Last week, I reviewed our investment trust portfolio. It was, even by our standards of churn, a particularly dull update. I told you that everything was going fine and made no changes whatsoever. I suspect that this all pleased most of you who hold the trusts. You are making a perfectly good return and no action is required.
But spare a thought if you will for the members of my investment trust advisory panel. Whenever we go through this process of thinking a lot and doing very little, I email all of them and demand that they recommend trusts I could put in the portfolio as replacements, if for whatever reason I was roused to sell one of the existing trusts.I nag them on this. I get their replies.
And then I mostly ignore them. However, it occurs to me that you might not want to do that, particularly if you have been following the suggestions for alternatives they made the last time round: Baillie Gifford Japan is up by around 61% since, for example, and Henderson Smaller Companies has returned 34%. So I am going to use this letter this week to run through their ideas.
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Several funds were put forward as possible replacements for 3i Infrastructure, given that the 3i shares trade on a high premium. Simon Elliott suggested Greencoat UK Wind (LSE: UKW) or Renewables Infrastructure Group (LSE: TRIG), while Alan Brierley still has a soft spot for HICL Infrastructure (LSE: HICL).
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Beyond the infrastructure sector, Simon noted that there is little offering "significant value" in the market at the moment, but that "one of the few exceptions" is British Empire Securities (LSE: BTEM).
Its shares trade on a double-digit discount to its net asset value (in other words, you'll pay less than 90p for £1 worth of assets), thanks to "the out-of-favour nature of its value approach to investing" (it focuses on finding cheap asset-backed companies).
Performance has picked up recently and the fund is benefiting from the general increase in merger activity in the market. He expects a re-rating.
Sandy Cross noted we have no Asia-focused funds, a shame given that there is clearly "long-term opportunity" here. To remedy this, he suggests the Edinburgh Dragon Trust (LSE: EFM), which is run by Aberdeen Asset Management and has a new manager, Adrian Lim. The shares in the trust trade on a 10% discount to net asset value.
After a "recent run of poor performance" Sandy is hoping for a "return to form". Simon agrees. He sees Asian equities as being "attractive from a value point of view" and also likes Edinburgh Dragon. Otherwise, he would suggest Schroder Asia Pacific (LSE: SDP).
If I had been forced to replace one of the perfectly adequate funds we have in the portfolio at the moment, I would, I think, have gone with the majority on the panel and chosen Edinburgh Dragon too.
