As well as running his own self-invested personal pension and Isa investments, James Curtis has also been charged with looking after his wife’s pensions and the two Junior Isas they have opened for their children.
The family is backing green energy to deliver long-term returns, and James has invested in Renewable Infrastructure Group (TRIG), an investment trust that, as the name suggests, holds a range of infrastructure assets that generate electricity from renewable sources.
The children’s Jisas are fully invested in the trust as James thinks “green energy is the future”. He says: “The trust looks attractive in that it offers an inflation-linked income as well as potential capital growth, and the team reinvests their profits.”
But being concentrated in just one sector is, James admits, a bit of a high risk strategy. This is fine for the Junior Isa accounts, he explains, as the children will be invested for the long-term and can afford to take on more risk. “They are young and can afford to take a knock or two along the way,” he says.
The trust - which is not currently rated by Morningstar - has delivered reasonable returns to date. According to Morningstar data, it has delivered total annualised returns of 13.55% over the past three years, comfortably outperforming its benchmark, the FTSE World TR, which delivered 9.63% over the same time period. (These returns are based on share price, rather than net asset value).
As well as investing the Jisas in the trust, James has put half of his wife’s pension in it too. While she doesn’t have the same long investment horizon, he says: “I see her pension as a satellite to the core investments we hold in my pensions, and therefore feel we have the capacity to take a higher risk.”
The other half of his wife’s pension is invested in BlackRock Energy and Resources investment trust (BERI). Rather than pursue a “green” remit, this three-star rated trust invests heavily in both the mining and oil sectors.
James says: “I realise this seems counterintuitive to the conviction that made me invest in the Renewable Infrastructure Group, but I believe mining will be instrumental in us moving away from oil to greener energy production. For example, copper is essential in the electric infrastructure that will need to be built to replace our current reliance on fossil fuels.
He also points out that commodities will be required by emerging markets as they grow and compete with developed markets as a global rebalance potentially unfolds.
James also has faith that the big global oil companies will adapt to green energy products and are well positioned to drive this industry forward given their vast financial resources and intellectual property. He adds that commodities are a good hedge against the “great experiment” of quantitative easing (QE), which has propped up developed economies in recent years.
But the commodities market has not been a good performer in recent years. According to Morningstar data, the BlackRock trust has delivered total annualised losses of 0.97% over the past three years, and total annualised losses of 0.48% over five years.
Maximum Growth
When it comes to his own pensions, James is trying to maximise payments into his workplace scheme and also has a Sipp, through which he invests in a range of global investment trusts including the Gold-Rated Scottish Mortgage (SMT), as Gold-Rated Fundsmith Equity fund, and the iShares Edge MSCI World Momentum fund.
All of these have been strong performers of late and, as a result, have a maximum five-star rating from Morningstar. While the first two are actively managed funds, the iShares fund is a passive “factor” fund; it tracks the MSCI Momentum index, which is designed to identify stocks with high price performance history, on the assumption that they will continue to outperform. It invests in large and mid-cap stocks across around 20 developed markets. This strategy has delivered decent performance, with annualized returns of 16.92% over five years, according to Morningstar data.
James has been trying to maximise payments into these various savings pots with a view to retiring early and has been contributing to various Save As You Earn (SAYE) schemes through work for a number of years: “These provide a conveyer belt of lump sums that can help finance the cash flow into my Isas and pensions.”
James - who works in the financial services sector - also switched to an interest-only mortgage a number of years ago to help him invest more into these tax-efficient savings plans. While he is unsure whether this will remain sustainable in the long run, he is hoping there will be sufficient money in his pension to use the tax-free cash 25% lump sum to pay off the outstanding capital balance on his mortgage. People can access their pensions from the age of 55, under the pension freedom rules.
James says: “Of course there is always the risk that the pension rules are changed again, and I am relying on investment growth. But given the relatively low rates of interest, and the good returns I’ve made on many of my core holdings I am optimistic that this strategy will pay off.”
