Junior ISAs: Where Are Morningstar Employees Investing?

Institutional sales manager Ed's three children have a Child Trust Fund invested in an investment trust and two Junior ISAs containing an Asia Pacific fund

Holly Cook 12 March, 2013 | 4:00PM
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This article is part of the special series, Investing with ISAs

Ed's children have started investing early and thanks to dad's research their investments are showing plenty of promise so far. Ed, an institutional relationship manager at Morningstar, had three main criteria for selecting his children’s investments: their regional/risk exposure; Morningstar Analyst Rating; and cost. 

Daniel's Child Trust Fund: Witan Investment Trust

For his first child, Ed set up a Child Trust Fund, triggered by the £250 voucher from the government. "With that voucher, there's no reason not to invest really," Ed says. His first son's CTF is automatically topped up on a monthly basis with an extra £25. 

When it came to selecting which investment to put his CTF funds into, Ed opted for an investment trust as he "knew these vehicles had a tendency to outperform open-ended funds." There were relatively few investment trusts available within the CTF, but Ed felt that Witan Investment Trust (WTAN) was the one that had the best chance of consistently growing returns. This closed-end fund aims to deliver long-term capital growth and a growing real income through investment in global equity markets. Morningstar director of closed-end fund research Jackie Beard has rated the fund Silver and among other benefits she flags Witan's relative low cost with ongoing charges amounting to less than 1%. 

Indeed, since investing in this fund within the CTF two-and-a-half years ago, the investment trust has returned around 40% on both a price and net asset value (NAV) basis. Those are returns that 4-year-old Daniel shouldn’t turn his nose up at. 

Emma & William's Junior ISAs: Aberdeen Asia Pacific Fund

Meanwhile, barely able to take their first steps and already Ed's daughter and second son are fully invest in emerging markets. A little under a year ago, at the start of the 2012-2013 tax year, Ed set up Junior ISAs for Emma and William that invested in the Aberdeen Asia Pacific Fund.

This fund aims to achieve capital growth by investing in the countries of the Asia Pacific region excluding Japan. It's a popular choice among UK investors and has for the past two years carried Morningstar’s highest Analyst Rating of Gold. Its total expense ratio of 1.84% isn't the cheapest on offer but Ed feels that the fund's solid performance is worth paying for. Aberdeen Asia Pacific has generated a total return of just under 20% since Ed purchased shares in April 2012.

"It's performed so well that now I wish I'd put more than just £500 in each of their Junior ISAs," says Ed. "I'm ready to invest more on behalf of all my children but each fund's recent strong performance puts a question mark over when to put that money in, I'm waiting to see if there's a bit of a dip that will trigger my purchases." 

CTFs vs. ISAs

For ease of management and to take advantage of Junior ISAs' broader investment choices, Ed would like to be able to transfer Daniel's CTF to a Junior ISA too. At present, however, this is not possible so he’s stuck with the CTF invested in Witan Investment Trust.

Along with thousands of other parents, Ed signed an e-petition to push the government to consider merging these two investment wrappers but so far there has been no movement on this quest.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
abrdn Asia Pacific Equity A Acc319.05 GBP-0.34Rating
Witan Ord  

About Author

Holly Cook

Holly Cook  is Manager, Morningstar EMEA Websites

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