5 Minutes With: Scottish Investment Trust’s Alasdair McKinnon

This week we talk with Alasdair Mckinnon about being a contrarian investor, the trouble with traffic in London, and his family's "Christmas fairy" tradition

Annalisa Esposito 13 December, 2019 | 12:24PM

Alasdair McKinnon has run the three-star rated Scottish Investment Trust (SCIN) since 2014, having originally joined the company back in 2003. The trust is up 8.5% over five years and 4.1% over the past 12 months.  Top holdings include clothing retailer Gap (GPS) and oil and gas giant Shell (RDSB).

What does the fund do?

It looks for unloved opportunities – it’s a contrarian fund. When an investment is out of favour and people’s expectations are low, then the odds are in your favour. Things in life are pretty cyclical: things that have not done well often recover, while things that have done well come off the boil.

What are the biggest challenges?

Going against the crowd, it’s not easy in any sphere of life. In the investment market you get feedback every single moment on what the crowd is thinking – the hardest bit is to remember that when things are good nobody tells you about the downsides, and likewise when things are bad no one tells you about the opportunities. 

What’s your worst investment?

Domestic UK stocks have done pretty badly this year – and are still out of favour, with international investors being very reluctant to back them. Royal Bank of Scotland (RBS) is just one example. But when uncertainty over Brexit clears up, there will be potential for them to recover.

And your best investment?

An Australian wine maker, Treasury Wine Estate (TWE). We bought it in 2015, when it was extremely out of favour and everyone thought it would never recover. But it moved from what we call an “ugly duckling” as a new management team came in and sold wine in a better way, especially in China. We sold the stock in 2018, after making lots of money.

What is a stock in the portfolio you’re excited about?

British grocery chain Tesco (TSCO). The grocery market is very competitive and Tesco got too big and diversified, forgetting that it gets most of its revenues in the UK. But it got back to its core, if you’ve been in a Tesco recently, you’ll see they are they are back on track. They also received a bid for one of their last major oversea stores and might possibly give shareholders a good extra dividend.

If you weren’t covering this asset class...

I like hard assets so possibly property – it has exposure to what the economy is doing, there is a degree of inflation protection in the long run (property prices tend to reflect what happens to inflation) and you can also get an income stream from them.

What would you change about the asset management industry?

It might sound boring and predictable but I would like investors to think more long-term. People should avoid fiddling and stick to their knitting.

What was the last “mistake” you’ve made in your job and what did you learn from it?

I organised a day full of meetings in London – I am based in Edinburgh – and what I didn’t appreciate, but I should have, is how long it can take to reach different parts of London. I had half an hour between meetings and it wasn’t enough. The lesson I learned is to plan even more time between meetings and leave some gaps in the schedule.

If you weren’t a fund manager…

I would like to be a teacher, maybe covering history. But I know it can be a hard job as my wife is one.

What do you do in your spare time?

I spend time with my four children, it’s great fun.

Do you have a particular Christmas tradition?

The night before Christmas the kids are very excited, so we invented "the tradition of the Christmas Fairy”, who leaves a little present in the tree. It's a bit like my investment approach: I try to keep the expectations managed, and the kids from getting too excited so my wife and I can go to bed.

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About Author

Annalisa Esposito  is a data journalist for Morningstar.co.uk

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