Investor Views: "Investment Trusts for My Pension Portfolio"

Private investor Shan Lancaster has built a retirement portfolio of direct shareholdings and investment trusts

Emma Simon 6 April, 2018 | 9:57AM

retirement pension saving SIPP investment trust

Shan Lancaster, 63, lives in Brighton and is investing for a self-funded retirement. “I’ve been a freelance writer for much of my working life so I don’t have a big corporate pension to look forward to,” she explained.

“I think of myself as semi-retired now. I paid off my mortgage seven years ago. This gives me more freedom to choose work I enjoy, rather than what pays the best, so I mainly research and write on arts related subjects these days.”

Lancaster has always been a keen investor: “I first invested £100 in British Gas shares after the Don’t Tell Sid campaign, back in 1986.

“As a result I started reading the business pages and came to the conclusions that investing via a portfolio of shares was a good way to save for my future.”

This encouraged her to invest in other direct shareholdings via a Personal Equity Plan and has since invested in SIPPs and ISAs, via AJ Bell.

She says: “I put my small company pension into my SIPP several years ago because I felt I could make it grow there, and I wouldn’t have to pay big management fees as part of the overall equation.”

DIY Retirement Investing

To date she has been happy with the decision to DIY now holds 23 funds and shares across her portfolio, with a substantial slice of these holdings in investment trusts.

These include Scottish Mortgage (SMT), Jupiter European Opportunities (JEO) and Murray International (MYI).

Lancaster says: “These trusts have been particularly good to me.”

This is perhaps not surprising; all three trusts have a coveted Gold Rating from Morningstar analysts.

Scottish Mortgage also has a five-star rating, reflecting its strong performance in recent years. It has delivered annualised returns of 23.2% over the past five years.

This trust focuses on high growth companies and tends to hold them for the long term to gain the benefit of compounded growth.

These companies will often have been new entrants or disruptors into a region or industry radically changing the landscape and challenging the business model for the traditional incumbents. This means there is a bias towards information technology, healthcare and consumer cyclical stocks.

Morningstar analyst David Holder says that as a result “this isn’t a fund for ‘widows and orphans”, meaning returns are not steady. But he adds: “This trust does have considerable merit for long term investors seeking exposure to the potential winners of tomorrow within a broadly spread portfolio.”

The fund is managed by the Long Term Global Growth team at Baillie Gifford. This is a team of nine, headed by James Anderson.

Jupiter European Opportunities is another five-star performer. As the name suggests this invests in European shares which have the potential for capital growth.

Holder says: “Alexander Darwall has managed the trust’s assets since its inception in November 2000. This is a notable achievement for the company in modern day fund management and this stability and consistency of investment approach is an undoubted contributing factor to the fund's success.”

He adds: “The fund is unconstrained to allow Darwall to find the best opportunities across Europe which in this case includes the UK.

“Darwall takes a high-conviction approach; he builds his portfolios from the bottom up, and there is a strong focus in his process on having an in-depth understanding of how a company works.”

This trust has delivered annualised returns of 12.9% over the past five years.

Murray International has a three star rating. Its performance against peers has not been as strong, mainly due to a period of poorer performance between 2013 and 2015, according Morningstar data. This was true of many Aberdeen-mandated funds, Holder says. However, performance of this global trust has since picked up.

Holder adds: “it is a reminder to investors that this fund can be volatile and go through some extended period of underperformance. We think, however, that over the longer term it is very likely investors will be rewarded for their patience.”

Investment Lessons Learned the Hard Way

Not all her holdings have been as successful. She says: “In over 30 years of investing I have learned that I should never get enthused by exciting new companies no matter how promising they look. I’ve also learned that if the price of something is soaring that’s not a great time, as a general rule, to jump aboard.”

Lancaster says she has also lost out by holding onto bank stocks for too long. She says: “I still have some very sad Royal Bank of Scotland (RBS) shares languishing in the bottom of my SIPP.”

When it comes to investment trusts Lancaster adds that she also looks at what discount or premium it is trading on, relative to its net asset value. Where possible, she says, she likes to buy at a discount.

She adds: “I am looking for both growth and income opportunities so will invest in both.” Lancaster regularly uses the fund and stock reports on Morningstar.co.uk as a means of researching potential buys for her portfolio.

She says: “I think the information is really useful for smaller investors to make quick checks.”

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
Jupiter European Opportunities Ord719.50 GBX0.21
Murray International Ord1,090.00 GBX0.55
Royal Bank of Scotland Group (The) PLC208.60 GBX2.76
Scottish Mortgage Ord496.40 GBX1.01

About Author

Emma Simon

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