Jason Locke has become a more serious investor since retiring eight years ago.
This does not necessarily mean he is a more active trader, as there is a cost to buying and selling shares. “You have to have a firm conviction that this is the right thing to do to justify the cost. At times I have probably been a bit hesitant when it comes to adjusting my portfolio.
“However, since retiring I have taken a much more active interest in how these investments are performing and have been less tolerant of sub-par results.”
Over this period he has focused on investment trusts, but more recently has diversified into ETFs.
Locke, who lives in West London, says: “Initially investment trusts seemed a very cost-effective way to diversify my holdings, and get access to overseas markets. But more recently ETFs seem a good way to complement this strategy. They are low cost and offer a further means of diversification.”
At the same time that he has started to invest more in ETFs he has grown “a little bit disillusioned” with the returns from many of the large global investment trusts that had been core holdings in his portfolio for many years.
He says this particularly applies to Alliance Trust (ATST), which he describes as a “drip feed of poor performance over many years”.
Locke is often reluctant to sell holdings, even if they are underperforming the market: “There is always the hope that things will pick up again.”
This hesitancy to sell was compounded by the fact that he also used their Alliance Trust Savings platform as his main investment platform.
Locke has since switched to run his share portfolio through Hargreaves Lansdown, and as a result has also realigned some of his shareholdings, including his stake in Alliance Trust.
Alliance Trust Shake-up
Alliance Trust’s problems have been well documented in recent years. The trust faced action from US-based activist investors Elliott Advisers in 2016 – and this led to a series of changes in a bid to drive up shareholder returns.
These changes saw it lose its chief executive at the time Katherine Garrett-Cox, as well as other senior board members. As part of this reorganisation the trust sold its fund business, Alliance Trust Investments (ATI), to Liontrust.
At the start of 2017 after a comprehensive strategic review, the board of Alliance Trust tasked Willis Towers Watson (WTW) to manage the Trust’s assets. They are adopting an innovative multi-manager approach, which effectively gives retail investors access to managers who typically run institutional money.
WTW has a 120 strong global manager research team which seeks to identify the most talented fund managers who are strong stock pickers. It then stipulates that these managers cherry pick from their strategies their highest conviction 10-20 stocks. These “best ideas” are then blended into a portfolio by WTW managers.
According to Morningstar analyst David Holder says: “We believe that the appointment of WTW to manage the trust’s assets brings much promise for long suffering investors here.
“We have seen sufficient evidence of the WTW approach to believe that this is a far improved proposition for investors combining as it does highly active management and low fees.”
As a result of these changes Holder says Alliance Trust has been upgraded to a Morningstar Analyst Rating of Bronze, having previously been Neutral-rated.
But Locke considers such changes too little, too late. Boardroom battles, strategic reviews and a long-term plan did little to address his immediate concerns about underperformance.
He says: “For many years it appears I was paying higher fees for a trust that seemed to effectively track the index.” He says as a result he decided to switch.
Also Worried About Witan Pacific
He is also concerned about the performance of investment trust Witan Pacific (WPC), which is another Bronze-rated trust.
He thinks their multi-manager approach has led to over-diversification, making it harder for the trust managers to outperform over the longer term, particularly given that this means additional fees.
However, Holder says this trust is a useful starting point for those looking to invest in the region; “Witan Pacific Investment Trust provides a solid choice for a one-stop shop Asia Pacific investment.
“[The trust] aims to generate capital and income growth and outperform the MSCI All Countries Asia Pacific Free Index.”
Holder adds: “Although this is a multi-manager set up, we think there is merit in a vehicle providing a one-stop shop for an investor keen to invest through the region and subcontract stock picking across the region to regional experts.”
He points out that the board blends together strategies from four investment management companies that have a strong track record in the region and can take a different approach. This includes portfolios managed by Aberdeen, Matthews Asia, Dalton and Robeco.
As a result of these concerns Locke says he is looking for trusts with a more focused or concentrated portfolio, so there is a clearer potential to outperform.
He also invests in a number of ETFs to track the index without paying over the odds.
For example he has more recently invested in iShares MSCI AC Far East (ex-Japan) ETF (IFFF).
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