Investment trusts are a core holding of any well-rounded Isa portfolio. Here we look at three highly-rated trusts that could thrive over the long-term:
City of London (CTY)
Recently upgraded to a Morningstar Analyst Rating of Gold, the City of London trust was launched more than 120 years ago in 1891 and has been run by manager Job Curtis since 1991. The £1.3 billion investment trust aims to deliver growth and income by choosing quality UK companies.
Morningstar analyst Robert Starkey says: “The combination of exceptionally experienced and stable management, a consistent process, low fees and a focus on dividend generation make this a compelling option for investors seeking a core UK equity income options.”
Indeed, the trust’s focus on reliable income payments has earned it a reputation as a “dividend hero” as the trust has increased its payout a whopping 53 years in a row. Over 10 years, it has delivered annualised returns of 6.47% and its ongoing charge is just 0.37%.
Around a quarter of assets are in financial services firms with top holdings including HSBC and Lloyds Bank. It also holds a number of other FTSE stocks renowned for their reliable shareholder pay outs including British American Tobacco, Unilever and Royal Dutch Shell.
Starkey adds: “Our ongoing conviction is primarily built upon our regard for manager Job Curtin, who has been at the helm since July 1991, a tenure that’s exceptionally rare to see. Curtis is a naturally cautious, mildly contrarian investor and this approach has served investors well over the years.”
Personal Assets (PNL)
The Gold-Rated Personal Assets investment trust has the flexibility to invest in equities as well as fixed income assets, and can also hold cash and gold if the manager thinks its appropriate. Morningstar analysts say the trust is “an exceptional offering for investors looking for capital preservation and long-term capital growth”.
Currently the £1.1 billion portfolio is fairly evenly split, with 47% of assets in equities and 41% in fixed income, with around 12% in cash. Personal Assets has the freedom to invest across the globe and currently around a quarter of the portfolio is in the US, 9% in Australia and 8% in the UK. Reflecting the trust’s focus on capital preservation, the current biggest holding is in Gold Bullion Limited, with other top investments in tech giants Microsoft and Alphabet.
Morningstar analysts say: “Lyon is a cautious investor who learnt early on in his career that preservation is more important than growth of assets and this ethos has served him, and his investors, well.”
A newer vehicle in investment trust terms, it was launched in 1983 and has been managed by Sebastian Lyon since 2009. Interestingly, however, the board includes Robin Angus, one of the original founders of the trust, who still helps to approve the portfolio’s broad asset allocation.
Over 10 years, it has delivered annualised returns of 5.6%% - behind its benchmark, which has delivered annualised returns of 8.73% over the same period. The ongoing charge is slightly higher than average at 0.91%.
Mid Wynd International (MWY)
Silver-Rated Mid Wynd International is a smaller trust, with around £240 million of assets under management. This should allow it to be more nimble and take advantage of opportunities when they arise than larger trusts might be.
With a focus on delivering both growth and income, it can invest in companies across the globe and currently has 45% of its assets in the US and 11% in Japan. Healthcare, Technoloy and Industrial are big themes in the portfolio but the largest holding is luxury goods firm Louise Vuitton, with chocolate maker Nestle also featuring among its biggest investments.
Morningstar analyst Fatima Khizou likes the fact the trust has three managers, each of which have been involved in the strategy since 2011 and whose skills complement each other. The ultimate decision maker is Simon Edelsten who has substantial skin in the game, helping to align his interests with investors, another feature Khizou rates.
She adds: “The managers seek quality firms that are trading at what they believe to be attractive valuations and which they see as poised to benefit from long-term secular trends. They typically prefer companies that have high and sustainable barriers to entry, sustainable cash flows, good management and a limited exposure to external factors.”
With an ongoing charge of 0.51%, the trust has delivered whopping annualised returns of 13.04% over 10 years, compared to 8.82% from its benchmark, the FTSE World Index.
