Investor Views: "My Biotech Funds are Up 400%"

Retired investor Ian Dunsire is prepared to take risks within his diversified SIPP portfolio - and they have paid off

Emma Simon 25 July, 2018 | 7:50AM

Private investor Ian Dunshire has an element of risk in his retirement portfolioIan Dunsire retired 14 years ago at the age of 55 and is using his SIPP to supplement his final salary pension.

He says: “My investment objective is to continue to grow the value of my SIPP through income and capital appreciation, whilst drawing down a monthly payment. I have been taking a monthly payment of around £2,500 a month for the past nine years. So far the fund has continued to grow so hopefully this will continue.”

Dunsire now lives on a smallholding in North West Wales with his wife Barbara, and various labradors, cats and chickens.

He says: “I am retired now but most of my career was spent in the financial services and IT sectors. I have always worked around financial services, and although by no means an expert this helped me understand the jargon and find my way through the investment maze.”

Dunsire invests in a range of different assets dependent on how well he understands a market;

“I invest in individual shares where I feel that I understand the company and its positioning in the marketplace. I use investment trusts for markets I don’t fully understand. I also hold ETFs for cheap passive market or theme tracking.”

He adds: “My personal belief is that diversity is key. I currently have around 55 holdings in my SIPP and a further 30 in my investment ISA.” He manages both of these through AJ Bell.

A Diverse Portfolio Protects Against Losses

Dunsire says that his main priority has been to invest in stocks or funds with potential to deliver capital growth. “Fortunately, at least 75% of the investments I’ve made over the years have turned out to be successful, and I have consistently managed to outperform the market – though possibly this has been more by luck than judgement.”

Dunsire says one of his best performing investment trusts has been the Biotech Growth Trust (BIOG). He says since investing in this trust he has seen as return of more than 400%.

This trust has a four-star performance rating as well as a coveted Silver Analyst Rating.

Morningstar analyst David Holder says: “The strength of this proposition comes from the in-depth knowledge that the investment team bring to this face paced and specialist market.”

Holder says the manager Richard Klemm brings industry and investment experience, having completed extensive studies in molecular and cell biology, and economics.

He points out that the team of around 100 is dominated by industry experience that brings “unparalleled insights to bear for investors”. The trust invests in both private and public equity and debt within the biotech and healthcare sectors.

Bolstered by Global Gains

Dunsire says other strong performing funds in his SIPP include the investment trusts Baillie Gifford Shin Nippon (BGS) and Scottish Mortgage (SMT).

Baillie Gifford Shin Nippon invests in medium and small-cap companies in the Japanese market. According to Morningstar data this trust has delivered annualised returns of 43.72% over the past year and 34.79% over the past three years.

Scottish Mortgage has the highest possible ratings from Morningstar, with five stars and a Gold Analyst Rating. This is a global trust, investing in larger companies.

This trust is also run Baillie Gifford, managed by its Long Term Global Growth team, headed by James Anderson and Tom Slater.

Holder says: “The investment approach followed her focuses on identifying high growth companies and holding them for the very 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 traditional incumbents.”  

Although this is a large cap fund, there is a bias towards sectors like information technology, healthcare and consumer cyclicals. As a result, Holder says: “This isn’t a fund for widows and orphans but it does have considerable merit for long-term investors seeking exposure to the potential winners of tomorrow within a broadly spread portfolio.”

Retaining an Element of Risk

Dunsire says that while these three investment trusts might appear higher risk for a retired investor, he says they meet his investment goal of delivering capital growth. He says he believes this is the best way to ensure that his SIPP will continue to be able to deliver a decent monthly income.

He adds: “I haven’t changed my investment strategy as I have got older, which I guess, for my age is quite contrarian. Everyone seemed to be telling me to get out of equities and go ‘safe’ with cash and gilts. If I had followed such advice I would literally be several hundred thousands pounds worse off.

“I watch markets carefully and do not react to the short-term panics that seem to be occurring more and more in this Twitter-led unstable age.”

He points out that he has stuck to his buy-and-hold approach. “Rarely do I ever do more than two transactions per month, and many months see no buy or sell activity at all.

He adds: “Two days after Brexit my SIPP and ISA were down over £40,000 and it would be easy for panic to have set in. Two weeks later both had recovered and added a further £80,000 so my main policy is usually just to sit tight.

“I realise having a final salary pension safety net perhaps allows me to take these risks, but somehow I feel that my strategy would have been the same regardless.”

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
Baillie Gifford Shin Nippon Ord186.00 GBX-0.43
Biotech Growth Ord708.00 GBX-1.12
Scottish Mortgage Ord488.35 GBX-0.39

About Author

Emma Simon

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