Which general IT to choose?

[bluedonkey]

Currently mulling over which IT to purchase. To help, I prepared a table of a short list. Currently leaning towards Mercantile IT. Your thoughts welcome. Can't bring myself to purchase at a premium, so that excludes three of them, tho' Merchants at +0.9% might sneak in.

[Dod101]

I wonder how you arrived at the short list? What are you looking for because it is not evident from the list. You have a mixture of clearly income trusts and UK oriented ones at that. Then you have international generalists, some more international than others. What do you expect your choice to do? No one could possibly advise you without answers I am sorry to say.

Furthermore, you may not want to buy at a premium but buying at a discount has its own problems. Often the discount is present for good reason.

Dod

[bluedonkey]

Dod,
You're right, I am "musing" at present, trying to clarify what I do want! Would you pick out any of the list that are at a discount that do indicate potential problems? Mercantile has c.50% in small cap, perhaps that is the reason for the discount.

[richfool]

Currently mulling over which IT to purchase. To help, I prepared a table of a short list. Currently leaning towards Mercantile IT. Your thoughts welcome. Can't bring myself to purchase at a premium, so that excludes three of them, tho' Merchants at +0.9% might sneak in.

Yes, as mentioned above, you have a mix of sectors there, so it would be helpful to indicate what your objectives, whether you are looking for income or growth or a balance of the two and what sectors you are looking to gain exposure to, or how many.

Mercantile is in the UK growth sector, as it targets UK mid caps, and so has a lower yield than the UK Growth & income trusts. It's growth has been impaired by Brexit concerns, but should recover well if and when Brexit is resolved. I hold MRC.

MYI is a global growth & income trust, whereas Alliance, F&C and Witan are global growth trusts (with lower dividend yields).

I wouldn't worry too much about premiums and discounts, just concentrate on picking the best trust or trusts.

Disc: From your list, I hold: MRC and MYI.

[Dod101]

I know several of those in your list, and indeed hold quite a few. City of London and Edinburgh are both UK focussed income trusts. I do not like either very much but Edinburgh has been hopeless on the capital front, worse I think than City. Both fishing in the high yield pool and like those of us with HYPs, not doing very well. I do not know of Dunedin Income Growth so cannot comment. I would not be looking to invest in a mainly UK trust, but that is because I have enough exposure here anyway. Temple Bar might be an exception. I hold it and it goes in for unloved and contrarian investments.

Of the generalists, F & C has a good record, I like Alliance and since its new approach is I think doing fine. I like Murray International and if I had to make only one choice from your list, it would be Murray or probably F & C. Murray of course has the higher yield.

As I said, I think you need to refine what it is that you are actually looking for and that will guide you in your choice.

Dod

[vrdiver]

Just a comment on premium / discounts; you might want to look at the 12 month average premium (or discount) so as to form a view whether the current price is above or below any "reversion" that might occur.

Do you have a list of questions that you have used to filter the IT list with?

E.g. "must have a growth rate of x over y years", or "must have a minimum yield of z%", or "must have exposure to x markets"?

From your list it looks like you might want to form a couple of parallel sets of filter questions, then compare what each of them throw up as options and whether you'd be happy investing in one subset, or want to spread your money across several...

Sorry for the suggestion of further research, but I think if you share your filter criteria as well as the results you might get some discussion on the relative merits of your choices.

VRD

[StOmer]

My top 3 just now are 1. Mid Wynd, 2. F&C IT, 3. Martin Currie Global.

Mid Wynd, run by Artemis and usually on a small premium. F&C has fallen to a 5% discount following is run to zero discount during the 150th celebrations, Martin Currie Global has a zero discount policy but watch the spread which can seem a little higher than normal sometimes. I like all three and there is one poster here who only holds F&C IT which has done very well for them. My wife holds these plus Brunner which is on a 7-9% discount, probably partly due to a large holding by Aviva who not long ao sold out of Witan.

Martin Currie Global had a recent manager change who started off very well but has run into headwinds during the US / China trade war. if I were to choose one then I would go for Mid Wynd but all usually do very similar over a longer period of time.

[Itsallaguess]

Just a comment on premium / discounts; you might want to look at the 12 month average premium (or discount) so as to form a view whether the current price is above or below any "reversion" that might occur.

A good suggestion there, and for anyone wanting to carry out this type of premium/discount review, then the Trustnet website usually has a good historical chart to use as a quick visual check.

Here's an example for Merchants Trust, one of the OP's listed options -



(Image source - https://www2.trustnet.com/Factsheets/Fa ... e&skipre=1)

To quickly get to the Trustnet 'Performance' page for a potential investment trust anyone is looking to investigate using this type of chart, then you can use the link below, and simply substitute the final 'Merchants Trust' search name with any other investment trust you wish to review -

https://www.google.com/search?q=site%3A ... ants+trust

The above custom Google search usually results in the first returned result being the one you're looking for, as it forces the search to use the Trustnet website, and also then looks to hone in on the 'Performance' page of the trust, which holds the premium/discount chart we're looking for here.

Cheers,

Itsallaguess

[Dod101]

As richfool has said do not pay too much attention to premium/discount. The underlying IT is much more important. Unless the Directors have a discount control mechanism in place, the discount or premium can usually tell you something about the demand for the shares though.

Dod

[scotia]

Just a comment on premium / discounts; you might want to look at the 12 month average premium (or discount) so as to form a view whether the current price is above or below any "reversion" that might occur.
VRD

I strongly agree with this - but I would extend the period of study to several years. Currently investor sentiment is supportive in many popular ITs, but once it reverses, the discount can increase sharply. E.G. about two and a half years ago I purchased TR European Growth at around par, and now it hovers around a 15% discount. Bad choice then - maybe a better choice today - but I'm afraid that's a drawback of ITs.
For a global mainstream IT, F&C Investment Trust (FCIT) is a reasonably popular choice - and is one of my holdings.

[richfool]

BlueDonkey, I previously avoided Merchants because it had historic costly borrowings (debentures), though they have now been repaid/resolved.

I used to hold CTY but sold out due to its lacklustre capital performance over recent years. My largest UK G&I holding is MUT (Murray Inc trust).

(So) My preferred and largest holdings in the sectors you've referred to are now:-

In the UK Growth & Inc sector:
MUT (Murray Inc trust), (for its overall return), TIGT (more defensive) and Shires (higher dividend yield and includes some fixed interest and small caps). FGT (Finsbury Grth &Inc (manager targets quality stocks - more growth, low yield)
In the UK Growth sector:- Mercantile (MRC) - (mid caps)
In the UK smaller coys sector:- SLS (Standard Life Smaller Coys trust)

In the Global Grth & Inc sector:- MYI and JPGI.
In the Global Growth sector:- MWY (low yield).
In the Canadian inc sector - MCT (higher yield)

I hold all of the above.

[bluedonkey]

Thank you all for your replies and for tolerating the vagueness of my query. I'm going to get my objectives clearer and revert to this thread later.

[monabri]

Have to say, I know all these are regarded as stalwart investments. I have spent a few minutes looking at the medium term returns from them. And some are absolutely appalling. (IMO of course.)

I find the Hargreaves Lansdowne comparator tool useful

https://www.hl.co.uk/funds/fund-discoun ... ion/charts

It's an easy way to compare total return on funds and individual shares very quickly.

[Dod101]

RVF

Don't keep us in suspense then. Which ones are really appalling investments? I know that Edinburgh's record is not very good over the last three years or so and I had the impression that Witan had gone off the rails, but I doubt that any are as bad as say Imperial Brands for Total Return over the last three years or so.

Dod

[bluedonkey]

I've now had a chance to refine my thoughts for the proposed investment. These are my objectives:

YIELD
In a few years I will retire and my portfolio will be the main source of retirement income. The absolute level of income it currently provides is not yet sufficient, though the trend is on target. In addition, I intend to live off the yield rather than total return. Therefore this investment must meet a minimum level of yield.
I'm setting this at 3%.
As a rider to this, the yield must not be achieved by paying out of capital, as some investment trusts do.

INVESTMENT TRUST DISCOUNT/PREMIUM
I can't bring myself to invest when the trust is at a substantial premium. Some trusts have a history of fluctuating between discount and premium. In those cases it seems worthwhile to wait for the premium to disappear before buying. Murray International may be a case in point. I bought at a discount, it is now at a premium and is I think the main or only reason I'm showing a capital gain on it!
Maximum premium 1%.

NOT JUST INVESTMENT TRUSTS
Although the thread title refers to general investment trusts, I really mean “collective investments”. By way of background, several years ago I stopped putting money into individual shares and started putting money into collective investments. Reasons: (1)to smooth out the effects of individual shares, especially with regards to dividend cancellations; (2)to diversify away from my UK HYP.

Further background: about 20% of my portfolio is now in collectives. Mainly Vanguard Developed Asia ex-Japan (VAPX), and to a lesser extent Aberdeen Asia Income (AAIF) and Murray International (MYI).

I hope the above helps to flesh out what I am trying to achieve.

[Dod101]

bluedonkey

That exercise in itself has no doubt helped you refine your thoughts. Given the parameters you have set, from your list I would choose Temple Bar and Murray International. The first gives you exposure to the UK market, but better I think than say City of London, which is a sort of HYP in a wrapper, the second gives you international exposure from a very conservative manager in Bruce Stout. Not on your list but also worth looking at to meet your objectives, would be Henderson Far East. As the name implies less international than Murray International but a decent performer in a dynamic part of the world.

The premium/discount you will need to decide on but I think choice of vehicle is more important.

I may say that I hold all three.

Dod

[Avantegarde]

I hold both Bankers and F&C and suggest you should consider looking at both of those.

[Aminatidi]

I'd throw Mid Wynd and Scottish American into the mix as ones to consider if you want a global outlook.

[Dod101]

RVF

Don't keep us in suspense then. Which ones are really appalling investments? I know that Edinburgh's record is not very good over the last three years or so and I had the impression that Witan had gone off the rails, but I doubt that any are as bad as say Imperial Brands for Total Return over the last three years or so.

Dod

Not a fantastic benchmark that though, is it Dod101? Don't have to try too hard to look good in that department. Stuffing tenners under the bed beats it.

Yes I agree with you there but you need to look long term.

The other way to look at say Imperial versus ITs is that whilst ITs will often beat individual shares over a given period, they tend not to over other periods and overall, you are reducing risk and also potential returns by choosing ITs. Imperial has been a wonderful investment over say the last 20 years (during which time I have held it). In fact, I have long since extracted much more than my original investment in Imperial and my current holding, not insignificant is held at no cost. I doubt that anyone can say that about any IT.

Dod

[Dod101]

RVF

Thanks for your comments although I am not so sure about sage advice. I think there is a place for both individual shares and collectives such as ITs. It has certainly worked for me. I need the income from HYP like shares because I live off it but I also hold 7/8 ITs. Each of these tries to address an area I would fund it difficult to access myself, and I on the whole I am happy with my choices although I suspect that Edinburgh IT will get the chop before long. Unless there is a pressing reason however I tend to leave the decisions until the year end when I can assess the individual contributions, both in terms of income and capital. Not quite sure how to replace it though which is another issue. I do not like to sit on cash in my investment portfolio. I like to get it to work asap.

Anyhow all of this is slightly off the original topic.

Dod