment. He expects the next six months to see “reasonably bullish” conditions in the global economy and is responding by investing in a series of growth-orientated investment trusts. These include the £380m JP Morgan European Fledgling Investment Trust and the £172m Baillie Gifford Japan Investment Trust.
Contact: 020-7253 0889
Unicorn Mastertrust’s top ten holdings
Name of holding % of assets
Osprey Smaller Companies Income Ord 3.6
Fidelity Asian Values Ord 3.5
British empire Secs & General Ord 3.5
Montanaro UK Smaller Companies 3.2
Renaissance US Growth 3.1
Aberforth Smaller Companies Ord 3.1
3i Group 3.0
Manchester & London IT 3.0
Polar Capital Technology Trust 3.0
Unicorn Eaglet IT 3.0