High Yield Investment trusts

[everhopeful]

In the spirit of wishing to use some spare cash in my ISA by buying something not directly correlated with equities and giving a decent yield I have been looking at Investment Trusts which invest in the higher risk end of the fixed interest market. The possibilities include Twentyfour Select Monthly Income, Fair Oaks, Carador and Real Estate Credit. These all have stellar yields. The managers at Twenyfour get good press and this fund seems popular and trades at a premium to NAV. I have decent exposure to more conventional fixed interest and equities so was looking for something a bit different. If anybody has any views on these trusts or has any other suggestions I would be very interested.

[monabri]

Carador...massive yield ( 13%+). Dividend not covered. If you do invest, I wouldn't dive in too deep and I would half expect a Divi reduction. Other than that, they appear to have no/ minimal debt which is always a positive. Hargreaves indicates that their earnings per share has decreased by 53%...(supporting a possible Divi reduction). However, anything with a 13% yield.......red flag!


TFIF (I hold but at a small percentage in my p/folio). Yield of ~6%. However it's on offer at 5% higher than the net asset value ( people are willing to pay "over the odds"....rightly or wrongly)

Fair Oaks...yield 14%.....red flag!

RECI....7% yield, 49 holdings across GB, Italy, France,Finland, Germany. No discount to NAV.

Personally, a yield of 13%/14% sounds fantastic but it'll most likely end in tears and I wouldn't go there. I'd rule Fair Oaks and Calador for that one reason alone...it's 14% ( on paper) for a reason.....the management of these companies ain't going to give investors 14% of its value ...not when they could pay it to themselves!!

[everhopeful]

Many thanks Monabri. Even at a premium Twenyfour may be the choice. It feels less esoteric even if I don't fully understand some of its investments.

[flyer61]

A few points about CIFU and FAIR.

Both trade and pay dividends in USD.

CIFU trades at a discount to NAV and has a new dividend policy so the yield quoted is not correct. Divs paid quarterly.

FAIR trades at a premium to NAV. Divs paid monthly, with a variable 12th div.

Make sure you understand the underlying assets.

Something a lot less racy that trades at a discount to NAV is Middlefield Canadian MCT - yield over 5 percent and seems sustainable.

[Alaric]

Make sure you understand the underlying assets.

A quick browse suggested that the assets were the corporate equivalent of payday loans. So a high return but possibility of an asset catastrophe if default rates went through the roof. Charges including performance fees look high as well.

Brokers might not let you trade unless you could satisfy them as to your experience or net worth.

[everhopeful]

Thank you. I don't have any problem trading and already hold Middlefield. The cash had come from selling a holding in an aircraft leasing outfit so was already in a slightly offbeat investment and I was prepared to take risk. Following your helpful comments though I think I will top up my holding in REA prefs.

[formoverfunction]

My personal "high yielder" in the IT sector.....VSL.

Near 10% yield, trading at a discount, highly regarded management team.

Downside, risky sector that's yet unproven, but there could also be capital appreciation if their present form continues.

I have a modest 1% of my overall portfolio with them (and under 3% of my equity exposure).

[flyer61]

For the record I have been selling down my holdings in IPE and NCYF and cycling the money into direct purchases of Fundsmith shares. The premium on these two is unjustified IMHO.

To achieve with a small pot a pension of 12K a year for my wife am holding CIFU, IPE, NCYF, RE.B, RAVP, AGNC etc but for my pot it needs to be quality income with a Capital Q...

[everhopeful]

Thank you formoverfunction. VSL looks interesting. Given the performance to date and the yield I am not sure why the discount to NAV is so big compared with twentyfour select for example. I am tempted.

[flyer61]

VSL - interestingly one of the directors, Mr Levy, has been a consistent buyer of the shares and now has a not inconsiderable holding.

[formoverfunction]

Good luck with VSL if you try it out.

"has been a consistent buyer of the shares and now has a not inconsiderable holding" if I remember rightly the management team has been taking fees in equity as well.

I wouldn't encourage a big position in the stock, but it's certainly an attractive proposition in my mind.

As you can see I hold just 1% of my overall portfolio in the stock. My average buying price is around 84p and I last bought at under 79.

The price has recovered recently, it might be worth holding out for weakness. There's been an improvement in performace this quarter and a tick-up in the quote.