Three ITs

[Dod1010]

Arb's post on the HYP Practical Board under the thread Nick Train and Pearson was stopped in its tracks because it was off topic but maybe I can resurrect something similar here.

Arb showed the results for Finsbury, Fundsmith and Scottish Mortgage over a 1,3 and 5 year period. Obviously these trusts can be taken as reflecting the policy and investing style of Nick Train, Terry Smith and James Anderson respectively, although personally I try to avoid personalising these things.

Over a 5 year period, Scottish Mortgage was well ahead, although as Arb said a bit more volatile. That is to be expected given the nature of its investments which are quite different from the other two. If I had to pick only one it would always have been Scottish Mortgage; indeed until a couple of years ago it was the only of the three I did hold. I have now added Finsbury as I wanted exposure to Nick Train and Finsbury seemed the best way.

It is truly astonishing the way that SM has grown. It is not so long ago that they had the share split (4 for 1) as the share approached £10 per share. Today, they are approaching £4 per share after the split. Anderson seems to have got under the skin of the 'disruptors', but whether this is a tech bubble or something more profound only time will tell.

Another small point. Apart from being the biggest IT around, it also I guess has the lowest fees so it is a bit of a virtuous circle. Would I buy it today? It depends on my timescale but I think I probably would, given its track record.

Either of the other two have got to be much lower risk but are both very successful. All of this of course would make me question even more the logic of those perpetual bears, Personal Assets. Whilst they hang on to non productive gold and US TIPS, the three managers cited are actually investing.

None of this is in any form to be taken as a recommendation!

Dod

[Raptor]

Here is the actual quote from Arb on HYP Practical:-

Nick Train, Anderson, Terry Smith - all rather similar characters and all very well known celebrities in the fund management business.

Let's see how they are doing, figures just now from Trustnet:



The final column is the TR of share price over 5years: previous columns are NAV (or unit price for Fundsmith OEIC).
For those who do not require an income, it seems Dod is correct for the moment, edging it over Fundsmith for the longer period. But all three are pretty dependable places to put your capital.
Checking the charts, I note that all three were more or less on a par for share price around early 2016, but Scottish Mortgage had a burst after Brexit rather more strongly than the others, whereas pre-Brexit the price was stagnating. He is also slightly more volatile.
Like all these comparisons, it's a snapshot and can change in the next period: a never ending story.
Arb.

[Dod1010]

Thanks Raptor. That probably makes my comments easier to follow.

Dod

[Raptor]

Thanks Raptor. That probably makes my comments easier to follow.

Dod

You are welcome, glad to help. Raptor.

[OZYU]

Should this read Two ITs and a Fund?

Anyway we hold all three too.

Dod mentions Personal Assets, which has been left well behind by those three.

My personal view is that after all this times of being very bearish, Personal Assets/Troy are bound to come good one of these days, but my scenario is as follows: If markets take a serious long dive, they, PAT/TROY will shine by going down very little, and the other three of course could very likely dive way deeper. But come the end of that long dive, the three will catch up and overtake PAT/Troy in three shakes of a lamb's tail.

So our money will stay with the three, and when markets take that dive, we will, if poss., heavily add to them at the point of our perceived heaviest pessimism.

Only works if you are in a position of ignoring market dives, and using them as welcome to up time by re deploying non equity investments if necessary.

We actually like market set backs, they improve profits in the long run! It is not just time in the market which pays off, it is the price you buy at in the first place.

Ozyu

[Lootman]

Apart from being the biggest IT around . .

Is it? Alliance, F&C and 3i have all been in the FTSE-100. Templeton Emerging Markets and RIT have come close in the past, I believe. But I don't recall Scottish Mortgage ever being in the major index.

SM can invest in the big US tech companies which have been on a roll, where more UK and income based ITs cannot. Apple alone is up 70% in the last year - a stunning result when you consider it was already the world's largest company.

As an aside, I don't think IT's should be in the indexes anyway because it represents a double counting.

[Dod1010]

Apart from being the biggest IT around . .

Is it? Alliance, F&C and 3i have all been in the FTSE-100. Templeton Emerging Markets and RIT have come close in the past, I believe. But I don't recall Scottish Mortgage ever being in the major index.

SM can invest in the big US tech companies which have been on a roll, where more UK and income based ITs cannot. Apple alone is up 70% in the last year - a stunning result when you consider it was already the world's largest company.

As an aside, I don't think IT's should be in the indexes anyway because it represents a double counting.

Well it is now! As of 17 March 2017 I think it was and with gross assets of over £5 billion it claims to be the largest generalist by some margin. Most ITs are in and then out of the FTSE100 so we'll see.

I see your point about membership in the first place but as SM illustrates, its biggest holdings are in the US and China so there is not as much double counting as might at first seem.

Dod

[MusingMarket]

tl;dr - bull markets are not the same, don't fall into the trap of believing the funds that outperformed in the last cycle will do so again.

My personal view is that after all this times of being very bearish, Personal Assets/Troy are bound to come good one of these days, but my scenario is as follows: If markets take a serious long dive, they, PAT/TROY will shine by going down very little, and the other three of course could very likely dive way deeper. But come the end of that long dive, the three will catch up and overtake PAT/Troy in three shakes of a lamb's tail.

So our money will stay with the three, and when markets take that dive, we will, if poss., heavily add to them at the point of our perceived heaviest pessimism.

I made the mistake of thinking like this in 2009 when buying SVM Global. My thinking was it's a risky highly volatile IT that had performed wonders in the prior bull market so it'll outperform this time as well. Given my lucky timing I never lost money on the IT with it flat-lining but the opportunity cost was huge since it took 3-4 years for me to give up on the trust when I would have made hay with any tracker or generalist trust/fund. You don't hear about SVM Global anymore (it changed manager to Henderson and was then wound up) despite it being the hot go-go trust 10 years ago, heck Colin Mclean was talked of like Train or Anderson is now.

At the beginning of March 2009, the nadir of the great recession for stocks, you simply wouldn't have picked Scottish Mortgage or Finsbury Growth & Income (both Anderson and Train had been running these trusts since 2000 according to Trustne) based on past performance. You can take a look at the AIC stats for February 2009 [1] if you want to be scared about the potential for Scottish Mortgage dropping through the floor - the worst performance in the Global Growth sector (barring the USD denominated oddity World Trust Fund) share price had more than halved over the previous year, its NAV fell more than 45%.

In the prior 10 years to 2009, with Anderson having been manager for nearly nine years, the total return of Scottish Mortgage was minus 7.6%, that compared to British Empire (+236%) or Hansa ('A' share +199.6%). So, which looked a better bet in 2009 if you had correctly figured out world stock markets were severely undervalued? British Empire and Hansa would not have been great investments over the past decade, until Brexit they were quite frankly complete dogs.

Bull markets are not the same and when managers massively outperform it's generally thanks to sector themes rather than stock-picking. Hansa (Brazil), British Empire (deep value conglomerates with a focus on emerging markets) were the place to be in the noughties, but should have been avoided in this past decade. There's no saying ultra-high growth silicon valley/chinese tech stocks loved by Anderson and co-manager Tom Slater (who joined in 2009 after the recession) will be the place to be after the next bust. [2]

Finsbury was just a very average performer in the Global Growth sector at the time of the last downturn, slightly underperforming on a 1&3 year basis, slightly overperforming over 5 & 10. If you had utmost faith in the manager Lindsell Train Investment Trust was the place to be. Of course Lindsell Train IT was very obscure and small at the time but I knew about it. I liked the manager notes and was intrigued by the holding of perpetual gilts but I passed on it for the better performing, at the time, SVM Global, c'est la vie.

mm

[1] http://www.theaic.co.uk/sites/default/f ... eb2009.pdf
[2] https://www.bloomberg.com/news/articles ... orn-hunter

[CryptoPlankton]

tl;dr - bull markets are not the same, don't fall into the trap of believing the funds that outperformed in the last cycle will do so again.

My personal view is that after all this times of being very bearish, Personal Assets/Troy are bound to come good one of these days, but my scenario is as follows: If markets take a serious long dive, they, PAT/TROY will shine by going down very little, and the other three of course could very likely dive way deeper. But come the end of that long dive, the three will catch up and overtake PAT/Troy in three shakes of a lamb's tail.

So our money will stay with the three, and when markets take that dive, we will, if poss., heavily add to them at the point of our perceived heaviest pessimism.

I made the mistake of thinking like this in 2009 when buying SVM Global. My thinking was it's a risky highly volatile IT that had performed wonders in the prior bull market so it'll outperform this time as well. Given my lucky timing I never lost money on the IT with it flat-lining but the opportunity cost was huge since it took 3-4 years for me to give up on the trust when I would have made hay with any tracker or generalist trust/fund. You don't hear about SVM Global anymore (it changed manager to Henderson and was then wound up) despite it being the hot go-go trust 10 years ago, heck Colin Mclean was talked of like Train or Anderson is now.

At the beginning of March 2009, the nadir of the great recession for stocks, you simply wouldn't have picked Scottish Mortgage or Finsbury Growth & Income (both Anderson and Train had been running these trusts since 2000 according to Trustne) based on past performance. You can take a look at the AIC stats for February 2009 [1] if you want to be scared about the potential for Scottish Mortgage dropping through the floor - the worst performance in the Global Growth sector (barring the USD denominated oddity World Trust Fund) share price had more than halved over the previous year, its NAV fell more than 45%.

In the prior 10 years to 2009, with Anderson having been manager for nearly nine years, the total return of Scottish Mortgage was minus 7.6%, that compared to British Empire (+236%) or Hansa ('A' share +199.6%). So, which looked a better bet in 2009 if you had correctly figured out world stock markets were severely undervalued? British Empire and Hansa would not have been great investments over the past decade, until Brexit they were quite frankly complete dogs.

Bull markets are not the same and when managers massively outperform it's generally thanks to sector themes rather than stock-picking. Hansa (Brazil), British Empire (deep value conglomerates with a focus on emerging markets) were the place to be in the noughties, but should have been avoided in this past decade. There's no saying ultra-high growth silicon valley/chinese tech stocks loved by Anderson and co-manager Tom Slater (who joined in 2009 after the recession) will be the place to be after the next bust. [2]

Finsbury was just a very average performer in the Global Growth sector at the time of the last downturn, slightly underperforming on a 1&3 year basis, slightly overperforming over 5 & 10. If you had utmost faith in the manager Lindsell Train Investment Trust was the place to be. Of course Lindsell Train IT was very obscure and small at the time but I knew about it. I liked the manager notes and was intrigued by the holding of perpetual gilts but I passed on it for the better performing, at the time, SVM Global, c'est la vie.

mm

[1] http://www.theaic.co.uk/sites/default/f ... eb2009.pdf
[2] https://www.bloomberg.com/news/articles ... orn-hunter

tl;dr...

[OZYU]

Crypto

I don't care what they did or did not do by 2009, the investment scene is different today. As a matter of fact of the three we only held SMT at that time, and not much at that, but showing a good profit, at the time.

We are judging things on what the Three are invested in NOW, and we believe that as a threesome, they have a bright future.

So our opinions differ, fine, this makes a market.

I was explaining why PNL won't get our dosh. And we will sure enough see what happens over the next five years.

Ozyu

PS In any case these three are part of very large and very diversified portfolios. My main point is that going in heavy at perceived low market/sp points has paid us off handsomely overall in the past(of course there were bad calls too, no broken eggs, no....). Warren B. likes it too as an approach(and he manages plenty of our dosh too, although we are gradually transferring our Berkshire H. shares dosh to the grandkids these days).

[CryptoPlankton]

Crypto

I don't care what they did or did not do by 2009, the investment scene is different today. As a matter of fact of the three we only held SMT at that time, and not much at that, but showing a good profit, at the time.

We are judging things on what the Three are invested in NOW, and we believe that as a threesome, they have a bright future.

So our opinions differ, fine...

Hi OZYU

Just thought I should point out that I think you are replying to the wrong person - my only contribution has been an ironic "tl;dr" to the previous poster who used that same (rather rude, in my opinion) abbreviation before promptly proceeding to write what was probably the longest post on the thread!

[OZYU]

Apologies, CryptoPlankton.

Replied to the wrong poster.

No further thoughts on the subject of course.

Ozyu

[Dod1010]

MM

Colin McLean was never in my book anything like Anderson or Train. I would never have invested in him and never did. The point about Scottish Mortgage is that it is not a one horse IT because it has the highly successful Baillie Gifford behind it. No one should be in any doubt that it will continue to be volatile but as part of a much larger portfolio I think it at least has a place. As for Nick Train and Finsbury, his holdings are not that removed from the average HYP, that is high quality defensive stuff in the main. Like British Empire and Hansa (both of which I held in the 1990s and have since sold) all ITs will have their periods of success and otherwise, although I am inclined to see Finsbury like say Caledonia as an IT for all seasons. As for Scottish Mortgage, it has always seemed to me, at least in James Anderson's time, to be a Trust with a very interesting and different manager. His vision and breadth of knowledge seems to me to be very refreshing. I have held it for I guess at least 20 years and have not regretted it.

As for Fundsmith? I do not like OEICs or open ended funds of any sort and so have never really looked at it seriously.

Dod

[scotia]

As a one-time celebrated manager of Fidelity Special Situations once remarked (Antony Bolton) - there is an element of luck in a Fund Manager's performance - and I think that has been demonstrated in earlier posts concerning the historic performances of current favourites.
So I think the correct response to investing in managed funds is "Do you feel lucky"

[OZYU]

As a one-time celebrated manager of Fidelity Special Situations once remarked (Antony Bolton) - there is an element of luck in a Fund Manager's performance - and I think that has been demonstrated in earlier posts concerning the historic performances of current favourites.
So I think the correct response to investing in managed funds is "Do you feel lucky"

On the contrary, scotia, investing in a carefully chosen, balanced and moderately looked after basket of ITs(and a few OEICs maybe, plus Berkshire H. of course) is imho the safest form of investing. Despite charges, returns will be more than adequate, volatility will be much lower than a basket of individual holdings.

Having said all that, one needs to look at this over a considerable period to form a view. I cannot believe that we have been lucky overall for decades, think of the probability, so these managers have delivered the goods generally.

When we started in investing many decades ago, one of my wife's uncles, a City veteran, urged us to stop messing about(which I certainly did in early years, you name an investing mistake, and I probably made it in the sixties!) and build a balanced basket of ITs to a few hundred £k if poss., before doing much more in investing elsewhere. This we broadly did, although I always dabbled with small cos on the side. Nowadays that original set is a little different of course, although a handful of original ITs are still in there after decades, but that original investment has grown massively, bettering FTAS TR in the process by some margin. We have urged our children to do the same when they started out, which all three did, and some of the grandkids are going that way too with their budding ISAs.

Of course nowadays our investment circle is much wider, with quite a few very different portfolios on the go. But broadly around 40% of our market investment remains in ITs and the odd open ended fund.

I can think of quite a few HYPs, for example, built with endless corporate hassle, cutters, etc...which over the past thirty-forty years might not have bettered just CTY+LWI, systematically reinvested. And that last bit is the key, when the proverbial hits the fan, there are steady ITs divis to re invest and make hay. (We do run a HYP, but we can compare exactly anyway because all element are separately unitised.)

Lucky? Don't think so, just 'ploddingly careful' with our hard earned.

Ozyu

[Dod1010]

I am not sure how we see recs, but I have rec'd OZYU. Well said. Pretty well my experience as well although only over the last 25 years or so.

Dod

[GJHarney]

I've had a monthly direct drip into SM via the Baille Gifford platform for yonks and have done very well, but worried as ever about the potential of it to go the other way given the nature of its concentrated holdings, over the past few years I've taken the profits and transferred them into Monks and Saints (free transfers as well as no holding charges and free reinvested divis on the platform which is fantastic) because I figure that both of those IT's are good balances for SM (although Monks has itself had a fantastic 12 months).

[Kidman]

As an aside, I don't think IT's should be in the indexes anyway because it represents a double counting.

FTSE offers alternatives for all of the 100, 250 and 350 excluding investment trusts.