Jason Britton, co-fund manager at investment boutique T. Bailey tells MoneyWeek where he’d put his money now.
The brief for this column was to write about my personal investments, rather than just those I manage professionally. Given that it is an investment principle of mine (which hopefully gives our investors confidence) that all my family’s investments go into the funds that I manage, this is quite tricky. But the recent arrival from the Government of a Child Trust Fund (CTF) voucher (from the new savings and investment scheme for children born on, or after, 1 September 2002, see https://www.childtrustfund.gov.uk/) has meant that for the first time I have needed to look elsewhere.
CTFs have been a much-debated topic at the nursery gates each afternoon when collecting my son. Having conducted a totally unscientific straw poll, it is very depressing to report that the majority of parents seem to be placing their CTF vouchers in a cash account, rather than opting for an equity-backed investment.
In my view, this is quite simply madness. By choosing the cash route, investors are swapping the value of the voucher today (£250) for the (near) certainty of about £500 in 18 years’ time (assuming interest rates of 4%, and before adjusting for inflation). As an alternative, an equity-based investment provides the opportunity for the child to receive £1,000 in 18 years’ time (assuming a return of 8% per annum and, again, before adjusting for inflation). Additionally, they may receive much more than this, if the sum is well managed and markets do well, albeit with a risk of receiving less – perhaps nothing – if markets plummet.
While the last outcome might make parents shy away from equities for a CTF investment, my own view is that, should the CTF investment be worth so little in 18 years’ time, then there will be many larger and more difficult problems in the world for us all to worry about than “where has the £500 that could have been attained from the cash option gone?”
Having decided on the equity route, one problem is that the amounts involved in CTFs are so small, and the administration burden relatively large, so few providers have decided to manage such products. However, one that has, and with whom my son’s CTF has been entrusted, is Walker Crips Stockbroker (https://www.wcwb.co.uk/).
Indeed, there are two very good equity products available for CTFs via Walker Crips: the CF Walker Crips Income Fund and the CF Walker Crips Growth Fund. Both are managed by the impressive Jan Luthman and Stephen Bailey.
These funds share many of the characteristics that T. Bailey likes to believe its products offer to investors, thus giving me confidence as a customer, just as I hope our same attributes appeal to T. Bailey’s customers. Walker Crips is an investment boutique specialising in what it is good at.It manages quite modest amounts of money, allowing them the flexibility and dynamism necessary to exploit value from the market, and the managers, being investors in the products they manage, have a great alignment of interests when it comes to getting the performance right.
In addition to the CTF investment with Walker Crips, my son’s child benefit goes into T. Bailey’s range of products each month – by direct debit, before I can spend it. So far, he has enough for about a term at college or university, should he wish to go. The main incentive for developing his nest egg, however, is to prevent him being a financial drain on his father during the latter’s retirement. And that gives me very good reason to manage the money well…