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What's in a Fund Manager's ISA?

Investor Views: Professional investor Peter Michaelis explains how he runs his own ISA when he’s not managing other people’s money

Emma Simon 5 October, 2016 | 4:35PM

Peter Michaelis, who works in the City of London as a fund manager, says he has two basic aims when it comes to investing his ISA: ensuring his money does good, while still earning a decent return.

He says: “I’ve always been interested in sustainable investment strategies. I don’t think you need to compromise on returns when taking a more principled stance on investment decisions.”

It is perhaps not surprising Michaelis takes this approach to his own investments. After completing a PhD in environmental economics he has worked for a number of investment companies, including Aviva and Alliance Trust.

With his own ISA investments he holds in a combination of funds and direct shareholdings.

Many of these shares are in smaller companies, often investing in new technologies. For example companies involved in healthcare, greener energy, or waste reduction.

“Because of this bias in my portfolio I’ve made more money that if I had invested all of my ISA in conventional funds. It’s trying to spot the companies that have the potential to benefit from our changing world,” he says.

Small Cap Stock Picks for Growth

In total Michaelis has share is around a dozen companies. “I don’t trade frequently. I take a buy and hold approach. But I do try to make the most of my ISA allowance each year, so very often I will be topping up existing holdings if I think they will continue to perform well.”

Three shareholdings that have done well in recent years include Abcam (ABC), Imagination Technologies (IMG) and ARM Holdings, now owned by Softbank Group.

Abcam is a biotech firm, involved in producing and distributing anti-bodies and protein research tools. It has delivered good returns for shareholders: in the last year alone its share price is up by almost 50% according to Morningstar research, and over the past 10 years investors have seen a 32% return on their money.

Imagination Technologies is a company that develops graphics, video and connectivity technologies for licensing to semiconductor companies for incorporation into silicon devices. In recent years it has delivered good returns for investors, with its share price up 12% over the past year. However over five years it is down 10%. According to Morningstar analysts this stock has a high degree of uncertainty.

ARM Holdings is one of the UK’s most successful technology companies. The Cambridge-based company - which makes microchips for iPhones and other smartphones - was recently bought by Japan’s Softbank Corporation in a £24.3 billion deal. Softbank agreed to pay shareholder a cash sum, equivalent to a 41% increase on its highest ever closing price.

Smaller Companies Investment Trust

Michaelis also has a holding in Herald Investment Trust (HRI). This trust invests in smaller quoted companies in the telecommunications, multimedia and technology sectors. It has a three-star rating from Morningstar reflecting its relatively strong position in recent years.

For steadier returns to balance his smaller companies exposure Michaelis invests in his own fund, Alliance Trust Sustainable Future UK Growth. He says it provides the ballast in his portfolio against the higher risk individual shareholdings.

By investing his own money into this fund, this helps to align his own interests with those of his investors.

This fund invests primarily in the UK equities. It can from time to time also invest in UK bond markets. According to Morningstar it has a high sustainability rating, reflecting the robust ecological and ethical screens used by the fund.

Over the last three years the fund has produced an annualised return of 7.55%, and over five years, 7.91% according to Morningstar data. This puts it comfortably ahead of its benchmark, the FTSE All Share.

Sustainable Investing for Sustainable Returns

In the past Michaelis has invested in other sustainable funds. His first investment, via a PEP, the forerunner for ISAs, was into Jupiter Ecology.  This fund has a four-star performance rating from Morningstar and its manager Charlie Thomas has a Bronze Analyst Rating.

Morningstar analysts say: “This continues to be a solid offering for investors seeking dedicated environment equity exposure.”

Michaelis currently lives near Oxford with his wife and three children. He says his focus has always been on equity saving, rather than investing in property.

“We have a decent family home, and I think that is enough exposure to property for me. It’s easier to get diversification with equities.” He says that alongside his ISA he also invests in a SIPP for retirement but this all invested in his own managed fund, which invests in a mix of shares, bonds and cash.

“I was lucky enough to start saving early, so hopefully this will make a big difference to my savings. It’s enabled me to choose investments that fit with my values, and give me the returns I need.” 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
Abcam PLC1,002.00 GBX-1.18-
Alliance Trust SF UK Growth 1 Acc87.87 GBP-0.98-
Herald Ord1,172.80 GBX-0.10
Imagination Technologies Group PLC  -
Jupiter Ecology389.13 GBP0.60
About Author Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk