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Investor Views: “I’ve Made 300% from Property Trusts”

Retired investor Philip Rawnsey has long been a fan of investment trusts – especially the recent gains he has made from REITs

Emma Simon 2 August, 2017 | 3:54PM

Philip Rawnsey was at university when he got the investing bug. While today’s students may have their finances consumed by loans and overdrafts, Rawnsey was lucky enough to receive a free higher education.

He says: “I was awarded a sponsorship at university and money was available over and above my immediate needs. So I started a 30-year with-profits endowment policy with Scottish Widows, which cost around £16 a month.”

Rawnsey says his humble background, made him determined to do well in life. He says: “I grew up in a single parent family, living in my grandmother’s house, and money was always short. I started to saving young to avoid penury in later life.”

After graduation, Rawnsey served in the Armed Forced for 16 years, then worked in the export market for the aerospace industry. Now aged 67 he describes himself as “almost fully retired”.

He has been married to a NHS practioner for over 40-years and has two sons and two young grandchildren.

Careful Saving for a Comfortable Retirement

Rawnsey and his wife have always “budgeted carefully” to be able to pay the mortgage, school fees for their sons and to enjoy a comfortable lifestyle. But by saving judiciously they have managed to do this as well as investing for their future.

Even as a student, Rawnsey was focused on the long-term – the Scottish Widows policy he picked was not due to pay out until he was in his 50s. He invested in a couple of other similar policies over the following few years, before turning his attention to shares and funds.

Rawnsey now manages the couple’s portfolio of SIPPs and ISAs. They are both in receipt of the State Pension and various company pensions from previous employments.

Within these portfolios he holds investment trusts and some direct shareholdings.

“I’ve been a big fan of investment trusts and Merchants Trust (MRCH) has been a great long term holding,” Rawnsey says. “After the first purchase I’ve added further shares at intervals and between us we have invested nearly £65,000 into this trust. On July 15th this year these shares were worth more than £112,000. More importantly the yield on the cost price is 9%, and even at today’s price it is 5.2%. We’ve been very happy with this investment.”

Bronze Rated India Trust

Another investment trust which has been a good long-term holding is JPMorgan Indian Investment Trust (JII). This trust has a Bronze Rating from Morningstar analysts, reflecting their confidence that it will continue to outperform.

Mark Laidlaw, analyst at Morningstar says: “An experienced portfolio management duo have worked together for over a decade helps to make JPMorgan India a favoured option.

Lead manager Rukhshad Shroff and comanager Rajendra Nair have worked together on the strategy since 2005, bringing a level of continuity that few can match in this space.”

Rawnsey explains why he first bought into this trust:  “I used to go to India regularly on business and felt it had good investment potential. Investment trusts seem to me to be a good way to access markets otherwise tricky for the small investor and my current holding is worth about four times its initial cost.”

After significant gains, Rawnsey has taken a more cautious approach. He says: “I have top sliced this holding to avoid too much regional exposure and I’m nervous about the current government’s treatment of international businesses, such as Vodafone (VOD).

Property Trusts Deliver Big Gains

Elsewhere, Rawnsey has exposure to the property market through a couple of Real Estate Investment Trusts, or REITs.

He says: “I’m not really a fan of direct investment in property, particularly residential buy-to-lets, for example. It’s not for me. But I’ve invested at arm’s length through a couple of REITs, which have proved to be solid investments in recent years.”

Five years ago, Rawnsey invested £10,000 in the Safestore REIT (SAFE) after a tip in Investors’ Chronicle magazine. As the name suggests, this company and its subsidiaries provide self-storage facilities to customers in the UK and also in France. It is structured as a close-end fund and is listed on the London Stock Exchange.

Rawnsey says investment has quadrupled in value in less than five years: “This investment recently peaked at over £40,000, but has backed off a bit since then. Over the last year it paid out nearly £900 in dividends, although this is now of course reflected in the share price which has rallied significantly. I wished I bought more shares before the price ramped up.”

He also has invested in the Sergo REIT (SGRO).

Rawnsey trawls the financial pages for general background on economies and markets. “I also have access to market commentary from AJ Bell, where I invest some of my holdings. I also access Morningstar data and use its stock screening tools.”

Screening to Avoid Sector Overexposure

When buying collective investments such as investment trusts, he is careful to check the holdings carefully, particularly if he already has investments in this sector. He says: “It can pay to make sure you are not buying the same assets twice, which leave you doubly at risk if the shares tank. The classic example was the zero dividend investment trust debacle, where cross holdings of shares effectively multiplied the risk.”

He does not like high charges and is suspicious of overly complex products, which he says often conceal multiple charges.

He adds: “At my age I’m a fan of investments that pay dividends or a decent income stream to supplement my pension. I think your investment strategy should be fluid in response to events.

“If I look back over 30 to 40 years so much has changed in almost every aspect of the saving environment as well as the political, social, economic and industrial arenas. Brexit is a good current example; I’d expected to take a significant hit but the structure of my portfolio resulted in a 40% boost.”

 

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
JPMorgan Indian Ord734.40 GBX-1.29
Merchants Trust Ord485.00 GBX0.39
Safestore Holdings PLC466.80 GBX-1.10-
Segro PLC560.50 GBX0.90-
Vodafone Group PLC233.00 GBX1.08
About Author Emma Simon

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