Figures released this month show that investors’ appetite for tax efficient investments continues to grow. VCTs have enjoyed another bumper year, with money flowing into these higher-risk trusts at a record level.
Elsewhere, perhaps the biggest investment news in April was the announcement that star fund manager, Alexander Darwall, is to step back from his management role at Jupiter European, after almost 20 years. This may leave investors wondering what to do next, given how well the fund has performed under his management.
European funds were also in the news, with the announcement that AllianceBernstein was launching a range of UK-based OEICs. The first in this range will be European fund which will utilise AllianceBernstein’s skills as an ESG manager.
Edinburgh-based asset manager Baillie Gifford was also making headlines this month. It is the latest investment trust provider to decide that it is no longer cost effective to run its own direct savings schemes for investors. It follows Witan and JPMorgan Asset Management in transferring these ISA and JISA schemes to Hargreaves Lansdown.
Jupiter Star Fund Manager to Step Down
Veteran fund manager Alexander Darwall — who has run Jupiter European for 18 years — is to stand down before the end of the year.
He will be replaced by Mark Nichols who has co-managed Threadneedle European Select since 2016. Nichols is due to join Jupiter in July and there will be a transition period before Darwall relinquishes the reins of this fund.
This fund has a five-star rating from Morningstar, and previously had a Gold Rating. Morningstar analyst Samuel Meakin says this has now been moved to Neutral following this announcement.
Darwall says he wants to step back from some of his management responsibility though he will remain at the company. He will focus on some smaller mandates, including Jupiter European Opportunities Investment Trust (JEO).
Commenting on this change, Darius McDermott, managing director of Chelsea, said: “Darwall has successfully run the European fund since 2001, producing outstanding returns for investors, and finding a suitable replacement for him will have been hard.
“Nichols is probably among the best successors Jupiter could have found: we've been very impressed with him since he started co-managing Threadneedle European Select with David Dudding and he had a good track record before that.”
McDermott points out that both managers have a similar investment style and philosophy, looking for quality growth companies.
Baillie Gifford Launches ‘Responsible’ Income Fund
Baillie Gifford has launched a new Responsible Global Equity Income fund, which will be managed by Toby Ross and James Dow – who also manage the company’s global income growth fund and its five-star rated Scottish American investment trust (SCAM). The fund will have an annual charge of 0.63%.
The fund will adhere to UN Global Principles in its stock selection process. It aims to produce the same outcome as the existing global income growth funds: delivering a higher yield than the FTSE All World index, while also achieving long-term capital growth.
Fees Cut on Polar Capital Technology Trust
Polar Capital Technology Trust (PCT) is altering its fee structure. The trust – which as a five-star rating from Morningstar – says these changes are due to its growing asset base and new regulatory requirements.
The trust has a tied management fee, with a base fee of 1% of its net asset value (NAV) up to £800m. This is reduced to 0.85% on assets between £800m and £1.7bn.
Earlier this year the board introduced a lower fee (of 0.8%) for assets over this threshold. This has now been made permanent, and at the same time charges are further reduced to 0.7% for if the NAV exceeds £2bn. Currently the fund has around £1.8bn in assets.
The trust is also making changes to the way it applies a performance fee, rewarding the manager for beating its benchmark in more difficult market conditions. And the manager – rather than the trust’s assets – will pay for all research costs, which should help boost return for shareholders.
Record Year for VCTs
It was another bumper year for the venture capital trust sector, with investors ploughing £731m into these specialist trusts in the 2018/19 tax year, according to figures published by the Association of Investment Companies (AIC).
VCTs invest in private equity and smaller start-up businesses. They offer lucrative tax breaks, but due to the illiquid nature of these assets are seen as higher risk investments.
The AIC says this is the highest amount raised, since the current tax rules were introduced. Currently VCTs offer 30% upfront tax relief on contributions.
It is also the second highest amount ever raised in a single year, since VCT were launched back in 1995.
AIC chief executive Ian Sayers says: “These figures reflect consistent high demand for the VCT sector and the growing recognition of the benefits VCTs provide to investors.”
He says pensions changes – which have restricted tax relief for higher earners – was one reason why more people were looking at the VCT sector. He says in addition many VCTs have a “strong long-term track recrod of delivering growth and income returns”.
Radical Change Proposed for Property Trust
Axa Property Trust (APT) is proposing to change its investment remit and focus on undervalued UK-listed securities instead.
The board, which is currently winding down its assets, has proposed this change as an attractive alternative to shareholders.
Currently all but one of the properties the trust invested have been sold, returning some £49.3 million to shareholders – equivalent to 87% of the total asset of the trust, when this process began.
However, the board says this new policy would improve prospects for long-term growth, and avoid the trust being a forced seller of its remaining assets – which it believes could be sold for significantly more at a later date.
Shareholders will now vote on these proposals. If accepted the board says it will appoint Worsley Associates to advise it on this new strategy.
AllianceBernstein Launches UK Fund Range
AllianceBernstein has launched its first ever OEIC and says its plans to add other UK-based products soon.
This initial fund will be a European (ex UK) fund. It will be jointly managed by Tawhid Ali – AB’s chief investment officer of European value equities – and Andrew Birse, a portfolio manager at the company.
The fund will have an unconstrained approach and will invest in a portfolio of 40 to 60 holdings, with an active bottom-up stock selection approach and an ESG overlay.
AllianceBernstein is active in the institutional market and runs a number of pension mandates. Prior to this launch it operated funds under two Luxembourg-domiciled structures. However the company said that to be more widely accepted on UK platforms it needs a range of UK products alongside the Luxembourg SICAV range.
Baillie Gifford Transfers Savings Scheme to HL
Baillie Gifford is the latest investment trust provider to close down its own directs savings scheme, and transfer assets to Hargreaves Lansdown.
The asset manager has around 21,000 customer accounts which include ISA, Share Plan and Children’s Savings Plans. Around £1.3 billion sits in these various direct savings plans.
Baillie Gifford says it was in the “long-term interests of the plan holders” to switch these accounts to a specialist platform provider, like Hargreaves Lansdown.
Plan holders will be contacted with further details of the transfer and their options. Hargreaves has agreed to maintain Baillie Gifford’s charges for at least three years from the transition date.
Similar moves have been made by JP Morgan Asset Management and Witan Investment Trust. Earlier this month JPMAM announces it was transferring its direct ISA clients to HL, while Witan Investment Services announced at the start of the year it would transfers its savings schemes to HL.
