Choosing the Best Investment Trust / Holdings Company

[FireDuck]

I’m looking at investing in an Investment Trust (e.g. Foreign Colonial Trust).

I’m finding it hard to come across resources for finding and comparing the various investment trusts out there.

In addition I’m curious how they compare to holdings companies like Berkshire Hathaway.

Also, does anyone know why we only talk about UK investment trusts and not trusts in other countries?
I presume it’s because we only have access to the EU market due to the KID document and the UK is the only country with investment trusts.

I’d be looking primarily for something as close to the S&P 500.
That is:
- lots of multinationals to reduce risk of having only UK companies.
- a similar performance over the years to the S&P500.
- low cost fees.
- similar companies to that of the big index funds like the S&P500.

From reading various threads on this forum over the years I think many people have these same questions.

If you know of any good investment trusts or holdings companies, or are currently investing in any please share your thoughts.

Looking forward to your responses, resources and links!
Feel free to link other threads here if there are some good ones with relevant content.

 

[TheBig40]

The more I look into these the less I understand them. theaic dot co dot uk has a comparison that’s seems helpful, yields etc. You’ll have to type that in as it won’t let me link to it.

can you share any conclusions you find

 

[Marc]

I can sympathize here. I used have to try and do this with just a copy of the FT when I started advising on these back in the early 1990s

A couple of points

You are generally better off tracking MSCI ACWI or FTSE All World than a very limited index like the S&P 500

A well constructed portfolio will generally provide a better risk adjusted return than a single trust picked at random

For example, this is our UK Investment Trust Portfolio over the last decade

You always want to be up and to the left more return for less volatility

So over the last 10 years at least you've had 2%pa over the market but with an average ongoing management charge of about 3 times an ETF portfolio.

We also have a small/ value weighted version of this which we blend with the market portfolio to get a dynamic factor strategy and a socially responsible and ethical version which again can be blended to get a light green/dark green ESG portfolio.



Marc Westlake
Chartered Certified and European Financial Planner
www.globalwealth.ie

 

[FireDuck]

So over the last 10 years at least you've had 2%pa over the market but with an average ongoing management charge of about 3 times an ETF portfolio.

Have you found that the extra 2% over the market made up for the x3 Mgmt charge?

If not then have you found that not having deemed disposal and exit tax (CGT instead) made up the difference for Irish residents?
I’m assuming yes, by a large margin.

Tax wise the Investment trusts and holdings companies make a lot more sense to me than the ETFs for Irish residents.

Also it looks like your IT portfolio has only two ITs, am I reading this correctly?

Thanks

 

[Sarenco]

I’m looking at investing in an Investment Trust (e.g. Foreign Colonial Trust).

FCIT (modestly) outperformed its benchmark (FTSE All World) on a total return basis over the last 10 years, with a comparable level of volatility.

The nice thing about ITs is that they can be bought by anybody with a brokerage account, without having to pay expensive fees to an investment advisor.

 

[Marc]

Good questions @FireDuck

no the additional returns have been purely driven by the large cap growth bias you can see in the Morningstar style box plus the gearing.
it’s not consistent outperformance and if large cap growth goes out of style you’ll see a drop off.

the nice thing about this analysis is that over a decade our fees have been comprehensively covered compared to a DIY investor which proves conclusively that good advice is worth paying for.

But my preference is to always go with a lower cost solution since costs compound but alpha doesn’t always show up. Investment trusts are relatively complex instruments and generally unsuitable for most Irish investors and shouldn’t be pushed as much as they are on here.

our preferred solution is therefore a non-EU ETF portfolio since you get the same tax benefits but lower costs and we can facilitate for retail investors who are otherwise blocked by EU regulations.

wouldn’t touch EU ETFs with a barge pole as an Irish investor - insane

No, the portfolio is about 8 trusts I just used F&C as a benchmark since it is the one plugged most often on AAM