£78bn of passive income? It’s easily available

Story by Christopher Ruane

 

IN THIS ARTICLE

£78bn of passive income? It’s easily available

Yes!

That is approximately how much FTSE 100 companies paid out in dividends to shareholders last year. The only thing those shareholders had to do to earn that passive income was to own shares.

That may have meant buying them last year. In some cases people who had not spent a penny buying shares for decades would still have seen the work-free cash rolling in, as long as they still owned the shares.

That enormous passive income pot is easily accessible, in my view. Simply by buying FTSE 100 dividends, I would hopefully get some of it for myself.

Is it really that easy?

Having said that, it is worth noting a couple of important points.

One is that dividends are never guaranteed. A company paying them now can decide tomorrow to stop. So I take care to diversify my passive income streams across a number of different companies, carefully assessing each one’s financial prospects before buying.

Also, to buy shares, I need money.

Setting up an investment strategy

How much money is up to my own financial circumstances. It is possible to start investing in the stock market even with just a few hundred pounds.

To get going, I would set up a share-dealing account or Stocks and Shares ISA. I would put the money I wanted to invest in that, ready to buy dividend shares.

Finding shares to buy

With passive income as my goal, the search field for shares would narrow. I might like a growth company like Tesla but I see little prospect of it paying dividends any time soon.

What would I be looking for?

Passive income here is essentially the extra cash the business earns that it does not need to spend on something else, like future growth. So I would look for a business I felt I could understand, with a sustainably strong position in a market I expect to benefit from ongoing customer demand.

I would consider whether the share is attractively valued. After all, what I earn in dividends could be effectively cancelled out if the share price falls lots while I own it.

Putting the theory into practice

As an example, consider one share from which I am currently earning passive income: M&G (LSE: MNG).

The FTSE 100 asset manager has a large addressable market. Within that, a number of things help it compete effectively. For example, it has a well-known brand, established customer base spanning over two dozen markets, and long asset management experience.

That has helped it generate cash flows to fund a generous dividend since it listed as an independent company in 2018. Currently, the dividend yield is 9.8%. So, if I invested £10,000 in it today, I would hopefully earn almost a thousand pounds in passive income annually.

Whether that continues depends on how the business performs. One risk I see is that any economic downturn could hurt investor sentiment, leading them to withdraw funds from M&G. That could be bad for its profits.

Still, I own the share precisely because I believe in its long-term prospects – and am earning passive income from it along the way!

The post £78bn of passive income? It’s easily available! appeared first on The Motley Fool UK.

The £80-a-week investment strategy that could make you a millionaire by retirement.

Story by RKE

When to start investing, how much to save, how quickly can you become a millionaire? Experts have calculated it. Many of us dream of becoming millionaires. Investment industry experts believe this dream can be achieved through relatively simple steps. According to them, saving just £80 a week might be key. The question is when to start.

One must remember to save

The information presented by the USA site can be particularly useful for residents of the United States but can also serve as motivation. What do financiers advise as the first step? Start saving, preferably before reaching the age of 25.  According to the Milken Institute, this gives a chance to accumulate adequate retirement funds amounting

to £882, 000. 

How much needs to be saved? Experts have estimated that £80 a week invested in the market at an annual gain of 7 percent can bring impressive savings. Under the right conditions, this can achieve millionaire status by age 65.

Bloomberg notes that following the path recommended by professionals can be a challenge for young people, especially considering that many students have educational loans. Therefore, setting aside £320 a month might seem difficult.

£££££££££££££££

Whilst u may not have a spare £320 a month to invest, any amount will compound, although in the beginning the amount compounded will seem miniscule. Stick to to your task until it sticks to you.

5 sustainable UK stocks that Fools love

Five completely different stocks, all listed in the UK, that tick a wealth of ESG boxes as well as looking good for the long term!

Published 20 May

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

Many investors aim to align their personal values (in relation to environmental protection, social justice, and ethical governance, or ESG) with their portfolios. This is where sustainable shares come in. And here in the UK, there are many stocks that allow investors to support companies that share their values while still creating wealth over the long term… Sounds pretty Foolish to me!

Croda International

What it does: Croda International sustainably creates speciality chemicals to enhance products in a wide range of

By Oliver Rodzianko. Croda International (LSE:CRDA) has “committed to becoming the most sustainable supplier of innovative ingredients on the planet”.


Not only is the company leading in environmental preservation efforts, but it’s also making a handsome profit in the process. Over the past 10 years, the shares have grown 78% in price. It also has a net margin of 10%, which is great for its industry.

Recently, it has hired sustainability expert Aris Vrettos. Bringing 15 years of top-class experience, I think this is going to even further deepen the sustainable future of Croda.

Now, I must mention that in the past, it has faced legal action over negative effects on the environment from a plant it operated. There’s some chance that something like this could happen again, which would be bad reputationally.

But overall, this company looks very strong to me. I appreciate its efforts in getting toward a cleaner, safer work culture.

Oliver Rodzianko does not own shares in Croda International.

Gore Street Energy Storage Fund

What it does: Gore Street Energy Storage Fund invests in power retention assets across Europe and the US.

By Royston Wild. If renewable energy is to take over from dirtier sources, the energy supplied by wind, solar and tidal sources will need to be reliable. Regular power cuts are not acceptable for any developed economy.

This is why Gore Street Energy Storage Fund (LSE:GSF) has a large and growing market to exploit. This small cap invests in utility-scale power storage assets with the aim of providing regular dividend income to its shareholders.

Today its objective is to provide annual dividends equivalent to 7% of net asset value (NAV) per ordinary share, or 7p per share, whichever is higher. It’s a strategy that creates a chunky 5.1% dividend yield for the current financial year.

Gore Street’s share price, like those of many renewable energy and property stocks, has been under pressure due to higher-than-normal interest rates. This could remain a problem, too, if inflation fails to drop significantly.

However, at current prices I think the trust is worth serious consideration. At 60.3p per share, it trades at a whopping 43% discount to its estimated NAV.

Royston Wild does not own shares in Gore Street Energy Storage Fund.

Renewi

What it does: Renewi is a European waste management company that uses most of the waste collected for recycling or energy production.
By Christopher Ruane. When Australian infrastructure-focused asset manager Macquarie made a takeover bid for Renewi (LSE: RWI) last year, it was rejected as undervaluing the company.

Since then, Renewi shares have fallen below the bid level. But the share price has still grown by an impressive 72% over the past five years.

Renewi shares trade on a price-to-earnings ratio of 12, which I think looks cheap. Whether that turns out to be the case depends partly on Renewi maintaining or growing its earnings. The past couple of years have been good, however the track record is inconsistent.

The business is highly cash generative but has a net debt that outstrips its market capitalisation. That is a risk to long-term profitability.

I like the business’ clear strategic focus, its extensive operational footprint and its proven business model. I see long-term revenue growth opportunities. If the company can reduce its indebtedness, I think those revenues provide a solid basis for profitability.

Christopher Ruane does not own shares in Renewi.

Tesco

What it does: British multinational high street supermarket chain selling groceries and general merchandise.

By Mark David Hartley. Founded in London in 1919, Tesco (LSE:TSCO) is now one of the largest retailers in the world. It has a strong focus on sustainability initiatives, often ranking near the top of lists for environmental, social and governance (ESG) scores. I like that it uses ethical sourcing and is known for giving back to local communities, including support for local farmers and suppliers. In its stores, I often see promotions for fair trade products and healthy, budget-friendly food options for customers.

However, it could improve more by reducing its reliance on plastic packaging and making efforts to reduce emissions from transportation and logistics. There is also some evidence to suggest its fair labour practices could be better. Overall, it scores higher than most of its competitors when it comes to ESG. I think it strikes a good balance of committing to realistic sustainability efforts without threatening its bottom line.

Mark David Hartley owns shares in Tesco.

The Renewables Infrastructure Group

What it does: The Renewables Infrastructure Group is an investment trust with a portfolio of onshore and offshore wind farms and solar parks in the UK and Europe.

By Ben McPoland. A FTSE 250 stock that I’ve been buying opportunistically over the past year is The Renewables Infrastructure Group (LSE: TRIG). It’s down 27% in two years.

One silver lining to this falling share price is that the dividend yield now stands at 7.3%. And the forecast yield for this financial year is a very attractive 7.6%.

Beyond the passive income potential, what I like here is the diversification in both assets (wind and solar farms and battery storage assets) and geography (six countries).

Unfortunately, the clean energy sector has fallen out of favour due to higher interest rates. Green projects often require significant upfront investment, and higher rates make borrowing for them more expensive. We don’t know when or by how much rates will come down. This adds uncertainty.

However, I can’t help feeling this is already more than reflected in the current valuation. The shares are trading at a whopping 23.1% discount to the estimated value of the firm’s assets.

Overall, I think there is a lot of value on offer here for patient investors.

Ben McPoland owns shares in The Renewables Infrastructure Group.

The Motley Fool

How to create a ton of passive income within an ISA in 3 easy steps
By Edward Sheldon

Passive income’s often said to be the ‘holy grail’ of personal finance. With this form of income, investors get paid without having to actively work for the money.

Here, I’m going to explain how UK investors can potentially build up a ton of passive income within an ISA in just a few simple steps. Let’s get into it.

Pick the right ISA
Thanks to higher interest rates, it’s possible to generate passive income within a Cash ISA. At present, some of these accounts are offering interest rates of over 5%.

However, if an investor wants to generate a really high-level income, Stocks and Shares ISAs are a better bet, in my view. That’s because these products offer access to high-yielding investments such as dividend stocks and income funds.
So if I was looking to create a powerful passive income stream, I’d start by opening this type of ISA.

Look for attractive dividend stocks
Once I have an account open, my next move would be to identify some attractive high-yielding dividend stocks.

Now, this part of the process can be a little tricky. This is due to the fact that high-yielding stocks don’t always turn out to be good investments.

Sometimes, a high yield’s actually a signal that the underlying company has fundamental problems. So it’s important to look beyond a company’s yield and think about its long-term prospects.

One dividend stock I like the look of today is FTSE 250 company the Renewables Infrastructure Group (LSE: TRIG). It’s an investment company that owns a portfolio of clean energy assets (wind and solar farms etc)

Looking ahead, the transition away from fossil fuels towards renewable energy is likely to be a huge theme. So the backdrop for this company should be quite favourable.

Currently, the yield here is around 7.75%. This means that a £3k investment could potentially generate annual income of about £233 (dividends are never guaranteed though).

Over the last two years, this company’s share price has taken a hit due to higher interest rates. After this fall, I reckon now’s a good time to consider building a position in it.

That said, there’s always the chance that the share price could dip further. Falling energy prices are one risk to consider with this company.

Diversify to reduce risk
Given that every company has its own risks, the last step in my passive income plan is spreading capital out over a number of different stocks.

This move – which is known as ‘diversifying’ a portfolio – can help to reduce stock-specific risk. This, in turn, can improve the chances of generating strong overall returns.

For example, if you only own three stocks and one of them tanks, your overall returns could be ugly. However, if you own 20 stocks and one falls heavily, it’s probably not going to be so bad.

If you’re looking for more stock ideas to build a diversified passive income portfolio, you can find plenty at The Motley Fool.

£££££££££££££

If u own a share and it cuts its dividend, it’s going to reduce your income to re-invest. If that share is in an Investment Trust, the effect will be hardly noticeable.

Chart value including dividends received but re-invested into an another higher yielder, where u would have still doubled your money.

U knew that MRCH was a ‘dividend hero’ and u decide to buy the yield, u would have been concerned that the price might keep falling but u were content with the yield. Your strategy is to do nothing apart from re-invest the dividends back into the Trust. U may not have bought the first breakout but Mr. Market gave u several opportunities to buy a position.

If u invested 10k, u would have shares worth 20k plus but let’s stick with 20k.

The current share price is 582p and the dividend is 28.4p a yield of 4.8%.

A buying yield of 9.6% a running yield of 4.8%.

U could sell half of the position to invest in higher yielder or all of the position and hope to do it all again. If u buy a Trust or 2 Trusts yielding 10%, u would have income of 2k pa, a yield on your initial investment of 20% and your Snowball is starting to gain momentum. U could buy a higher yielder at a discount, a belt and braces trade and wait for Trust prices to recover. If they don’t u can buy even more shares at bargain prices.

Remember to DYOR as dividends aren’t guaranteed.

Discount Watch

We estimate there to be eight investment companies trading at a 52-week high discounts this week – including Octopus Renewables Infrastructure and Finsbury Growth & Income. Do their appearance herald another rough patch for the renewables and UK equity income sectors or are company-specific reasons the driver?

ByFrank Buhagiar•28 May, 2024•

We estimate that eight investment companies saw their discounts hit 12-month highs over the course of the week ended Friday 24 May 2024 – one more than the previous week’s seven.

Not much change in terms of the headline number, but two new additions to the list of 52-week high discounters worth mentioning. Firstly, Octopus Renewables Infrastructure (ORIT). For having dominated the list earlier this year, renewable energy infrastructure companies have seen their share prices bounce off their year-high discounts. So much so that, for the past few weeks, there has not been a renewable energy infrastructure company in sight on the Discount Watch List. So does, ORIT’s reappearance herald another rough patch for the sector or is there a company-specific reason at play here?  ORIT’s share price turned lower from mid-May onward, around the time the company announced it was no longer considering a possible combination with Aquila European Renewables (AERI). The market expressing its disappointment at the failed union perhaps?

Next up, Finsbury Growth & Income (FGT). As with renewables, UK equity income trusts had, up until recently, been a feature but their numbers too have dwindled. Publication of FGT’s latest monthly factsheet on 15 May appears to be the driver, specifically the performance table. NAV/share price off -3.0%/-3.2% respectively during the month of April. The index by contrast was up +2.5%. Another company-specific reason as opposed to a sector-wide issue?

The top-five discounters

Fund	Discnt	Sector
Ceiba Investments CBA	-68.99%	Property
Life Science REIT LABS	-57.73%	Property
VPC Specialty Lending Investments VSL	-43.92%	Debt
JPEL Private Equity JPEL	-40.67%	Private Equity
Octopus Renewables Infrastructure ORIT	-36.12%	Renewables

The full list

Fund	Discnt	Sector
VPC Specialty Lending Investments VSL	-43.92%	Debt
Develop North DVNO	-1.36%	Debt
JPEL Private Equity JPEL	-40.67%	Private Equity
Life Science REIT LABS	-57.73%	Property
Ceiba Investments CBA	-68.99%	Property
Octopus Renewables Infrastructure ORIT	-36.12%	Renewables
Finsbury Growth & Income FGT	-8.78%	UK Equity Income
Invesco Perpetual UK Smallers IPU	-17.32%	UK Smaller Co

Dividends really do matter over the long term, even in North America

Investors in America have swarmed into growth stocks with rampant earnings growth and fat margins, ignoring boring old dividends. But those humble dividend cheques matter over the long term, even in North America, the home of the Magnificent Seven.

ByDavid Stevenson

A few weeks ago, the social network tech leviathan Meta announced that it would pay its first dividend, at a $0.50 quarterly rate, with a yield of 0.51% (using the closing price on the day). That annual dividend will cost the firm $4.4 billion. The payout in absolute terms makes it the 31st biggest dividend payer in the S&P 500 and should increase the S&P 500 yield by 0.74%, to 1.4609% from 1.4501% pa.

For many investors, this seemed a surprise at the time – a growth stock paying a dividend? Surely the best thing to do is to keep reinvesting back in the business. But Meta’s boss Mark Zuckerberg has realised once essential bit of investment logic. At some point, your potential growth rate slows down and at that point, you need to reward patient investors for providing you with the cash to expand. Cue a dividend. It’s also very normal for US corporations to pay a dividend. According to analysts at S&P Dow Jones, the total dividend payout for all stocks in the benchmark S&P 500 index hit – by February 1, 2024 – $600 billion. Ten years ago, that total payout amounted to just $330 billion. Those increasing dividend payouts remind us that investors in equities receive a return from many different sources. The dividend cheque is a direct return of course, and that payout can increase over time as the corporation grows its profits. Many investors then choose to reinvest that dividend back into those shares. In addition, shares can also be re-rated i.e. the multiple investors are willing to pay for those shares changes over time. In the last few decades, that multiple for US stocks has increased.

Analysts look at all these moving parts (dividends, dividend payout growth, dividend reinvestment and multiple expansion) through the lens of what’s called total shareholder returns. Analysts at French investment bank SocGen have looked at different countries in different decades and broken down how that total shareholder return has grown. Looking at returns from 1970 onwards they’ve found that in the UK nearly all the returns from investing in equities through to today have come from the dividend and the subsequent growth of that dividend payout over time. That’s true also for equities in France, Australia and Germany. Looking globally, they found that since 1970 the annualised real return from investing in equities was just over 5% pa of which the real price return (multiples expansion) was just over 2% implying that the rest of the total return comprised dividends, dividend payout growth and dividend reinvestment.

In the US by contrast, multiple expansion was a much more significant element although of course US stocks do pay a dividend – according to academics at Yale, the median dividend yield for the entire period since the end of WW2 was 2.90%. Another study this time by analysts at S&P Dow Jones looked at returns since 1926 and found dividends have contributed approximately 32% of total return for the S&P 500, while capital appreciation (multiple expansion) has contributed 68%. It’s important to say that the contribution of dividends to total returns varies, even in the US. From 1930–2022, dividend income’s contribution to the total return of the S&P 500 Index averaged 41% but peaked at above 50% in the 1940s and 1970s and dipped below 30% in the 1950s, 1990s and 2010s.

And of course, the compounding effect of receiving a dividend cheque, the business increasing the dividend payout every year and the investor subsequently reinvesting the dividend cheque in the stock is huge. According to S&P Dow Jones, if you’d have started in 1930 with $1 invested in US equities, excluding dividends, the return of the S&P 500 on Jan. 1, 1930, would have grown to $214 by the end of July 2023. During the same period, the return of the S&P 500 with dividends reinvested would have been $7,219. Another study this time by US fund management group Hartford noted if we start at 1960, 69% of the total return of the S&P 500 Index can be attributed to reinvested dividends and the power of compounding.

So, dividends matter, even in the US. And what’s true for the US is also true for its North American peer, Canada. According to Canadian bank RBC, over the past 30 years, dividends have accounted for 30% of the total return from the Canadian equity market, although that fell to 31% over the last 30 years. Over the past 46 years, dividends have contributed an average of 3.2% per year to the S&P/TSX Composite Total Return. Crucially the Canadian equity market now offers a much higher dividend yield over U.S. equities – the yield advantage offered by Canadian equities is currently at one of its widest levels in over 20 years, running at above 3%. That gap is why UK funds such as the Middlefield Canadian Income Trust – an investment trust that focuses on Canadian and to a lesser extent US dividend-paying equities – have proved popular. The Middlefield fund is currently yielding 5.3% on a discount of 15%.

There’s a catch though. While dividends do matter in North America – both in the US and Canada – that doesn’t mean that just blindly investing in the highest-yielding stocks is the best strategy. Numerous studies have shown that investors should avoid the highest-yielding stocks and stick with dividend-paying businesses with more modest yields, strong balance sheets and growth potential. US fund management firm Hartford quotes a study by Wellington Management from a few years back which involved dividing dividend-paying stocks into quintiles by their level of dividend payouts. The first quintile (i.e., top 20%) comprised the highest dividend payers, while the fifth quintile (i.e., bottom 20%) comprised the lowest dividend payers. According to Hartford, “the second-quintile stocks outperformed the S&P 500 Index eight out of the 10 time periods (1930 to 2022), while first- and third-quintile stocks tied for second, beating the Index 67% of the time. Fourth- and fifth-quintile stocks lagged by a significant margin.”

So, although dividends are a useful component of total returns, how you invest to get those dividend cheques matters hugely. Don’t be fooled by high-yielding value traps, think about how the dividend can grow sustainably over time. Study after study has shown that corporations that consistently grow their dividends have historically exhibited strong fundamentals, solid business plans, and a deep commitment to their shareholders. And arguably now is a great time to think about growing the dividend in the US (and Canada). According to equity analysts at French investment bank SocGen, the average dividend payout ratio over the past 96 years has been 56.3%. As of December 31, 2022, the payout ratio stood at just 37.1%, implying plenty of potential for other large corporates to follow the example set by Meta. North America is full of businesses like Meta that are cutting back on their debt, reining in their share buyback programmes and rolling in cash. Maybe the time for the humble dividend cheque might finally have come, even for the go-go momentum-driven markets of North America.

The Results Round-Up – The Week’s Investment Trust Results
Which investment trust’s NAV total return has beaten the benchmark for four consecutive years? And which portfolio manager found it difficult to write his latest half-year report?

By
Frank Buhagiar

Doceo

Edinburgh’s (EDIN) excellent outcome
EDIN easily beat the benchmark over the full year – NAV per share (with debt at fair value) came in at +13.4% on a total return basis compared to the FTSE All-Share’s +8.4%. That makes it four consecutive years of NAV outperformance. The full-year dividend is on course to exceed its target too – up +3.8%, compared to the +3.2% rise in CPI inflation. Unsurprising then that Chair Elisabeth Stheeman described the performance as ‘an excellent outcome’.

Tough act to follow for the new portfolio managers but Imran Sattarr sounds up for it. For despite UK equities being out of fashion, for a host of well-rehearsed reasons and despite it being hard to spot a catalyst for a turnaround in sentiment, ‘strong businesses generating attractive returns don’t go unnoticed for long.’

Numis: ‘The fund seeks to deliver in a range of economic conditions, given its ‘all weather’ approach which offers exposure to growth, value, and recovery stocks.’

JPMorgan: ‘We think EDIN remains an attractive opportunity and it is our top pick for exposure to UK equities within the investment companies sector.’

Investec: ‘We regard Edinburgh Investment Trust as a strong investment proposition which is enhanced by both the current discount and the potential for an improvement in sentiment towards UK equites.’

Finsbury Growth & Income (FGT) should be able to do better
FGT’s +5.9% NAV per share total return for the half year couldn’t quite match the FTSE All-Share’s +6.9%. Portfolio Manager Nick Train admits he found ‘this a difficult report to write’ as ‘this was yet another six-month period when I, with my colleagues underperformed our benchmark. We really should be able to do better than this’.

A standout reason for the poor run, not enough exposure to technology companies or those well-placed to exploit it. Action has been taken though, with exposure to companies that stand to benefit from technology increased. So, while disappointed, Train is optimistic for the future, believing ‘there is tremendous value building in the portfolio. Specifically, I believe we own significant positions in a number of businesses that could grow their market capitalisations multiple times over the next decade or more.’ Bullish stuff.

Winterflood: ‘Technology allocation increased from c.30% of portfolio in early 2020 to over 55% today.’

Henderson European Focus (HEFT) staying out of trouble
HEFT’s NAV per share total return stood at +17.9% for the half year – the benchmark could ‘only’ muster +14.9%. All bodes well for the proposed combination with stablemate Henderson EuroTrust (HNE). As for the main driver of performance, according to the Fund Managers, ‘staying out of trouble felt like the most notable achievement’. HEFT has now outperformed the FTSE World Europe (ex UK) index over six months, one year, three years, five years, seven years and 10 years – the full house!

Numis: ‘The portfolio is positioned toward companies that the managers believe will benefit from the capital expenditure required to support themes such as: de-globalisation and the onshoring of supply chains, electrification/energy efficiency, automation, digitalisation, and artificial intelligence (AI).’

CT UK Equity Capital & Income’s (CTUK) pleasant surprise
CTUK’s+12.9% NAV total return for the half year, almost double that of the FTSE All-Share’s +6.9%. Chair, Jane Lewis, is surprised by the market’s positive performance, ‘it is perhaps surprising that the UK stock market has made any progress over the six months under review’, after all the UK was in recession, the reporting season was widely-viewed as disappointing and there was no shortage of geopolitical tension. And the Managers think UK stocks still offer good value. Because of this, Lewis thinks ‘This certainly provides scope for additional progress.’

Winterflood: ‘Strongest stock contributors were CRH (+54%), Intermediate Capital Group (+51%) and DS Smith (+41%).’

Majedie Investments (MAJE) maintaining discipline
MAJE reported a +13.3% NAV total return for the latest half-year period. Total shareholder return fared even better up +28.1%. Both comfortably above the long-term target of CPI plus 4%. The fund generated returns from areas as diverse as biotech and software as well as Chinese and copper stocks. The Investment Managers are not taking anything for granted, ‘this is no time for complacency’. They go on to cite the number of elections due, stress in commercial real estate markets, geopolitics and full valuations. But the managers have a plan – ‘focus on our best ideas, demand a wide margin of safety, and maintain discipline.’

JPMorgan: ‘The portfolio is mostly listed equities on a look through basis and the six months to 31/3/24 were a strong period for global equity markets although the MAJE portfolio looks very different to a typical global market cap weighted index with no exposure to mega cap technology names’.

HarbourVest Global Private Equity’s (HVPE) reasons to be optimistic
HVPE’s 4% NAV per share growth for the year brings the 10-year return up to +251%, considerably more than the FTSE All-World Index’s +138% (USD) Total Return. Chair, Ed Warner, thinks the private equity fund’s investment case remains compelling, ‘the Company has outperformed public equity markets over the past ten years, and we are optimistic that this will continue in the long term.’ Reasons to be optimistic include not just HVPE’s track record and diversified portfolio, but also the rising number of IPO and M&A transactions which are easing valuation concerns. Speaking of transactions, exits during the year were secured at a 24% premium to carrying value – always helpful to have the numbers on one’s side.

JPMorgan: ‘HVPE is a good product for investors wanting a diversified private equity investment but we prefer other names.’

JPMorgan Asia Growth & Income (JAGI) riding Asia’s powerful drivers
JAGI’s +4.6% return on net assets for the latest half year, a little short of the MSCI AC Asia ex Japan Index’s +5.3%. Chairman, Sir Richard Stagg, puts this down to being underweight, ‘the thriving Indian market’. Several Chinese stocks also underperformed. Longer-term track record stacks up though with JAGI outperforming over five- and ten-year periods. And there’s more to come, if the Portfolio Managers’ Review is anything to go by. For despite persistent uncertainties, both globally and regionally, ‘Asia’s powerful combination of strong growth, innovation, favourable structural trends, and attractive valuations’ will continue to generate ‘many attractive investment opportunities.’

Winterflood: ‘Share price TR +3.4% as discount widened from 9.2% to 10.4%; Board repurchased 5.6m shares (6.2% of issued share capital).’

JPMorgan China Growth & Income (JCGI) believes the worst is over
JCGI’s half-year Chair’s Statement highlights how it was a tough period for Chinese stocks. And it shows in the numbers – the MSCI China Index was down -9.5%. JCGI fared worse as the fund’s growth bias worked against it – total return on net assets (with net dividends reinvested) was -13.1%. Six months’ performance does not make a summer though – over ten years the fund has comfortably outperformed the benchmark.

Chair, Alexandra Mackesy, notes that the investment managers are ‘determined to recover lost performance’ by taking advantage of current low valuations to build up stakes in ‘quality companies that offer robust long-term growth.’ Helpfully, according to the investment managers, ‘the worst is probably behind us both in terms of the slowdown of China’s economic growth, and the derating of Chinese equities.’ Here’s hoping!

Winterflood: ‘Underperformance attributed to growth style bias, as the MSCI China Growth Index declined by -11.6% (in GBP terms), lagging the MSCI China Value Index (-4.8%).’

CT UK High Income (CHI) sees fantastic opportunities
CHI posted a double-digit return for the year (+11.8% NAV total return per share). That compares to the benchmark’s +8.4%. In their review, the Portfolio Managers put the outperformance down to ‘the judicious use of gearing’ and ‘strong stock selection’. Both could well come in handy as the managers plan to take advantage of low valuations in the UK Stock Market to capitalise on what they see as ‘fantastic opportunities’.

JPMorgan: ‘CHI is a unique company in the AIC UK Equity Income sector with its split structure that allows for shareholders to pick between receiving their income in the form of dividends or as capital.’

BlackRock Frontiers’ (BRFI) five out of six
BRFI, another fund to outperform – a +12.0% NAV total return for the latest half year, comfortably ahead of the benchmark’s +8.6% (in US Dollar terms with dividends reinvested). This means BRFI has outperformed the benchmark in five of the past six half-year periods. According to Chair Katrina Hart, the fund has outperformed by +47% over the last five years. As you’d expect, the Investment Managers have a positive outlook for emerging and frontier markets. Not only are equity markets undervalued but they are under-researched too making the investment universe ‘the perfect hunting ground’.

Numis: ‘We believe BlackRock Frontiers offers highly differentiated exposure and is run by a management team that we rate highly, meaning we believe it warrants a place in many portfolios.’

Dividends received and declared at the end of this month should be £5,276.00 at the halfway reporting stage. The full year is unlikely to be double the six month figure but is still on track for the fcast of income of 8k and the target of 9k.