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The 5th of February marks the start of Chinese New Year, ushering in the Year of the Pig. Pigs are said to be generous and enthusiastic and though they may not stand out from the crowd, they are creatures of action rather than talk.

So how are China-focused fund managers viewing the threat of trade wars, the current state of the Chinese economy and the prospects for their investments? The Association of Investment Companies (AIC) has gathered comments from managers with significant proportions of their portfolios in the region. 

Trade wars damaging but opportunities arise

Robin Parbrook, manager of Schroder Asian Total Return said: “We remain sceptical of any real let-up in US and China tensions despite Trump’s suggestions that a deal will be completed. As highlighted several times last year, it is clear that US-China tensions are not just about trade, but something much bigger. It involves US perceptions around China’s intellectual property theft, cybercrime, the way China projects its political and financial power via One Belt One Road and China’s desire to dominate key industries via massive state subsidies through Made in China 2025.”

Howard Wang, the manager of JPMorgan Chinese said: “We believe we should see a resolution on tariffs as it is in the interest of both parties. However, the political dimension means we do not have strong conviction.  We do think that domestic Chinese equities have discounted a very pessimistic outcome: both a trade war and growth slowdown.  Consequently, we are beginning to see value in several areas of the A-share market.  Whatever the outcome of current negotiations we believe China and the US will increasingly compete in areas of technological innovation from electric vehicles to artificial intelligence.” 

Suresh Withana, Managing Partner of Harmony Capital, the investment manager of Adamas Finance Asia said: “At a macro level, the trade war between the US and China has the potential to cause continued, serious, short-term global disruption. However, this disruption may have unexpected benefits for certain regional economies. For instance, companies may seek to shift production from China to other Asian countries. Furthermore, if volatility in public markets continues to prevail, we would expect to see both Chinese and Asian SMEs increasing their reliance on private financing sources as they will still require capital to fund ongoing regional growth opportunities. We believe the most exciting investment areas will be those driven by intra-Asian consumption.” 

Investment trusts with highest exposure to China, Hong Kong and Taiwan
Company nameAIC sector% China% Hong Kong% Taiwan% TotalPortfolio data as at
JPMorgan ChineseCountry Specialists: Asia Pacific95.20.70.496.331st October 2018
Adamas Finance AsiaPrivate Equity-85-8530th June 2018
Fidelity China Special SituationsCountry Specialists: Asia Pacific3642.93.982.831st October 2018
Schroder Asian Total ReturnAsia Pacific - Excluding Japan28.227.87.963.931st October 2018
JPMorgan AsianAsia Pacific - Excluding Japan3612.411.259.631st October 2018
Macau Property OpportunitiesProperty Direct - Asia Pacific58.08--58.0831st December 2017
Schroder AsiaPacificAsia Pacific - Excluding Japan25.822.2105831st October 2018
Invesco AsiaAsia Pacific - Excluding Japan24.9215.2312.8953.0431st October 2018
Schroder Oriental IncomeAsia Pacific - Excluding Japan10.924.611.947.431st October 2018
Henderson Far East IncomeAsia Pacific - Excluding Japan25.436.8713.7946.0931st October 2018
JPMorgan Global Emerging Markets IncomeGlobal Emerging Markets17.78.415.741.831st October 2018
Edinburgh DragonAsia Pacific - Excluding Japan16.2319.925.4641.6131st October 2018
Pacific HorizonAsia Pacific - Excluding Japan301104131st October 2018
Fidelity Asian ValuesAsia Pacific - Excluding Japan16.899.9111.6638.4631st October 2018
Aberdeen New DawnAsia Pacific - Excluding Japan17.3515.895.2138.4531st October 2018
Aberdeen Emerging MarketsGlobal Emerging Markets188113731st October 2018
JPMorgan Emerging MarketsGlobal Emerging Markets25.3-1035.331st October 2018
Witan PacificAsia Pacific - Including Japan18.238.665.3232.2131st October 2018
Templeton Emerging MarketsGlobal Emerging Markets20.5-10.831.331st October 2018
Establishment Investment TrustFlexible Investment-2082831st October 2018

Dale Nicholls, portfolio manager of Fidelity China Special Situations said: “While Chinese exports to the US as a proportion of their total exports globally have been falling for years as China has expanded its global reach and trading partners, increased tariffs will impact the export sector. Of greater concern is the broader impact on general sentiment and the prospect of delayed investment by Chinese companies in general. Despite the rumoured prospect of new trade concessions and a possible ceasefire between the two nations, we remain vigilant.” 

Chinese growth slowing but expected

Dale Nicholls said: “China is facing a slowdown, but this is already well documented and the growth rates in China remain the envy of most economies. The authorities’ focus on deleverage has been the main catalyst for a slowdown as this has impacted access to funding and subsequently impacted business and consumer confidence. There has been a slowdown in the rate of growth of consumption, particularly in larger durable goods such as cars. This has not been helped by falling markets and the sense that house prices have peaked. However, retail sales are still showing high single digit year-on-year growth despite the decline in car sales and, even with a general economic slowdown, the medium-term prospects for earnings growth remain strong.” 

Mike Kerley, manager of Henderson Far East Income said: “Chinese growth is slowing although not by more than we would have expected. The rising base ensures that the growth of the past cannot be repeated, while the reforms of state-owned enterprises and the clampdown on non-bank credit will put pressure on growth in the short to medium term. These headwinds are being offset by measures to promote consumer spending and by tax cuts to corporates and individuals. This should be seen as a positive as the government pursues a policy of sustainability, rather than the old model of pump priming through debt-funded investment. Ultimately, the quantity of growth may slow but the quality will improve.” 

Robin Parbrook, Fund Manager of Schroder Asian Total Return said: “The scope for China to undertake major stimulus measures is now much more limited – unless they wish to suspend the effective renminbi peg. We expect the Chinese economy to continue to slow in 2019 as a result of the authorities’ desire to rein in excessive leverage and bring shadow banking back to balance sheets. Given the pegged currency, a current account no longer in surplus and a leaky capital account, we view the monetary options as limited assuming devaluation is not considered an option – this would cause market chaos and global deflation.

“We do expect some fiscal measures to boost consumption but given the size of the economy coupled with high housing and auto ownership rates, such measures are likely to have a limited impact compared with previous efforts. Our base case is for the Chinese economy to slow, but with debt effectively internalised, the immediate triggers for a financial crisis are unlikely to happen. However, one of the major tail risks we see for the Asian region, is a messy unwind of the renminbi peg.”

Suresh Withana,  of Adamas Finance Asia said: “China’s SMEs already face a significant financing gap but we expect any slowdown in the Chinese economy to further restrict access to traditional financing methods. That being said, we would also expect to see some form of government intervention to increase domestic spending to counteract many of the effects of slower economic growth.” 

Howard Wang, Fund Manager of JPMorgan Chinese said: “China has been on the path of slower, but higher quality growth for the last several years. Amid uncertainties in US-China trade negotiations and domestic cyclical headwinds, the government has moderated the pace of financial deleveraging. We expect policymakers to continue to ease and to resort to more coordinated pro-growth policies on both monetary and fiscal fronts, to direct liquidity to the real economy and to cushion for growth. The personal and corporate tax cuts, along with more market-oriented reforms around resource allocation, should support domestic demand and private sector productivity. Given the current valuations and bearish sentiment, we are optimistic on the outlook of China equities, in particular onshore China equities.” 

Market turbulence producing opportunities

Dale Nicholls said: “Following a period of market volatility towards the end of 2018, activity in the portfolio has been focused on opportunities that arise during a period of indiscriminate sell-off. Certain sectors are particularly sensitive to market falls, such as insurance and investment companies.

“In many of these types of companies, valuations have dropped to historically low levels that significantly discount their attractive long-term growth prospects. When it comes to insurance, the sector is hugely underpenetrated relative to the West with demand coming from the growing middle class in China. With regards to securities, the long-term prospects in capital markets, particularly for institutions, make securities firms very attractive at these prices.” 

Suresh Withana said he thinks that “2018 was a volatile year for Asian equity markets. However, we continue to see abundant investment opportunities in China and throughout the wider region, particularly in financing companies in the SME sector where there is a significant shortfall of fresh capital available to quality businesses.

“A key regional investment theme that we expect to continue in 2019 is the rise of an increasingly aspirational consumer culture and this should provide increasing SME investment opportunities in healthcare, tourism, consumer and retail businesses and education.”

Mike Kerley said: “Around 25% of the portfolio is invested in China, as it is a country that we believe will only grow in corporate stature. Historically, Asia has generally been associated with the mass manufacturing of low-cost products. Now, however, this is changing. For the first time we believe China will spend more on R&D this year than the US and, within five years, we think it may spend more than the US and EU combined. This is most prominent in newer sectors such as electric vehicles, renewable energy, healthcare, artificial intelligence and virtual reality – products and services we will embrace in years to come and have the potential to become part of our day-to-day lives.” 

Howard Wang said: “We continue to find plenty of attractive investment ideas in consumer, healthcare, and technology. We have taken the market sell-offs as opportunities to add to quality, structural growth names in internet, software and healthcare services.”

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  • UK adults get most confused by the terms effective annual rate (48%), loan-to-value (47%) and compound interest (35%)
  • Lack of financial understanding is having consequences for their finances
  • Over six million Brits have incurred late fees because they’ve misunderstood information on financial products

Over three-quarters (77%) of UK adults say they are confused by financial jargon and this is having consequences for their finances, according to research.

Six million[1] Brits have incurred late fees because they’ve misunderstood information on financial products. One in 10 (10%) say they have lost out on favourable rates at the bank because they were confused by financial terminology and 12 per cent admit their credit score has been impacted because they didn’t understand the terms and conditions on a financial agreement.

The research produced on behalf of credit report provider Noddle.co.uk has created a league table of all the words and abbreviations confusing Brits the most (See below).

Topping the table is effective annual rate (EAR) – with almost half (48%) saying they have no idea what it means. Other terms causing confusion include loan-to-value or LTV (47%), compound interest (35%), individual voluntary agreement or IVA (34%) and annuity (31%).

And despite the Bank of England recently raising interest rates, 16 per cent say they are confused by the term ‘base rate’. Almost one in 10 (8%) say they are baffled by the word inflation, even though it has a big impact on the cost of everyday items.

With so many Brits saying they are confused by financial jargon, it’s unsurprising that one in five (20%) don’t believe they have a good grasp of financial terms and concepts. Nearly half (47%) say they mentally switch off when they hear financial words and only a third (34%) say they enjoy learning about personal finance.

This lack of understanding may be down to poor financial literacy. A separate Noddle study2 found that almost of half (46%) of UK adults don’t believe their education prepared them to make financial decisions in adulthood.

Jacqueline Dewey, Managing Director of Noddle.co.uk, said: “It’s clear that many Brits are baffled by financial jargon. And as innocuous as this may seem, it’s having repercussions for consumers’ finances.

“Not only are people missing out on favourable rates because of this lack of financial understanding, they are also being stung with unnecessary charges too. Worryingly, a significant minority have even seen their credit score negatively affected.

“For example, consumers may be paying off their credit card bills late because they are confused about the terms and conditions on their monthly statement. This means they are being hit with interest and run the very real risk of hurting their credit score.  

“It’s therefore important not to shy away from financial topics – despite some terms being difficult to understand. Ultimately, taking a proactive approach in improving your financialknowledge, will help you take control of your finances.”  

Financial jargon buster:

  1. Effective Annual Rate (EAR) –is the actual percentage interest that a bank account or a loan will earn or pay on an annual basis
  2. Loan-to-Value (LTV) – is a ratio that describes the size of a loan you take out compared to the value of what you’ve purchased, such as a house
  3. Compound Interest – it’s when interest is paid on both the original amount of money and the interest it has already earned. Think of it as interest that slowly gets bigger over time; like building a house. So, 10% interest on £100 would be £110 after a year, and £121 the year after. The interest is worth £10 in first year but compound interest means it’s £11 in year two. This might sound minor, but after many years it really starts to add up
  4. Individual Voluntary Arrangement (IVA) – is an agreement with your creditors (e.g. the people you owe money to) to pay off your debts at an affordable rate. Not everyone can get an IVA – there are certain criteria that you have to meet, such as a regular income or money left over each month to pay your creditors
  5. Annuity – is a contract between you and an insurance company which pays a regular retirement income either for life or a set period. You typically buy it with all or part of your pension pot
  6. Annual Percentage Rate (APR)– this refers to the amount it will cost you to borrow money over 12 months, including interest and other additional fees, such an arrangement fee
  7. Equity Release –is a way to unlock some of the value of your property, and turn it into a lump sum of money
  8. Base Rate – is the Bank of England’s official borrowing rate e.g. what it charges other banks and lenders when they borrow money. It ultimately influences what borrowers pay and savers earn

Research methodology

Noddle commissioned Opinium Research to interview 2,008 GB adults online from 16-20 November 2018. Results are weighted to be representative of the UK population.

[1] 12% of UK Adult population (52,079,000) is 6,249,480

[2]  Noddle’s Class of 2018 study

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Two of the widest held stocks on the London market have reported results that demonstrate a divergence of performance.

As Unilever issues an update to the market, Ian Forrest, investment research analyst at The Share Centre, explains what it means for investors in one of the most widely held stock across the investment trust sector that many if not most invests are likely to indirectly own:

Global consumer products group Unilever disappointed the market today by missing expectations as its Q4 sales growth came in at the bottom of the forecast range.

Excluding the spreads division, which was sold during the year, sales in 2018 were up 3.1%, compared to the 3-5% range multi-year forecast. The market noted challenging market conditions in H2 and the forecast from the new CEO Alan Jope who expected sales growth in the new financial year to be in the lower half of the 3-5% range.

The reduced expectations for 2019 led to the shares dropping 3% this morning. However, growth in emerging markets remains good and Jope’s decision to keep the profit margin target of his predecessor is reassuring.

“The company’s diverse portfolio of global brands gives the business a defensive quality which is attractive in times of economic uncertainty.  We therefore maintain our ‘buy’ recommendation for low to medium risk investors seeking a balance of growth and income.


Meanwhile, Graham Spooner, investment research analyst at The Share Centre has been taking a look at Diageo’s results.

Shares in the company fizzed to an all-time high this morning as the markets reacted to the group’s latest interim results, which came in towards the top end of analyst forecasts, and were impressed with a further £660 million of share buybacks. Net sales rose by 5.8% to £6.91 billion and operating profit was up by 11% to £2.43 billion helped by organic growth.

Tapping into the UK’s ever growing taste for gin, sales  rose by 14% in the UK and with Johnnie Walker & Tanqueray gin two of its famous brands, helping make the company   the largest producer of the spirit in the world. The group have been increasing focus on its faster growing brands, which has led to the sale of some of its smaller brands.

The CEO highlighted growth was broad-based and they expect to deliver mid-single digit organic sales growth for the financial year. He also went onto highlight how these results are further evidence of the changes they have made to put the consumer at the heart of our business.

We continue to recommend the shares as buy for investors seeking balance and willing to accept a lower level of risk.

The post Share Watch: Unilever drops as Diageo sparkles appeared first on WhichInvestmentTrust.com.

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The majority (71%) of mobile customers with a SIM-only plan are overpaying for data they don’t use, at a total cost of £800 million per year, according to new analysis from Citizens Advice.

SIM-only mobile customers could save approximately £63 per year by switching to a cheaper deal that matched their data consumption. The average amount of data wasted each month was 2GB. This is equivalent to streaming 3 hours of video or 28 hours of music.

Citizens Advice estimates this affects 12 million people in the UK who have a SIM-only contract. While polling only asked SIM-only clients, the researchers estimate that this likely affects people who have bundled contracts too.

People who purchased their contract in store were found to waste 4.2GB on average, while those who bought online waste 2.6GB, suggesting sales practices in store could particularly be leading consumers to take out contracts with excessive data allowances.

The charity is urging more mobile networks to refund unused data, or make it easier for customers to reduce their monthly allowance if they find they are wasting data repeatedly.

The charity previously found mobile phone companies profit £475 million each year by continuing to charge customers for phones they have already paid off. Broadband companies earn £1.2bn annually from the loyalty penalty, by charging loyal customers more for their services.

Citizens Advice is calling for an independent consumer champion for the mobile and broadband industries to stand up to practices that exploit customers.

Gillian Guy, Chief Executive of Citizens Advice, said: “Mobile companies should be doing more to help their customers save on data they don’t use, especially when it’s clear people are consistently underusing their allowance.

“This is another example of mobile companies overcharging their customers. It’s time for a consumer champion to stand up for people and push for change on issues like this.

“While we wait for industry to improve support for customers, individuals can take action too. Anyone looking to save money should check their data usage and see if they can switch to a cheaper deal that matches what they use.”

Details on the research:

  1. Citizens Advice analysis of raw data from a YouGov survey of 4,070 adults in Great Britain, surveyed between 29 November and 3 December 2018. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).
  2. Citizens Advice commissioned YouGov to survey 4,070 GB adults between 29th November and 3rd December 2018. Of these, 1,425 people were on a SIM-only contract. Survey participants were asked: How much they spend each month, How much data they pay for, How much data they use. To reflect that real world use can fluctuate, we then applied a buffer of 25% onto this estimated monthly consumption, to account for monthly variations in use. We then rounded up to the next whole gigabyte (GB), in order to find cheaper tariffs that match. This means that whilst everyone had a buffer of 25%, most people had a more generous buffer, some as high as 90%. We used desk research to find the cheapest SIM-only tariffs (from any network) with a range of monthly data allowances (from 500MB to unlimited). We then compared the prices of the cheapest SIM-only deal that matched their consumption to the price they are currently paying. We found that 71% could save money. For people who had unlimited deals we compared the price they were paying now to the cheapest unlimited tariff. Scaling this up to population level (assuming 50,644,094 Great Britain adults 18+) resulted in 12.6 million GB adults who could save, with average savings of £5.29 per month.

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The Top 20 most viewed investment trusts, reflects investors’ hopes and fears and tells something about what is going on in the mind of investors’.

Scottish Mortgage, the investment trust behemoth that practically lives at the number one spot has slipped further than it has done for the past two years down to this month’s number 5. The trust has suffered from a period of volatility as its favoured tech sector has become increasing unpopular with investors which has had a knock on effect at Scottish Mortgage where we have seen a decline in the value of the NAV (net asset value)

The number one slot is instead occupied by Murray International, the large conservatively managed trust with an income focus, with a near 5% dividend, from the Aberdeen Standard stable of trusts has attracted bargain hunters as it slipped to a small discount.

Finsbury Growth and Income is at number two. The trust attracts a strong following from retail investors, and has attracted the attention of influential investors including Hargreaves Lansdown and Neil Collins recently.

City of London is third as this popular high yielder, which mainly invests in large UK listed businesses has bucked the trend for trusts investing in the UK to fall from favour due to Brexit concerns.

The investment trust that started the industry F&C Investment Trust (formerly Foreign & Colonial), is number 4. The F&C investment trust range has recently rebranded to BMO with the exception this trust.

At number nine down from last month’s number six is Independent Investment Trust.  This £312 million assets trusts has been on a perennial premium to NAV (net asset value), as its strong long term performance record attracted investors, but following a short period of underperformance it slipped to a discount, short lived discount as it happens as it now sits on a circa 5% premium.

Demonstrating the enduring theme of the need for income since the onset of the financial crises Murray International is number 4, which is also this month’s highest new entry as this near 5% yielder from the Aberdeen Standard Investments Stable, continues to be popular with investors. It has recently slipped from a trading on a premium to trading on a 4% discount.

Staying on the income theme Merchants investment trust is at number 6. This 5.5% yielder has been benefitting from a period of strong performance as expensive long-term debt has recently matured.

Another income favourite European Assets is at number 13. The trust invests in the European smaller companies excluding UK sector, and pays a fixed annual dividend of 6% of net assets annually. It is one of a small band of trusts prepared to pay a dividend from a mix of capital and income.

Further down the chart we see a new entry from Securities Trust of Scotland at number 20. This £213 million assets trust from the Martin Currie stable has delivers near 4% dividend that has grown at a compounded annual rate of 4.9% per annum over the past five years.

AIC Investment Trust Top 20 - December 2018
CompanyPreviousTop 20
Murray International31
Finsbury Growth & Income42
City of London53
Scottish Mortgage14
F&C Investment Trust155
Edinburgh Investment27
Independent Investment Trust69
Alliance Trust810
Temple Bar1212
European Assets913
BMO Global Smaller Companies-14
Perpetual Income & Growth-16
Securities Trust of Scotland2017
Scottish Investment Trust-19

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The Top 20 most viewed investment trusts, reflects investors’ hopes and fears and tells us something about what is going on in investors’.

Scottish Mortgage occupies the number one slot it has come to almost own, though the investment trust goliath has had a turbulent few months as short term volatility has seen its share price decline by circa 15% giving it a market capitalisation of just shy of £6.7 billion, still comfortably the biggest investment trust.

At number two is Independent Investment Trust, this £312 million assets trusts has been on a perennial premium to NAV (net asset value) as its strong long term performance record attracted investors, but following a short period of underperformance it slipped to a discount, short lived discount as it happens as it now sits on a circa 5% premium.

City of London is third as this popular high yielder, which mainly invests in large UK listed businesses has bucked the trend for trusts investing in the UK falling from favour due to Brexit concerns.

What do you think? Join the conversation in our forums and see what others are saying here.

Demonstrating the enduring theme of the need for income since the onset of the financial crises Murray International is number 4, which is also this month’s highest new entry, as this near 5% yielder from the Aberdeen Standard Investments Stable, continues to be popular with investors. It has recently slipped from trading on a premium to trading on a 4% discount.

The investment trust that started the industry Foreign & Colonial Investment Trust, which likes to be known these days as F&C is number 5, as the 150 year old continues to benefit from the spotlight its incredible anniversary year.

Another income favourite European Assets is at number 6. The trust invests in the European smaller companies excluding the UK sector, and pays a fixed annual dividend of 6% of net assets. It is one of a small band of trusts prepared to pay a dividend from a mix of capital and income.

Staying on the income theme, Merchants investment trust is at number 7. This 5.5% yielder has been benefiting from a period of strong performance as expensive long-term debt recently matured.

At number nine we break from the shackles of income for an out and out growth story as Allianz Technology Trust perches. The trust has delivered stellar performance over the past few years with NAV growth of +21%, +119%, +165% and +615% over 1, 3, 5 and 10 years. None too shabby.

Further down the chart we see a new entry from Securities Trust of Scotland at number 13. This £213 million assets trust from the Martin Currie stable delivers a near 4% dividend that has grown at a compounded annual rate of 4.9% per annum over the past five years.

At number 15 there’s a new entry from investment trust minnow the Chelverton UK Dividend investment trust. This small and mid-cap UK companies investor has had a tough year as it has been caught up, alongside other small and mid-cap investment trusts in the negative sentiment towards the UK equity market,  in relation to the ongoing Brexit negotiations.

Over the very long-term, owners of this trust have done well with 10 year NAV returns of 380%, but they’ve done less well over 1, 3, and 5 years where it has delivered total NAV returns of -17%, +9% and +43%.

The top 20 is taken from user searches on the AIC website for the month of September 2018.

What do you think? Join the conversation in our forums and see what others are saying here.

The Investnebt Trust Top 20 September 2018
Investment TrustPreviousTop 20
Scottish Mortgage11
Independent Investment Trust42
City of London53
Murray International-4
Foreign & Colonial Investment Trust35
European Assets66
Allianz Technology118
Finsbury Growth & Income710
F&C Global Smaller Companies1311
Edinburgh Worldwide1012
Securities Trust of Scotland-13
Invesco Perpetual Enhanced Income-14
Chelverton UK Dividend-15
Alliance Trust1416
JPMorgan Global Growth & Income818
Temple Bar1519
Source: Searches on the AIC website for the month of September 2018.

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The new owner has promised to maintain a presence in Dundee but hasn’t commented on job losses in the combined business.

Alliance Trust (LON:ATST) has sold its savings platform business to Interactive Investor (II), a rival owned by U.S. investor J.C. Flowers. The sale includes Alliance Trust Savings (ATS) Dundee head office, though no details on job losses or whether II has issued any guarantee to continue to operate in Dundee long term.

ATS has been sold for £40 million, which compares to its book value of £38 million at June 30th this year, when the Dundee head office was valued at £4.9 million.

II is acquiring assets on the platform of circa £16 billion, which when added to exiting assets means it has a total of £35 billion, and 400,000 customers including ATS’ 110,000. II has been one of the sectors consolidators in recent years as it has bought up rivals including the Canadian owned TD Direct, and acquired a while label business that provides platforms for other companies including Motley Fool, Trustnet Direct and Telegraph Investor.

Alliance Trust Dundee head office.

Richard Wilson, CEO of ii said: “This is another important step in our ambition to build the UK’s best investment platform. The acquisition brings together the country’s two largest fixed price providers, adding significant scale to ii, and reinforcing our ability to deliver excellent choice, value and service to all our customers.” 

Lord Smith of Kelvin, Alliance Trust’s Chair, added: “The Board is pleased to announce the sale of ATS to Interactive Investor. The two businesses are highly complementary and ATS customers, many of whom are Alliance Trust shareholders, will benefit from Interactive Investor’s similar flat-fee structure, as well as its increased scale and focus. A key consideration for the Board was a commitment to maintaining ATS’ presence in Scotland. We are therefore very pleased that ii plans to invest in ATS’ Dundee operating centre.”

Since 2013 the investment platform market has almost doubled in size to £500 billion of assets, with an extra 2.2 million customer accounts opened in the period. ii has approximately 10% of the UK direct to consumer investment platform market.

The platform business has been increasingly consolidating in recent years as Standard Life has acquired AXA’s Elevate platform, and Aegon Scottish Equitable bought the adviser centred Cofunds business.

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Champagne corks are popping as the trust raises 80% of its target in what marks a successful fund raising.

AVI Japan Opportunity Trust (LON:AJOT) has raised £80m as it lists on the London Stock Exchange, with a remit to invest in a consternated portfolio of Japanese equities.

With a slew of new investment trusts looking to be a home to investors, including the uber successful new Smithson trust we reported on recently and you can read here ,managers AVI (Asset Value Investors) will be relieved to have hit 80% of their fund raising target. Shares in the trust will begin trading on October 23rd.

AJOT will invest in a portfolio of 20-30 small and mid-cap stocks that the manager considers to be undervalued and that where a substantial percentage of the balance sheet is accounted for by cash or cash type investments.

What do you think? Join the conversation in our forums and see what others are saying here.

The trust will be managed by Joe Bauernfreund, the fund manager of British Empire Trust (LON:BTEM).  He will be supported by Tom Treanor and Daniel Lee.

Commenting on the successful launch, Joe said: “It has been an exciting journey and I am pleased that AVI will be able to continue its work in Japan with a dedicated fund. This will be a portfolio of some of the extraordinarily cheap smaller companies in Japan at a time when an improving corporate governance regime is forcing change.

“We will have the right to make shareholder resolutions at annual general meetings, which are becoming more common with a record number this year.  AJOT is an opportunity we see for investing in Japan today as evidenced by the more than £1m invested by the AVI team in AJOT.”

Norman Crighton, Chairman of AJOT, said: “We are pleased to have successfully raised £80m, providing an exciting opportunity for UK retail and institutional shareholders to access distinctive investment opportunities in Japan’s equity market.

“The Board and I look forward to working with Joe and the highly experienced team at AVI.  They have an established track record of engagement with investee companies in Asia and I am confident in the prospects for this strategy to deliver sustainable, long-term returns for shareholders.”

Unlocking value

Bauernfreund and his team will seek to unlock value through engaging with the Board and management of investee companies, and agitating for change including improving corporate governance, and distributing cash to shareholders.

encouraging capital distributions to shareholders, accretive M&A and productive capital expenditure. The manager has a network of local advisors who will be used when conducting due diligence over potential targets

Blue Ocean Maritime Income abandons IPO

Meanwhile, Blue Ocean Maritime Income has ‘postponed’ its proposed IPO after the minimum net proceeds were not met. The trust had targeted $250m but it found the current market conditions represented a “challenging background in which to raise capital for the strategy”.

The trust aimed to provide investors with a high dividend through providing debt financing to small and medium sized, privately owned shipping companies. But it charged a high and easy to obtain performance fee, as described in an article by James Pigott here.

The manager noted that it will continue to engage with potential investors as it looks to proceed at a later date.

What do you think? Join the conversation in our forums and see what others are saying here.

The post AVI Japan Opportunity Trust raises £80m as Blue Ocean pulls float appeared first on WhichInvestmentTrust.com.

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The success of the fund raising has surprised many as investors appear to have been attracted to the Fundsmith investment process.  

Fundsmith has raised £822.5m for its global small/mid-cap Smithson Investment Trust (LON:SSON. Smithson initially targeted £250m, but increased it following strong demand from investors.

Prior to the launch Woodford Patient Capital had been the most successful trust IPO, when it raised £800 million from investors back in 2015, with BioPharma Credit raising £606 million last year.

What do you think? Join the conversation in our forums and see what others are saying here.

Prior to this, and in a reflection of the unpopularity of investment trusts, in the era when commission payments dominated the fund industry, which disadvantaged trusts who didn’t pay commission, you need to go back to the 1990’s when the Mercury European Privatisation trust raised £549m in 1994, and Kleinwort European Privatisation trust raised £481 million in the same year. Incidentally, both of the last two trusts were wound up after failing to live up to expectations and delivering poor returns to investors as they struggled to find suitable investments.

Investment Remit

Smithson will invest globally in a portfolio of small/mid-caps with a focus on companies with a market cap between £500m and £15bn, and with an average of £7bn. It’ll build a portfolio of 25-40 stocks, employing Fundsmith’s mantra of buying good companies, not overpaying and then doing nothing.

The investment case is based on the long-term outperformance of small and medium sized companies compared to large companies. In addition, the manager highlights that there are greater opportunities for active management in small and mid-caps given less coverage from research analysts. The manager estimated that based on issue proceeds of £600m, 92% of proceeds were expected to be deployed within seven business days.

Largest UK investment trust launches
YearMonthInvestment TrustAIC sectorTotal assets
2018OctSmithson Investment TrustGlobal Smaller Companies£822m
2015AprWoodford Patient Capital UK All Companies £800m
2017MarBioPharma CreditSector Specialist: Debt£606m
1994MarMercury European PrivatisationEurope£549m
1994FebKleinwort European PrivatisationPan Europe£481m

Fundsmith has grown strongly since it was launched by Terry Smith 2010 to a business managing circa £18 billion, centred on its open-ended  and huge £17 billion Fundsmith Equity fund, which invests in global mega cap stocks, and its specialist emerging markets investment trust Fundsmith Emerging Equities, with a little less than £300 million assets.

Ian Sayers, the head of industry trade body the AIC said: “It’s a testament to the strength of the investment company structure that Smithson Investment Trust has raised so much money, becoming the largest UK investment company at launch. Clearly, the closed-ended structure allows managers to pursue long-term focussed strategies without having to worry about redemptions.”

What do you think? Join the conversation in our forums and see what others are saying here.

The post Smithson raises £822.5m to become largest ever investment trust IPO appeared first on WhichInvestmentTrust.com.

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A young couple who are novice investors need help to plan where they should invest to build up chunk a of money to use for a deposit in several years’ time.
  • Name: Pavan and Maya
  • Your Portfolio: Each has £3,000 in lump sums from savings, and they are willing to save £325 pm to save in an ISA.
  • What do you need help with? Where should we invest our lump sums and our monthly savings.
  • It adds up to £650pm between us, or £7,800 per year, or £46,800 over 6 years.
  • Age range 26 and 25
  • How long can you keep this money invested for? 4-8 years
  • Dow you have a separate pot of ready cash for a ‘rainy day’? No
  • Risk: Where would you place yourself on a scale of 1-10 if one were no risk at all and 10 was very risky? As much as risk as we need to take.
  • Do you need an income from your investments? No. 
  • Do you intend to actively manage your investments? (frequently monitor with a view to switching investments when necessary) Or do you want investments you can just forget about for a few years and let them grow?
  • I think a bit of both. The money is very important to us, so we will monitor it but at the same time it would be preferable if we didn’t have to move things around on anything like a daily basis.
  • How much investment knowledge do you think you have?
  • A Little. Maya says she has an interest in investing but little knowledge, and she has always been a good saver. Pavan has very little knowledge of investing but he is willing to learn.
  • Do you have a preference for the type of investments you will consider? E.g. Investment Trusts and maybe Unit Trusts.
  • Investment Trusts (Closed ended funds), Unit Trust/OEIC Funds (Open ended funds), Shares (equities/stocks), Bonds (retail bonds rather than bond funds), Property, Other (including collectibles)
  • Do you own your home? No.
  • Are you saving for a purpose such as retirement/school fees/University fees? Yes for a deposit for a home in 4-8 years.
  • Please tell us a little bit about you which might help in forming an opinion on your financial situation (Relevant information such as: Married/Civil Partnered/Living with partner/single, children and their ages etc): We’re both at the start of our careers earning £26,500 and almost £29,000 respectively. We hope this might grow a little as our careers progress.
  •  Do you expect to inherit money? Hopefully not for a very long time

We could all do with a little help from our friends, and that is what is being asked for here, giving a little bit of help or feedback to people looking for help and advice on their portfolios and investment aims.

How you can I involved?

Read the description in the blue inset box together with the personal statement below, and then head over to the dedicated forum we’ve created to share your opinion, feedback or comments (You can read comments when they appear at the foot of this page but you need to click on the link if you wish comment yourself).

Pavan and Maya’s forum: Click here to join the conversation in the Investor Clinic forum (opens in a new tab/window).

WhichInvestmenTrust.com (WIT) members are a varied group of people, with a wide range of investment knowledge and experience, which collectively can produce an impressive range of ideas and suggestions, informed by their own personal experience of investing, sometimes aided by knowledge and experience earned through their careers.

What this is NOT is financial advice. For that you should consider consulting an independent financial adviser. We have some in our links section or you can find one on www.unbiased.co.uk.

Would you like to feature here?

Any WIT member can submit their portfolio for inclusion on the site. If you are not yet a member you can join by clicking on the ‘Login/Join’ button, the small person icon at the top right of every page.

Use the contact us form or email us at enquiries@whichinvestmenttrust.com for more information.

Personal statement: Use this to tell us anything else you think we should know.

We are both teachers at the very beginning of our careers. We met at Uni and live in London but we’re both originally from the Midlands and the North West.

We are living as property Guardians, which means our rent is cheap, though the properties are really disgusting. Many things don’t work, nothing is ever fixed, we have very little rights, and we could be asked to leave at any time with two weeks’ notice.

As horrible as our living environment is, we are willing to suffer it in the short term in order that we can attempt to save to plan for our future.

Our plan is to invest on a monthly basis in order to build up a substantial deposit to buy a home. We’re not sure when this will be, it could be in four years or 6 or 8. It really depends on how our investments perform and where we are in life.

We’d like to get married eventually, but our families have told us they will pay for the wedding, and we don’t want to have children until we are settled in our own home.

We will probably move out of London at some point in the next few years, which would maker buying a home more affordable, but for now we are really enjoying all London has to offer so we want to remain here for the foreseeable future.

Click here to join the conversation in Pavan and Maya’s dedicated Investor Clinic forum (opens in a new tab/window).

The post Investor Clinic: Help two young teachers who are slumming it to save for their future appeared first on WhichInvestmentTrust.com.

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