Investor Views: "I Swapped Stock Picks for Closed-end Funds"

Retired investor Robert Long tells Morningstar why investment trusts form a core part of his portfolio

Emma Simon 7 June, 2017 | 2:19PM

Robert Long, 74, describes himself as a keen investor: “It’s become a bit of a hobby in recent years, although I don’t buy and sell shares as often as I used too. I more interested in decent long-term returns, rather than a quick gain.”

Long started investing early. His first investments were insurance-based savings bonds he says. “I saved monthly, into a type of endowment plan,” he explained. “It wasn’t a huge amount each month, nothing I really missed, but after 10 years I had a decent sum of money. It taught me the benefits of saving on a regular basis. It soon adds up.”

He started investing more seriously in the 1980s, when he bought a number of the shares in companies that were being privatised. This included BT (BT.A), British Airways and British Gas, which subsequently split into Centrica (CNA) and BG Group, recently acquired by Royal Dutch Shell (RDSB).

Long made strong gains on these shares shortly after they were privatised, he says: “It felt like you couldn’t lose. I probably held onto them a couple of years. I wasn’t really thinking long-term then. I think I sold one tranche of shares to pay for a holiday.”

This experience made him interested in buying more individual shares. “Over the years I built up quite a portfolio. Some were very successful, others less so.

“I always preferred picking my own investments, rather than paying a fund manager to choose them. Obviously, I made some fantastic gains in the run up to the tech boom, but then many of these holdings subsequently crashed. Like most people I held on for too long.”

Long has tended to prefer investing in smaller companies. Often these were tips from people he worked with or other investors, adding: “For a while I was a part of an investment club, we’d swap ideas.”

Why I Prefer Closed-end Funds

Long initially worked as a sales and product manager for an insurance company. Later on, he worked in sales in the food and drinks industry, before switching to the property sector.

He says: “Looking back some of my better long-term holdings have been in investment trusts. I like the fact that charges are similar to holding and dealing shares, but they offer a bit more diversification. I invested in a few just to provide some steady returns when I was dabbling with higher risk shares. But I also liked the opportunity to potentially gear returns by buying those trusts trading on discounts.”

He adds: “Over the years though I’ve mainly stopped investing in higher risk shares such as AIM-listed stocks or tech shares. I now largely hold investment trusts. It’s a smaller portfolio but it’s probably delivering better returns.”

Many of these trusts he’s held for 10 years and more have an excellent track record on paying dividends. These include two Henderson trusts: City of London (CTY) and Bankers (BNKR).

Both trusts are highly rated by Morningstar analysts. Job Curtis has run the City of London trust for 25 years and this investment has a coveted Gold Rating.

David Holder, an analyst at Morningstar describes the trust as “a compelling option for investors”. He adds: “Not only has the management been consistent but the process used by Curtis is also little changed over that time.”

The trust, which mainly invests in larger UK companies, is conservatively managed, with a relatively low stock turnover. Curtis takes a ‘bottom-up’ approach, focusing on well-managed companies with a commitment to paying dividends.

Holder adds: “This prudent and measured approach to portfolio management here has resulted in outperformance over most time frames. Indeed, over Curtis’ tenure since 1991, the fund has returned an annualised 9.3%, some 80 basis points more than the FTSE All-Share and around 190 basis points ahead of the peer group over this period.” The trust has increased its dividend for 50 years. 

Bankers Investment Trust now has a more international remit, but is another trust that has increased its dividend for 50-plus years. It has a Silver Rating from Morningstar, reflecting analysts’ confidence that it will continue to outperform peers. The trust has been managed by Alex Crooke since 2003.

Holder says: “In April 2016, Bankers benefitted as a rollover option for investors in Henderson Global Trust, which was being wound up. Consequently, the company issued nearly £60 million of new shares to these investors, increasing liquidity and spreading costs. This capital injection was also a catalyst to tilt the portfolio further away from its historical UK bias, work that that been under way over fund manager Alex Crooke's tenure.”

Trust Pick for Long Term Growth

While these are strong dividend payers, Long says he also invests in more growth-orientated trusts such as Finsbury Growth & Income (FGT) – run by Nick Train. This he says has a lower yield that some of his other investment trusts holdings, but still pays around 2%. Long says he has been very impressed with the returns on this trust, which he has not held for as long as the others.

Morningstar analysts clearly share his view. This is another trust with a coveted Gold Rating from Morningstar. It also has a five-star rating reflecting its very strong performance in recent years, compared to peers.

Simon Dorricott of Morningstar says: “Train's process is differentiated and has proved successful over a number of market cycles. He looks for unique and high-quality companies that offer a high and sustainable return on equity and low capital intensity and are cash-generative.

“The result is a concentrated portfolio with clear biases relative to peers and the FTSE All-Share Index. Turnover is low, reflecting Train's long-term approach and his buy-and-hold style. He only sells out if he no longer considers a company to be of sufficient quality.

“This process has led to strong absolute returns and, given the strategy has clear biases and risks, unusually consistent relative returns over the medium to longer term.”

Private Pension Provision

Long says that for now his main income comes from his various pensions. “I’m lucky enough to have had a final salary pension from the days when I worked for an insurance company. This is supplemented with some private pensions and other smaller company pensions.”

“To date I haven’t started taking any income from my investment portfolio, though I have cashed in small amount of capital as and when we need the money. I think this is often more tax efficient.” His holdings are split between SIPPs and ISAs as well as a separate investment account.



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
Bankers Ord797.00 GBX-0.62
BT Group PLC244.00 GBX-2.42
Centrica PLC133.00 GBX-1.88
City of London Ord380.00 GBX-0.91
Finsbury Growth & Income Ord753.00 GBX-0.92
Royal Dutch Shell PLC B2,281.50 GBX-2.46

About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for