Emma Wall: Hello and welcome to the Morningstar series, Ask the Expert. I'm Emma Wall, and here with me today for out How to Pay Less Tax special is Jackie Beard, Morningstar analyst.
Hello, Jackie.
Jackie Beard: Hi, Emma.
Wall: So we're going to talk about SIPPs today. Looking for investment trust that you can buy and hold for a very, very long time, who do you have in mind?
Beard: So the first idea I have got for you today is Personal Assets (PNL), it's a fund that we rate Gold. First thing to say on this fund is that the focus is on capital preservation, first and foremost, which makes it slightly different from other funds I think.
And it's run by Sebastian Lyon of Troy. You can't get his funds elsewhere because the open-end funds are soft-closed, so that's kind of a nice twist. He didn't have a great year last year; they held gold, they were quite cautious. But he is absolutely focused on protecting your wealth.
Then, you've got Robin Angus running the Board. The two speak all the time; it's very much about asset allocation decisions. Turnover is pretty low. It has a zero discount policy. So, we've seen the Board acting on both the sides now, whereas up until the end of last year when Sebastian was running it, we've seen them issuing shares because it's been at a premium. We've now seen it move to a discount, and they're buying back shares. He got very strong commitment from the Board there; very, very focused on their capital preservation. So I think for a SIPP it's actually a very good fund.
Wall: They actually did well at a time when other investment trusts were losing a lot of money, weren't they, during the depths of the credit crisis?
Beard: That's right. So, didn't work quite so well last year, but 2011 when a lot of funds ended the year down, they actually made money for their clients. So, very, very different type of style, but very solid.
Wall: And over the long-term, not losing cash is as important as making cash?
Beard: Absolutely.
Wall: What's the second trust?
Beard: So the second idea is British Empire (BTEM). It's a fund that we rate Silver. Slightly different, it's pretty much an equities fund, with a global remit. Interestingly, they don't have any U.S. exposure. It's run by value investors and they feel the U.S. market is so efficient, there are just no anomalies there for them to gain any edge on. They're looking for really deep value companies or conglomerates, or other investment trusts actually as well.
And has to be deep value with some kind of catalyst to unlock that value and they will be very, very patient. Of course, we saw last year a lot of value style funds really didn't do very well at all. In this particular case, they held cash for a bit too long and they were just generally very cautious. So, as a result of that we've seen the discount widen a little bit as well. So, that in itself makes it a quite good entry point.
Wall: Value investing, can be quite volatile. Is that the case with this fund? Presumably it doesn't matter if you are holding for the long-term, but something to bear in mind?
Beard: Exactly. So I would say that, look at that discount and use it as an opportunity to buy. Don't get too hung up on it – we’ve talked about that before in other videos – but if you see the discount widen because of that kind of an issue, it's a good time to buy it.
Wall: And what about the third trust then?
Beard: So, the third one is less of a discount angle, Scottish Mortgage Trust (SMT), a very solid core fund. Lot of people know it very well, we rate it Gold. Run by James Anderson, of Baillie Gifford with his deputy, Tom Slater. Increasingly, we're seeing Tom more involved, which I think is a great thing. There is a good succession planning going on there. A very solid fund, core global equity exposure. It does have debentures, they do use gearing; it might be a little bit more risky for some people. But as a good long-term all-encompassing global proposition we think is one of the best out there.
Wall: Succession planning is incredibly important if you are holding something for the long-term. We've seen a raft of departures and sabbaticals recently, so it’s important knowing you've got someone in place there who at the time, when it's appropriate, will do a good job.
Beard: Exactly, we saw James Anderson go on sabbatical last year for six months and Tom Slater took over. Their turnover is so low it really didn't matter. James has come back, he's very bouncy. The other thing I would just add on Scottish Mortgage in its favour is that the Board have cut the fees. So, the fund was already cheap, 32 basis points a year, they've cut it to 30. Now, some might argue, well, 2 basis points. But actually I think that shows a really strong commitment by all the parties involved – cheap can get cheaper.
Wall: Jackie, thank you very much.
Beard: Thank you.
Wall: This is Emma Wall for Morningstar. Thank you for watching.
