Investment trusts may be old and have a traditional cut to their jib but there is nothing wrong with that. The industry is proud of its heritage and it is indicative of its success and longevity that many of the original names remain involved in this sector. They sought to raise funds to garner profits from diverse ventures such as North American railroads, Hawaiian sugar plantations and rubber estates in Malaysia. Men such as Robert Fleming and Alexander Henderson (the 1st Lord Faringdon) securitised the money they raised in the form of investment companies.
Fleming launched Scottish American Investment Trust in 1876 and when Henderson died his estate spawned Witan Investment Trust. As a result both the Fleming and Henderson names have become indelibly linked with fund management in this country. The names live on, as do their family fortunes, kept safe and prosperous within the investment structure they helped found over a Century ago.
Today the sector is still home to considerable family wealth. Rothschild Investment Trust
(RIT) is the vehicle for Jacob Rothschild. Caledonia still looks after some Cayzer money despite past family issues. The Barlow family have Majedie Investment Trust husbanding their cash. The old Jute barons of Dundee, the Scotts, have done well out of the Mid Wynd Investment Trust managed by Baillie Gifford. Brunner Investment Trust was formed with the proceeds of the sale of Brunner Mond & Co in 1926, which the eponymous family had sold to what effectively became ICI. Then there are those who have done well from within the asset management industry and now choose to manage their own assets in the way they did for their clients.
Personal Assets was the brainchild of the late Ian Rushbrook and now managed by Troy
of Weinstock fame. New Star Investment Trust looks after the proceeds of the first Jupiter buy out on behalf of some lucky ex-executives. Likewise Invesco Select is the home for funds liberated by Mercury Asset Managements sale to Merrill Lynch all those years ago. Then there is the Independent Investment Trust, managed and owned by some Scotland’s sharpest financial minds.
More modest private investment continues to roll into the investment trust sector. Individuals frequently buy shares through ISAs and share schemes or via internet trading platforms while intermediaries such as Rathbones, Rensburg and Brewin Dolphin dominate the share registers
of many trusts, taking large positions collectively on behalf of their private clients.
However, despite possessing such a provenance and displaying an on-going commitment to private wealth management, the investment trust sector can hardly be described as front of mind for many of today’s family offices and their advisers. There is an absence of what might be termed ‘new’ money and more international wealth coming into the sector.
For these communities it is doubtful whether investment trusts would feature on a list of preferred assets. Today’s favourites seemingly are hedge, property and private equity.
Yet for those with room for long-only equity within their portfolios, investment trusts offer a sensible and lasting solution. Global Growth trusts such as Scottish Mortgage, Monks and Alliance bring together a powerful cocktail of active management, outperformance of global indices, respectable dividend yields and low fees. They have centuries of experience behind them and may be described as providing a quintessential buy-and-hold strategy.
The close-ended fund sector has had its fair share of criticism over the years and some of it is well justified. The split capital debacle at the turn of the century tarnished the reputation of conventional trusts as well as understandably destroying faith in splits themselves. Some trusts have been correctly accused of being nothing more than index track while a few trust boards have been rightly unmasked as indolent for allowing performance to drift and discounts to widen on their watch. Indeed too often discounts are cited as a source of concern for investors. Of course, equally they can be an opportunity. Liquidity may be a worry for smaller trusts and those dealing in specialist or cyclical areas. Again this need not be a problem if the investor is happy to hold for the long term. Invariably no such liquidity issues exist with the larger and more popular funds.
A charge often levelled at the investment trust sector is that it is old fashioned and anachronistic as if only new funds and new methods of investment have any real relevance or worth in today’s world. Nemesis has been calling on those harbouring such hubristic thinking. Investment trusts may be old and have a traditional cut to their jib but there is nothing wrong with that. The industry is proud of its heritage and it is indicative of its success and longevity that many of the original names remain involved in this sector.
It would also be a mistake to think investment trusts have survived through the turbulence of the past century or so without adapting to prevailing economic circumstance. The industry has its roots in innovation and remains true to that beginning today.
Trusts such as Murray International and Scottish Mortgage are packed with modern investment thinking and their horizons focus on the future and not the past.
The investment trust sector deserves consideration as a home for private wealth with a long term perspective. It may not be fashionable but that should not be a factor when planning for the future.
