'3 Investment Trusts Are Driving My Returns'

Investor Views: Private investor Alex Davis says his investment trust holdings are helping to now drive positive returns in his portfolio

Emma Simon 11 August, 2021 | 11:46AM
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Alex Davis may have recently retired, but managing his investment portfolio is now a full-time occupation.

Alex, who is 63 and worked as a manager for a large local authority, holds a diverse range of holdings. These include an Aviva pension, a Sipp with AJ Bell, a unit trust ISA with L&G and a stocks and shares Isa with Lloyds.

Alex sees these pensions and Isas as opposite sides of the investment coin, particularly when it comes to tax benefits and access. He says: “I think you really need to have both to ensure flexibility, particularly as you get older.”

Alongside these accounts, Alex gets an income from his workplace pension. He also rents out a couple of properties and has more recently invested in cryptocurrencies. He says: “I see crypto as the future despite its volatile history. I try to diversify as much as possible so I also own some Premium Bonds and invest in some overseas currencies.”

Financial Crisis

Alex started investing in the stock market after the 2007/2008 financial crash. “I realised it was a good time to do this and was really inspired by a friend who appeared to have no fear of the stock market.

“I have to say though I wasn’t very good at it initially and bought mostly crashing banks or small companies that were vulnerable.”

After this initial investment period Alex says he ended up “probably about even overall”. He decided to take more of a disciplined approach in about 2017, and expanded his portfolio to ensure he was investing in funds, investment trusts and cryptocurrencies as well as direct shareholdings. He says since then returns have been more encouraging.

When it comes to his direct shareholdings, he now mainly buys FTSE 100 stocks. "I am only interested in companies that I think I understand and seem solid to me. I think most FTSE-listed stocks are probably a bit undervalued now, after years of relatively poor sentiment following Brexit and lockdowns.”

Holdings include household names like National Grid (NG.) or Aviva (AV.).  He says good experience as a customer would encourage him to buy shares. For example he invested in AJ Bell (AJB) when it listed on the stock market and says this has been an excellent investment for him.

AJ Bell floated at the end of 2018, with an initial price of 236p per share. Prices rose steeply, to a high of 473p soon after but like many companies, it was hit by the market downfall at the outset of the Covid-19 pandemic. Its share price has since recovered and has consistently traded between 410p and 450p for the past year.

Alex has also sold shares in companies when he has had a poor experience as a customer. “I’ve done this with companies like BT and Centrica … My logic is that if they are bad to their customers they must surely be under seriously poor management. If I can’t trust them as a customer I can’t trust them as a shareholder.”

The Right Result

When it comes to buying funds or trusts, the track record of a fund manager is key. “In my life experience no matter what training or experience any professional has had there will always be those who plod through because they fall short on the spark that gives insight; and there are those who have a real instinct for smelling out the right result.

“It’s the latter I’m looking for in a fund/ trust team. And I can only gauge that through past performance.”

Alex tries to invest in a diverse range of funds looking across different sectors and regions. However he has focused on the UK, Europe and Asia Pacific regions and technology and mining sectors in particular.

He highlights three particular trusts within these sectors that have performed well for him. These include Polar Capital Investment Trust (PCT), Montanaro European (MTE) and Pacific Horizon (PHI).

All have 5-star ratings from Morningstar reflecting their strong performance relative to peers and have delivered buoyant returns over the past five years.

Polar Capital is an investment trust which seeks capital growth investing in technology companies. It is managed by veteran tech fund managers Ben Rogoff and Alastair Unwin and has delivered annualised returns of 26.52% over the past five years for investors.

Montanaro European is another 5-star performer and has a Bronze Analyst Rating from Morningstar. The fund primarily invests in smaller listed companies within continental Europe. Over the past five years it has delivered annualised returns of 28.38% for investors.

Meanwhile, Pacific Horizon has delivered even higher returns with investors seeing annualised returns of 31.65% over the past five years. This trusts invests in companies based in Asia Pacific (excluding Japan) and also in India. It is managed by Roderick Snell, who has run the trust since 2013.


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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About Author

Emma Simon

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

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