How’s our investment trust portfolio faring?

In the middle of June 2012, I was finally persuaded to produce a small portfolio of our favourite investment trusts for regular readers. I’d been resisting for two simple reasons. The first was that you’d all demand regular updates on the thing and that I would have to produce them. It was clearly going to be one more thing that would end up almost permanently on my “to do” list.

The second was that it seemed to me that if I took a break from carping at the investment industry from the sidelines to produce an actual portfolio, it was almost inevitable that it would go wrong. So when I produced it for the first time, I told you that I wasn’t going to update on it very often; that I wasn’t going to change it much; and that anyone who decided to invest alongside me (I hold all the trusts in my own portfolio) would be doing so at their own risk. All complaints were to be ignored.

So where are we with it now? So far, so good. We’ve stuck to the first two declarations pretty well (not many updates, almost no changes) and the third has not (yet) been an issue. Since we first wrote up the portfolio it has returned investors a total of 51% (42% in capital and the rest in income). The FTSE All Share has managed only 35% – see the table below. So complaints have been minimal.

The biggest contributors to returns so far have been Scottish Mortgage and Finsbury, but RIT Capital is coming along nicely and we are pleased to see Personal Assets Trust (PAT) doing what it is supposed to this year. The trust has underperformed for some time due to its focus on capital preservation. The managers have long believed the stockmarket as a whole is overvalued and that extreme monetary policy will end in tears.

So while the managers at Scottish Mortgage have thrived on optimism and pouring our money into exciting technology, genomics, robotics and social media, PAT’s Sebastian Lyon has hung on to his gold (10.3% of the portfolio), index-linked bonds (22.9%) and very short-dated bonds (21%). Scottish Mortgage is down not far off 9% in the last three months (although still popular enough to be trading at a small premium). PAT is up just over 6%. So that balances things out nicely.

On the downside I am mildly disappointed in our newest addition, Law Debenture Corporation. It is down 9% since we bought it last September. That’s partly down to some bad choices: the portfolio has had too many industrials (these have been weak) and the manager moved back into oil and mining a little too early.

However, it is also about the fiduciary business that Law Debenture owns in its entirety. In the past this has not been valued inside the net asset value (NAV – the official sum of the value of all the holdings). It still isn’t, but there is now a stated value in the accounts – one that some may have found disappointing.

This (along with the worse-than-usual performance) has meant that the premium to NAV that the shares were enjoying has disappeared. We aren’t much concerned. The manager – James Henderson – has an excellent record (the trust is still up 55% over the last five years), and it adds good balance to our portfolio, both with the fiduciary business and with the exposure to the resources sector. We’ll stick with it for now. We’re happy with the rest of the portfolio too. No change (again).

Investment trust Ticker Date bought Price when bought Date sold Price at 1/3/16, or when sold Change Total return (divs reinvested)
BH Macro BHMG 15/06/12 1,948p 11/10/13 2,056p 5.5% 5.5%
Caledonia Investments CLDN 11/10/13 1,830p n/a 2, 280p 24.59% 31.01%
Personal Assets PNL 15/06/12 36,000p n/a 36,050p 0.14% 6.45%
Scottish Mortgage* SMT 15/06/12 642p n/a 250.8p 95.33% 105.13%
Finsbury Growth FGT 15/06/12 331.75p n/a 595p 79.35% 94.22%
Capital RCP 15/06/12 1,238p n/a 1,583p 27.87% 36.3%
3i Infrastructure 3IN 15/06/12 124p 18/09/15 167.5p 35.08% 60.39%
Law Debenture Corporation LWDB 18/09/15 503.5p n/a 458p -9.04% -9.04%
Portfolio return** 42.35% 51.02%
FTSE All Share 18.81% 34.64%
MSCI World*** (excl. EMs) 46.15% 60.18%
MSCI World*** (incl. EMs) 38.83% 52.22%
* Return adjusted for 5-for-1 stock split on 30/6/14
** Assumes BH Macro holding rolled into Caledonia
*** Returns in pounds sterling
Investment trust Ticker NAV when bought Latest NAV at 1/3/16 NAV change Prem/disc when bought Prem/disc at 1/3/16 Forward yield
BH Macro BHMG SOLD 11/10/13
Caledonia Investments CLDN 2,311p 2,829p 22.4% -26.28% -19.1% 2.3%
Personal Assets PNL 33,675p 36,305p 7.8% 6.46% -0.3% 1.6%
Scottish Mortgage SMT 138.7p 250p 80.2% -8.02% 1.8% 1.2%
Finsbury Growth FGT 328.2p 581p 77.0% 1.07% 3.3% 2.0%
Capital RCP 1,211p 1,534p 26.7% 2.18% 4.3% 1.9%
3i Infrastructure 3IN SOLD 18/09/15
Law Debenture Corporation LWDB 461p 423p -8.2% 8.5% 7.3% 3.5%