The Tip Sheet
The Times thinks Finsbury Growth & Income remains a solid choice, while This is Money explains what sets CQS Natural Resources Growth and Income apart from its peers.

By
Frank Buhagiar
29 May, 2024

Tempus: Finsbury fund is a train well worth boarding
Finsbury Growth & Income (FGT) gets the nod of approval from The Times’ Tempus Column. The tipster thinks the UK equity income fund remains a solid choice despite having had a tough time of it in recent years – the shares have only a measly looking 1% gain to show for the last three years. But it’s the long-term track record that has caught Tempus’ eye. Over the past decade, fund manager Nick Train has generated a 99% return, around 20% more than the FTSE All Share.

The article puts the strong long-term performance down to a focus on high-quality, high-growth and mostly British businesses that are market leaders. Focus being the operative word, for when Train finds a stock he likes, he invests with conviction – the fund holds just 21 stocks with the top ten alone accounting for 85% of assets. This high-conviction approach works both ways. When underlying holdings hit a rough patch, the portfolio’s performance takes a hit – Diageo (10% of the portfolio) has suffered a 20% fall in the share price this last year following a slowdown in US sales. Throw in an improvement in sentiment towards value stocks and it’s easy to see why FGT has struggled to make headway over the past three years.

That may be true at the fund level but in terms of the portfolio’s holdings, these continue to churn out decent numbers. Tempus highlights how FGT’s underlying companies have an average return on equity (how efficiently businesses generate profits) of 35% and have an estimated 9.5% long-term earnings growth rate. Together with the 8% discount to net assets at which the fund’s shares trade (the five-year average discount is 2.5%) and Train’s sizeable stake in the trust (£44.6 million as at September 2023) and there’s enough there for Tempus to rate FGT a buy ‘for those who want a high-quality, concentrated portfolio at a discount and under the care of a well-respected manager’.

This is Money: CQS Natural Resources Growth and Income: Golden Opportunities
Before running through what This is Money has to say about CQS Natural Resources Growth and Income Fund (CYN), have you ever wondered what CQS stands for? Jeff Prestridge explains, CQS reflects the investment house’s expertise in managing credit – ‘convertible and quantitative strategies’. Back to CYN, the more established of three natural resources funds managed by CQS, the others being Geiger Counter (GCL) and Golden Prospect Precious Metals (GPM).

The managers of CYN, which has been running since 2003, invest in companies involved in the extraction of natural resources. Based on the performance record, the managers do their jobs well. Over the last year, the £127 million fund has delivered an 18% shareholder return. Over five years, the return stands at 187%. The article goes on to explain what sets CYN apart from its peers – a focus on mid-sized and smaller companies. This means when building its exposure to a sector such as oil and gas (25% of the portfolio) it avoids energy giants such as BP and Shell. Instead, the fund is littered with stocks unfamiliar to the eyes of most UK investors – listed in the US, Canada and Australia.

In terms of income and costs, the trust pays dividends quarterly and currently offers an annual yield of 2.9 per cent. Meanwhile, at 1.8%, ongoing annual charges are on the high side but that’s the price you pay for CYN.