Investor Views: "I Want a Fund Which Preserves Capital"

Private investor Glenn Sweeney says capital protection is as important as stellar returns when you reach retirement

Emma Simon 13 July, 2018 | 9:07AM
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Private investor Glenn Sweeny is retired and investing for incomeGlenn Sweeney started to take a more active interest in his investments when he retired from his role as an IT support manager seven years ago.

He says: “I was forced into managing my own investments when I realised that the insurer that ran my pension plan offered a very poor choice of funds.”

Sweeney says at that point he transferred all of his private pension into one SIPP and one stocks and shares ISA, and has managed both himself since. 

As he is retired his focus is income-generating investments and capital protection.

Sweeney says: “I want to try to preserve my wealth and to make sure that the taxman doesn’t take more than his fair share.” 

He aims to diversify where possible, and holds a mixture of shares and funds within his SIPP and ISA.

He says: “When it comes to selecting individual shares I look at dividend cover, as income is my main priority. For funds, I’m looking for managers who are cautious, and will cherish my money as if it were their own. 

“I am not keen on high fees or performance fees. In fact, I am not interested in raging returns on my money. I just want security and steady growth.” 

Top Fund Picks for Security

To this end, Sweeney says two of his best fund holdings have been the Troy Trojan fund and RIT Capital Partners investment trust (RCP). The Troy Trojan Fund is managed by Sebastian Lyon, who has run the fund since 2001.

The fund has produced annualised returns of 6.34% over the past 10 years, according to Morningstar data. This equity income fund has substantial holdings in the UK, but also invests in overseas equities and fixed-interest investments. It aims to achieve capital and income growth over the longer term. 

The RIT Capital trust has a four-star performance rating from Morningstar, reflecting strong recent performance against peers and its benchmark. This is a global trust. Sweeney says he chose this trust as he feels it is “conservatively managed” with a good long-term track record of capital preservation.

Returns have certainly been buoyant in recent years, with annualised returns of 12.61% over the past five years, and 7.97% over the past decade.

Stock Picks for Income and Growth

When it comes to individual shareholdings, Sweeney says that both Diageo (DGE) and Smart Metering Systems (SMS) have both provided a decent income stream, alongside strong share price growth.

Premium drinks manufacturer Diageo has a three-star fair value rating from Morningstar equity analysts, meaning they consider it to be trading at the right price. Its share price has comfortable outperformed returns from the FTSE 100 over three, five and 10 years.

Morningstar analysts point out that it has a wide economic moat for many of its drinks brands, which include Johnnie Walker whiskey, Smirnoff Vodka, Baileys and Gordon’s gin. This means analysts reckon that brand loyalty means its markets are well protected from competitors.

As the name suggests SMS is involved in providing and installing smart gas and electricity meters, both for domestic and corporate clients. 

This has been a boom area in recent years, which is reflected in the returns seen by shareholders. 

According to Morningstar data, investors has seen total annualised returns of 30% over the past three years. This compares to total annualised returns of 9.6% from the FTSE 100.

Investments That Haven’t Fared So Well

But not all of Sweeney’s investments have proved to be so lucrative. He says he has not seen a decent return after buying into both Tesco (TSCO) and Standard Chartered (STAN) after their share price faltered. He says: “Five years ago these looked like solid dependable companies, and it seemed like a good opportunity to buy when their share price dipped.”

However, both have been beset by problems, including an accounting scandal at Tesco, which has affected dividends as well as the share price. 

Over the past five years, for example shareholders in Standard Chartered have seen total annualised returns of minus 10.7%.

Tesco has delivered a negative return of 4.1% over the same period.

Sweeney says that in both cases prices remain below the price at which he bought. Both are considered fairly priced by Morningstar equity analysts.

Sweeney says that his general investment philosophy is to buy and hold. He says: “I’m always very value-centric. It’s easier to be distracted by the rolling news cycle, but I try to buy and hold.

“I try to look for wider themes which might offer investment potential, such as the ageing population.”

But as he points out this is no guarantee of decent returns. “If I’d invested in care homes I might have come a cropper as they have performed very badly.”

Sweeney says that when he retired he took the tax-free lump sum from his pension and used that to invest for him and his wife. He says: “As well as these investment, we also bought a plot of building land overseas, some Premium Bonds and coloured diamonds.”

He says he hopes this diverse mix of assets will help see them through their retirement. He adds: “We don’t have any children, so we are spending our own inheritance – SOING – rather than spending the kids’ inheritance – SKIING.”

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.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Diageo PLC3,717.50 GBP0.00Rating
RIT Capital Partners Ord2,630.00 GBP0.00Rating
Smart Metering Systems PLC797.00 GBP0.00
Standard Chartered PLC523.20 GBP0.00Rating
Tesco PLC285.00 GBP0.00Rating
Trojan I Acc356.60 GBP-0.58Rating

About Author

Emma Simon

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