Best to DYOR but as always timing then time in is more important
than just time in. The further the Trust is trading from a recent low
the higher the risk of the trade.
Category: Uncategorized (Page 318 of 374)
Why lifestyling could be your worst decision if u want a comfortable retirement.
The Motley Fool
£20,000 in savings? I’d try to turn that into £29,685 of passive income each year
By James Beard
Passive income is earned by doing very little. But as appealing as it might sound to earn lots of it, there’s a bit of patience needed. Let me explain.
For the purposes of this exercise, I’m going to assume I have savings of £20,000 available to invest. This is the amount that can be invested each year in a Stocks and Shares ISA.
As a risk-averse investor, I’d be uncomfortable concentrating all of my funds in a single stock. I know that if I bought the ‘correct’ one, I could make a lot of money. But with an estimated 60,000 listed companies in the world, there’s a good chance I’d choose unwisely.
One way of potentially overcoming the problem of picking winners is to buy shares in an investment trust. Although I’d hold a single investment, my risk’s spread across the many stocks the trust owns. My exposure isn’t then limited to one particular industry, index, or country.
What to buy?
With this in mind, I’d use my hypothetical £20,000 to buy shares in Allianz Technology Trust (LSE:ATT). Although not guaranteed, I believe technology stocks are likely to out-perform the wider market.
I like the fact that the trust isn’t just focused on artificial intelligence (AI). Although I believe AI’s going to revolutionise our lives, I think it’s a little too early to identify which particular aspect of the technology is going to be the most profitable.
As its name suggests, ATT has a wider remit and invests in all parts of the tech sector. Having said that, its biggest holding (9.9% of total assets at 29 February 2024) is Nvidia, whose semiconductors are used in many AI applications.
Its next four biggest stakes are in Microsoft (8.1%), Meta Platforms (6%), Apple (6%) and Broadcom (4.2%).
Another positive is that it invests only in quoted companies. Its more famous peer, Scottish Mortgage Investment Trust, owns some of the “world’s most exceptional growth companies”. But many of them aren’t listed, which means valuing them accurately can be difficult.
Although it hasn’t performed as well as the Dow Jones World Technology Index, its cumulative five-year return of 139.4%’s impressive.
Also, the fund currently trades at a discount of approximately 10% to its net asset value, which implies the stock’s undervalued.
But tech stocks can be volatile. And when the dotcom bubble burst, we saw how quickly things can go spectacularly wrong.
However, for the purposes of this hypothetical exercise, I’m going to assume that the trust’s share price increases by 17.4% a year. This is equal to its compound annual growth rate during the five years ended 22 March.
Of course, there’s no guarantee history will be repeated. But if I could achieve this growth rate, after 20 years, my initial stake would be worth £494,757.
I could then sell up and buy some dividend stocks. Assuming an average yield of 6% — again, not guaranteed — I’d be able to generate an impressive income stream of £29,685 a year, with minimum effort.
That’s why I believe patience is the superpower of the wise.
£££££££££££££
Anyone with more time in the market before u need the income for retirement could include a percentage of higher risk Trusts in their portfolio.
ATT or PCT
Only trading back at their 2021 price, since the start of this year.
There are only two.
Buy Investment Trusts that pay a dividend and re-invest those dividends to buy more Investment Trusts that pay a dividend.
Any Trust that drastically changes their dividend policy must be sold, even at a loss.
All blog purchases include a charge of ten pounds and a sale of five pounds.
(AJ Bell recent change to charges)
Stick to your plan thru thick and thin, there will be plenty of thin.
The current plan is to have a Snowball of between 14-16k after ten years,
those lucky enough to have longer before they retire can expect a bigger Snowball.
The plan’s fcast is based on the calendar year, where the current fcast is 8k and a target of 9k. (2023 £9.422,00)
Using the current tax year, which is a snapshot of the last 12 months
the figure will be £11,072.00. Well ahead of the target in the plan but it’s too early in the year to change the fcast.
An comparable annuity would be 7k and u would have to donate all your
capital to a pension provider.
Income earned this year £3,139.00, do not scale by 4 to arrive at figure
for the year.
Plan for the next generation
Leaving an inheritance is a major consideration for most investors in their 80s, says Mr Khalaf. “If you’re investing for an inheritance, you can probably afford to take a more growth-orientated approach,” he says.
Assets to be passed on as a bequest do not necessarily need to be liquidated – they could instead be treated as a longer-term investment for those who inherit them. However, older investors should also ensure they have a steady income source, Mr Khalaf says.
This is particularly important to meet the cost of any health or care needs that may arise. Making gifts to children or grandchildren within seven years of death may trigger inheritance tax, but there are some exceptions.
Ms Guy suggests making gifts of £5,000 to children getting married (or £2,500 to grandchildren getting married). Both would be exempt from IHT. Gifts of £3,000 each tax year are also permitted.
DIY – if you feel confident
After working with “perfectly nice” financial advisers from major firms, Mr Pannett decided to go solo at the age of 40. “I don’t think we need to pay for advice when we’re quite capable of sorting things out ourselves and I much prefer doing it myself,” he says.
Mr Young agrees, although he cautions that doing so means taking on a “certain level of personal responsibility”. “The truth of the matter is I really resent paying the fees [for professional management],” he says.
He points out that if advisers take fees out of capital, any income the investor receives from their investments is being undermined. “You virtually have to do it yourself. Otherwise you’re not gaining anything,” he says.
Ms Guy says many people are already comfortable making their own investment decisions. She adds: “It’s important to do your own research and understand your own risk level as the right type of investments will be different for everyone.”
Some prefer a mixture of different funds and shares while others are happy with a simple stock marker tracker fund, she adds.
Lord Lee, who bought his first share, in a shipping company, in 1958 at the age of 15, says common sense and patience are needed.
“Apart from a little money and time, that’s all you need,” he says. “Patience is the most important thing, and that’s what most people haven’t got.
“I do understand that most people aren’t terribly interested, and are happy to pass investment decisions on to others, but it’s more expensive over time. I believe that most people can and should handle their own affairs.”
£££££££££££££££
If u want to leave a legacy, an IT re-investment plan may be suitable for u,
as u can’t sell the Trusts in the portfolio (unless an unexpected event happens) as your plan is to use the dividends to pay for your retirement.
The sooner u start to re-invest the larger your Snowball will be.
Why long-term investing works
Investing over a long period is a tried and tested strategy.
The sooner you start saving the more you can put aside, and early contributions are the most valuable because they have the longest to grow.
Compounding will also boost returns. In simple terms, your money earns a return in the first year and both the original cash and the return benefit from any growth in the second year. In the third year your investment is further enhanced by any returns achieved. This snowball effect is known as compounding.
There is a residual holding in LBOW.
RGL are selling property to reduce their LTV, which will mean less income so expect a dividend reduction.
AGR only states a NTAV figure.
Current corporate action.
ADIG
TENT
VPC
Ian Cowie: this investment trust has a 7.4% yield and a big tailwind
Our columnist explains why a pledge this week by the Labour Party shows the continued direction of travel for a long-term trend that will benefit one of his investment trust holdings.
by Ian Cowie from interactive investor
It’s an ill wind that blows no good and renewable energy investment trusts stand to gain from wars in Gaza and Ukraine. The explanation is that violent conflict is disrupting the global supply of liquefied natural gas (LNG) and oil, boosting the strategic and market value of the energy self-sufficiency that solar and wind power can provide.
Sad to say, no amount of wishing will make the British Isles as sunny as Spain and so we have to make the most of what environmental energy we have got. That’s why this week the Labour Party leader pledged to invest £8.3 billion building offshore floating wind farms.
Sir Kier Starmer told voters in Holyhead, North Wales: “In an increasingly insecure world, with tyrants using energy as an economic weapon, Britain must take back control of our national energy security.
“Here in Wales, the potential for offshore wind is enormous, and the UK Tory government is squandering it. With public investment we can unlock billions more in private investment to turbocharge jobs and growth for Wales.”
To be fair to the Tories, they have also noticed the attractions of using wind to generate electricity. Former prime minister Boris Johnson briefly enthused about turning Britain into “the Saudi Arabia of wind”.
Unfortunately, Johnson soon moved on to the next photo call and hopes of government help for wind farms evaporated as swiftly as Labour shadow chancellor Rachel Reeve’s scheme to spend £28 billion per annum on a “green investment plan”. She lost interest when an expert pointed out that this was going to cost, er, £28 billion per annum.
Coming down from the clouds of hot air emitted by politicians, some renewable energy investment trusts are already generating green electricity – and decent dividends – here and now. Step forward, Greencoat UK Wind
UKW
Income-seeking investors might be more impressed by UKW’s success in raising dividends at least in line with inflation since the trust was formed in 2013. Independent statisticians Morningstar calculate UKW shareholders’ income has increased by an annual average of 8.1% over the last five years, to produce a current yield of 7.4%.
the self-descriptive pooled fund with total assets of £4.8 billion that claims its wind farms produced 4,362 gigawatt hours (GWh) of electricity last year, or sufficient to power more than 1.8 million homes.
It is important to beware that dividends can be cut or cancelled without notice and the past is not necessarily a guide to the future. However, if that historic rate of ascent is maintained, it would double shareholders’ income in less than nine years.
No wonder UKW is the top performer in the Association of Investment Companies (AIC) “Renewable Energy Infrastructure” sector over the last decade and five years with total returns of 126% and 29% respectively, although it continues to trade at a -17% discount to net asset value (NAV).
As discussed here before, a “perfect storm” of rising interest rates elsewhere, the Conservative government’s windfall tax on North Sea energy producers – and a bungled electricity auction – placed the sector under a cloud and pushed UKW into a negative “return” of -7.8% over one year.
That short-term setback left the one-year top slot vacant for Triple Point Energy Transition Ord
TENT
to grab with a total return of 5.26%. However, this £97 million fund will be too small and illiquid for many wealth managers and it lacks any five or 10-year track record.
Over the long term, UKW’s closest rivals include Bluefield Solar Income Fund
BSIF
which despite the British weather, produced total returns over the last decade, five years and one-year periods of 83%, and 6% before a shocking loss of -21%.
Another rival, Renewables Infrastructure Grp
TRIG
delivered 69%, 10% and -16% over the same three periods.
BSIF yields 8.8% dividend income, rising by nearly 3% per annum, and trades at a -27% discount to NAV. Meanwhile, TRIG yields 7.7%, rising by an annual average of just over 2%, and trades at a -24% discount to NAV.
Against all that, climate change deniers continue to argue that wind farms are expensive and unreliable in a debate that often generates more heat than light.
How this ‘best ideas’ strategy has beaten the global index
Under-the-radar stock pickers to back this tax year
By contrast, the biggest fund manager in the world this week called for a more “pragmatic” approach to energy strategies. Larry Fink, chief executive of BlackRock, reported in his annual letter to investors that he visited 17 countries last year, meeting senior figures from business and politics. He observed: “These leaders were far more pragmatic about energy than dogmatic. Nobody will support decarbonisation if it means giving up heating their home in the winter or cooling it in the summer. Or if the cost of doing so is prohibitive.”
On the fossil fuels versus renewable energy debate, Fink concluded: “The world still needs both.” Such even-handed common sense won’t impress the keyboard warriors but seems our best hope of keeping warm and in work, whatever happens next in Gaza and Ukraine.
Ian Cowie is a freelance contributor and not a direct employee of interactive investor.
Ian Cowie is a shareholder in Greencoat UK Wind (UKW), as part of a globally diversified portfolio of investment trusts and other shares.
This week’s Discount Watch sees 32 Investment Companies trading at 52-week high discounts. Down five from last week. Three of which are trading at discounts of over 60%.
By
Frank Buhagiar
We estimate there to be 32 investment companies whose discounts hit 12-month highs over the course of the week ended Friday 22 March 2024 – five less than the previous week’s 37.
Interest rate sensitive sectors such as renewables, equity income and UK smallers all well represented among the 32 names (see table below). The prospect of interest rate cuts being been pushed further out this year weighing on sentiment perhaps? After all, Q1 is drawing to a close.
The top-five discounters
Investment Company Sector 52-week high discount
Gresham House Energy Storage (GRID) Renewables -68.69%
LMS Capital (LMS) Private Equity -66.90%
Hydrogen One Capital Growth (HGEN) Renewables -60.19%
Menhaden Resource Efficiency (MHN) Environmental -42.58%
Apax Global Alpha (APAx) Private Equity -35.70%
The full list
Investment Company Sector 52-week high discount
Pacific Assets (PAC) Asia Pacific -13.76%
Asia Dragon (DGN) Asia Pacific -19.53%
Schroder Asian Total Return (ATR) Asia Pacific -8.91%
Fidelity Asian Values (FAS) Asian smaller companies -12.03%
Real Estate Credit Investments (RECI) Debt -18.93%
Utilico Emerging Markets (UEM) Emerging markets -19.99%
Impax Environmental (IEM) Environmental -10.83%
Jupiter Green (JGC) Environmental -27.23%
Menhaden Resource Efficiency (MHN) Environmental -42.58%
Baillie Gifford European Growth (BGEU) European -15.97%
European Assets (EAT) European smaller companies -13.21%
Ruffer (RICA) Flexible -7.08%
Schroder BSC Social Impact (SBSI) Flexible -19.94%
Baillie Gifford Shin Nippon (BGS) Japan -17.58%
Baillie Gifford Japan (BGFD) Japan -13.14%
North American Income (NAIT) North American equity -15.99%
LMS Capital (LMS) Private equity -66.90%
Apax Global Alpha (APAX) Private equity -35.70%
Downing Renewables and Infrastructure (DORE) Renewables -33.06%
Gresham House Energy Storage (GRID) Renewables -68.69%
Hydrogen One Capital Growth (HGEN) Renewables -60.19%
Weekly 360 – the week’s Investment Trust results
According to the AIC which fund is the third best performing investment trust since the launch of ISAs 25 years ago? And which Investment Trust has bounced back impressively after a difficult 2022?
By
Frank Buhagiar
Octopus Renewables Infrastructure (ORIT) sends a message?
ORIT’s full-year highlights include a 2.1% NAV Total Return, 28.6% total return since the Dec 2019 IPO; and a 4% increase in the 2024 dividend target. Chairman Phil Austin thinks “ORIT has demonstrated resilience”. Meanwhile, on the previously announced possible tie-up with Aquila European Renewables, Austin thinks “a larger, more liquid combined vehicle would benefit both sets of shareholders and help address some of the continuing challenges in the investment trust sector.” A message not just to ORIT shareholders?
Liberum sees “exceptional earnings visibility for investors and together with the NAV upside from declining discount rates makes us BUYers of the fund with a TP of 115p.”
US Solar Fund (USF) on a firmer footing
USF puts a 20% decline in NAV to $258.2m for the year down to “discount rate widening ($36.7m), updates to operating cost assumptions ($41.9m) and dividend payments ($18.7m)”. Chair Gill Nott is happy to see the back of 2023 “The last 12 months will be remembered as a challenging year.” Wasn’t all bad though “The end of 2023 sees the Company in a stronger position having secured a new Investment Manager, Amber”, putting the fund on a firmer footing.
Numis “The Board and manager are currently analysing available options to return capital, including share buybacks, as well as the refinancing of existing debt to optimise capital structure and improve operational cash flows.”
Princess Private Equity (PEY), farewell Princess hello Partners?
PEY clocked a 32.6% share price total return for the full year. NAV performance was more sedate, including dividends paid, NAV total return came in at 1.8%. Short and sweet announcement, although there was room for a detailed capital allocation statement and news of a possible name change to Partners Group Private Equity Limited.
Jefferies focuses on the capital allocation policy “once the share price is at a discount of more than or equal to 30% to the last reported NAV, 75% of ‘Free Cash Flow’ will be used to acquire issued shares until the discount is less than 30%. Where the discount is between 20% and 30%, 50% of ‘Free Cash Flow’ will be used to acquire issued shares until the discount is less than 20%.” Everyone get that?
Baillie Gifford Shin Nippon (BGS) has been here before
BGS’ new Chair Jamie Skinner “had hoped to report an improvement in performance by the end of it. However, this has not materialised. ‘NAV’ per share declined by 14.9% and share price by 20.5%. The comparative index (MSCI Japan Small Cap Index, total return in sterling terms) appreciated by 6.3%.” The investment managers blame the underperformance on the outperformance of Japanese large-cap value stocks – BGS has a philosophy of investing in high growth small caps. But the investment managers have been here before and think “that investor interest will refocus on the prospects for dynamic small cap growth companies in Japan”.
Winterflood “We think that there is scope for a notable re-rating if underlying NAV performance improves, while the newly introduced performance-related tender offer should also be supportive for the rating over the next three years”.
JPMorgan “Our Overweight recommendation has proven to be somewhat overoptimistic, but we are inclined to give the managers the benefit of the doubt”.
JP Morgan UK Small Cap Growth & Income (JUGI) hearing positive noises
JUGI had a busy half year – name change, merger with JPMorgan Mid Cap – but still managed to outperform. Chairman Andrew Impey “total return on net assets of +8.5% outperformed the benchmark which returned +1.0%.” As for the outlook “Overall the message we are hearing from our holdings is a positive one”.
Winterflood “JUGI will introduce an enhanced dividend, paying out 4% of NAV as at 31 July each year”.
VinaCapital Vietnam Opportunity (VOF) broadly unchanged
VOF’s NAV per share for the half year was broadly unchanged. Chairman Huw Evans said: “Taking account of the dividend paid in December, the total return was 1.9% in USD terms and 1.0% for sterling investors.” Still beat the index though which was off 1%. Evans thinks things are looking up “liquidity is beginning to return to the market and confidence is being restored. Against this background, the Board is cautiously optimistic”.
Numis “The NAV is up 8.5% year to date, however share price returns have been impacted by a large holder reducing exposure to Vietnam. This has resulted in the shares trading on a c.23% discount to NAV, which we believe offers an attractive entry point.”
BioPharma Credit (BPCR) delivers again
BPCR posted a 1.5% increase in NAV per share from 101.39 cents to 102.93 cents for the full year, while total dividends paid amounted to 10.21 cents per share. The investment managers “are happy to have again delivered dividends that were in excess of our annual target with 10.21 cents per share paid to shareholders as a result of income received during the period”.
JPMorgan sounds underwhelmed by the new Discount Control Mechanism (DCM) “We believe that NAV total returns will be attractive and although the new DCM is clearly softer than before, it is more flexible, and on balance we remain Overweight.”
JPMorgan American (JAM), comfortably ahead
JAM clocked up a 24.7% NAV total return for the year, comfortably ahead of the S&P500’s 18.9%. The longer-term performance is not bad either “Since the change in investment approach on 1st June 2019 to the end of February 2024, JAM has generated a NAV total return of +116.3% compared with +97.3% for its benchmark”.
JPMorgan “relative to peers we continue to like JAM that offers a diversified proposition and one consciously balanced between value and growth”.
Fidelity Japan’s (FJV) long-term record remains intact
FJV’s +12.2% NAV total return for the year fell marginally short of the TOPIX Index’s 13.3% (sterling terms) but that hasn’t derailed the longer-term track record. As Chairman David Graham explains, since fund manager Nicholas Price took over “in September 2015 and up to the end of December 2023, the NAV has returned 112.5% against the Index Return of 95.5%.” Underperformance this year is down to large-cap value names outperforming higher-growth small-caps. Still, Graham doesn’t sound overly concerned “We share the Portfolio Manager’s view that there is significant scope for a rerating of these businesses which now look undervalued”.
Winterflood “FJV has authority to invest up to 20% of assets in unlisted companies, but given weak IPO market the Board has limited this to 10% at present”.
abrdn Asian Income (AAIF) outperforms over 1, 3 and 5 years
AAIF’s 2.5% NAV total return for the year, a tad higher than the MSCI AC Asia Pacific ex Japan Index’s 1.6% return. That means “NAV and share price total returns have now outperformed the Index over one, three, and five years. Our structural underweight exposure to China continues to contribute to performance”.
Chairman Ian Cadby doesn’t sound surprised about the continued outperformance “the Investment Manager has a strong record of finding those proven, quality companies that benefit from structural trends while generating healthy income and capital growth for investors”.
Winterflood “As previously announced, fund has reduced its management fee by 23%, expected to reduce OCR from 1.00% to 0.83%, resulting in one of the lowest fees in the peer group”.
Aurora (ARR) bounces back
ARR’s 36.3% NAV per share total return for the year, easily beat the FTSE All Share’s 7.9% and more than made up for 2022’s 19.1% decline. Good news for the investment managers at Phoenix who, as Chair Lucy Walker explains “uniquely receives no annual management fee. Instead, they are solely remunerated from an annual performance fee, equal to one third of any outperformance of the Company’s NAV against its benchmark”.
Question is does Phoenix’s Gary Channon have a ball of elastic bands on his desk? “If intrinsic value keeps growing without an accompanying rise in share prices, the invisible elastic that connects them becomes stretched. That’s where we were when we wrote at the end of 2022, and in 2023 that force finally resulted in the price of the Company’s portfolio holdings performing ahead of the growth in intrinsic value. That said, the elastic remains very stretched, with 130% upside in our view”.
Winterflood “Annual dividend of 3.45p per share proposed (FY22: 2.97p), in line with expectation to distribute substantially all net revenue proceeds”.
abrdn Asian Focus (AAS) the third best-performing investment trust over 25 years
AAS’s -0.7% NAV total return per share (sterling) for the half year fell between the MSCI AC Asia Pacific ex Japan Small Cap index’s +4.5% and the MSCI AC Asia ex Japan index’s 7.3% fall. Over the long-term though, AAS is a stand out. As Chair Krishna Shanmuganathan notes “According to the Association of Investment Companies (AIC), as the 25th anniversary of the inception of the Individual Savings Account (ISA) approaches, the Company is ranked third best performing investment trust. Based upon a single investment of the full £7,000 ISA allowance on 6 April 1999, the day ISAs came into existence, with dividends reinvested until 5 March 2024, an investment in the Company’s shares would have generated a tax-free pot of £273,758”.
Winterflood “The managers note that ‘In the short term, the active nature of the portfolio can often lead to divergence from the index’”.