3 Investment Trust Picks

VIDEO: Capital Gearing's Peter Spiller looks at three investment trusts he is backing for the long-term

Holly Black 2 September, 2020 | 11:08AM
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Holly Black: Welcome to Morningstar. I'm Holly Black. With me is Peter Spiller. He is Manager of the Capital Gearing Trust. Hello.

Peter Spiller: Hello, Holly.

Black: So, you've got three stock picks for us today. They're not really stock picks because you invest in other funds and investment trusts, but where would you like to start?

Spiller: Right. But still I'd start with an investment trust which we have owned for a very long time. It's called North Atlantic Securities. North Atlantic is run by a man called Chris Mills and it is probably the most activist of any investment trusts. So, he takes substantial stakes in the underlying investments and works very hard to improve them, often changing the management, sometimes buying the whole company and taking it private and then reissuing it. And his record has been very powerful over the last 25 years. It's a great way for investors to get exposure to private equity kind of investments without paying huge fees.

Black: So, how does a trust like that fit in with your capital preservation mandate?

Spiller: Well, the mandate is to grow capital over time. So, you have to have some assets, the risk assets. You can't just have treasury bills. So, we have an allocation, which is currently about 40%, towards risk assets and that will be a good example of it.

Black: Okay. And let's move on stock number two then.

Spiller: So, Tritax Big Box has big warehouses, big sheds. And because the cost of the warehouse is relatively low, but the cost of the equipment that their tenants put inside it is very high, therefore, the tenants want to make sure they're going to have that warehouse for a long time. So, they are willing to sign up to very long-term leases. And that's terrific. They are inflation-adjusted. And so, the average lease is over 14 years. So, this looks awfully like a credit portfolio as well as property portfolio.

Black: And presumably, online shopping is driving that trend towards needing these big warehouses anyway and that has only been exacerbated by the current situation.

Spiller: Indeed. So, the warehouses are one of the key parts of the property world where the share prices tend to go to premium (indiscernible) investor, bigger investor trading at large premium.

Black: Okay. Let's go on to stock number three.

Spiller: So, the third one is slightly riskier. It's called Secure Income. So, this is a property company run by Nick Leslau who has a fantastic record. It does hospitals which unsurprisingly are doing very well, look very sound at the moment. It has leisure assets which would include things like Legoland and Warwick Castle and (indiscernible). And obviously, they have been closed down for the period – reopening now. But we think the company is strong enough to get through that operates them. It's backed by the Lego family and by Blackstone. These are people with deep pockets, and they are in for the long haul. And we've got every confidence that when Covid is gone away, you can tell me how real that is. But when it's gone away, these will be very highly rated assets. They are the crown jewels of that company.

Black: Peter, thank you so much for your time. For Morningstar, I'm Holly Black.

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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Holly Black  is Senior Editor, Morningstar.co.uk