Investment Trusts in the News Again

Dear Friend

Included in this edition of our e-newsletter …





Well, shall we, shan’t we have a deal?  He said he would do things that others denied he could do; it seems the right thing and all eyes are on Parliament tomorrow.  Sterling has rallied and the UK-centric stocks we have been saying were far too undervalued regardless of the outcome have had a wonderful few days – including the banking sector which far too many momentum players didn’t and don’t hold.  We’ve had a very good few weeks and some of that has been long overdue.  Of course, it is easy seeing a ‘share’ for example at £5 and believing its value is fine now and realising it was £2.50 six months ago but that you didn’t buy any because the sentiment was so negative.  Just have a look at some like Capita and Serco which were black-balled by everyone and some of the quoted property companies we were flagging as real bargains.  Did you nibble-away at some?  Did we buy enough – probably not, sadly but is that simply being too greedy?


A survey has just concluded that 94% of assets on platforms are not Investment Trusts.  Instead, they are what are called open-ended funds.  So why do we generally tend to prefer closed-ended funds like Investment Trusts (though I must state that being staunchly independent it makes no difference to us in that we buy whatever we believe will do the best job for that small part of our clients’ portfolios).  I should add too that can include other funds of comparable assets and also Exchange Traded Funds, currencies and commodities – and it does, from wheat to gold and copper for example.

If you are not with us, have you ever asked the question of your adviser why they don’t use Investment trusts?  Do they not understand them? Do the platforms they use not facilitate the use of these excellent vehicles?  Indeed, apparently less than one-fifth of platforms allow a universal range of investments so are you using one which won’t even allow you to have all of the options including the cheapest and often best opportunity ones out there?  Yes, with ours, we can have anything we want.

Now, if by our understanding of Investment Trusts and recognising the better potential benefits (and actual benefits in most respects!) of these over their typically more expensive and more remunerative (to the managers and agents) brethren promoted by most other advisers, that we can pass-on even a smidgen of better results as a consequence, even a marginal 0.5% or perhaps 1% or even more every year because of how they operate, where does that feature in the comparison of costs between one advisory offering and another?

As an interesting analogy (whilst price in itself does not always work like this), at our badminton club we are trialling some more robust feather shuttles.  They are quite significantly more expensive but on my first night, all I can say is that they seemed to last much longer and fly more consistently.  Now that is not a scientific experiment but, in that regard, I think the Club is onto something.  Remember too, the adage of a fool, price and value being an expensive reminder often of receiving what you deserve, for what you pay.  All I think I should say is that investors of all ilks need to stack the deck as much as they can in their favour, whether that is opportunity seeking, diversity or risk mitigation but that also follows down to the underlying product type you or your adviser selects to achieve that part of the pot for you.  It might sound ruthless saying it but if your adviser isn’t doing that… and is still charging you an annual review fee for just sending on your investment valuation….  And encouraging a few changes for which they then take a transaction fee for the bother… Are you receiving the sort of service that you deserve?  We don’t think probably you are!


I have stated previously that we had no exposure to the suspended Unit Trust funds (open-ended funds – see above).  We never supported the launch and neither the flotation of what at the time was the biggest Investment Trust either – now why is that you might wonder?  I have stated too that whilst it appears not everything had been as it should have been and hence the reason for the suspension, compounding the problems by raining money to meet redemptions by selling lines of less liquid holdings to a vulture market which knows you are there is not the best nor right thing to do.

Now the custodians have announced they have sacked the management company and are going to liquidate the fund starting with dispersals in January.  That is yet another grave mistake after the earlier mistakes demanded of Mr Woodford and also undertaken by St James’s Place and OpenWork which both had funds managed by Woodford Investment Management and which appointed new managers who took a new broom to the portfolio.  Frankly, it is a very stupid thing to do.  By all means a new manager could have been appointed to continue the funds (or even give Mr Woodford the chance to prove he still has his previous magic and be more vigilant on what is put in the fund) and then long-suffering holders could have decided whether to liquidate or await a recovery (and especially as a post-Brexit review could indeed repair some of those gaping holes).  Instead, extra costs will be suffered by investors in the selling process and not forgetting when you sell stock, you receive a lower price than what you paid for it and many of those stocks will be things Mr Woodford had only recently bought to reposition the Fund too – paying the buying price, brokerage and Stamp Duty to acquire them.  It is suspected too that the funds will be holding growing amounts of uninvested cash and just imagine that salt being added to the wound if the market jumps 15% on a Brexit deal in the meantime.

We have been buying the quoted Investment Trust – Patient Capital – from which the Group has also been sacked as manager. These shares are now ridiculously cheap and it is trusted that a strategy of selling those £300million of assets into an illiquid market-place will not happen and indeed that a new manager of such things is appointed instead.  Remember, innocent or naïve investors and institutions paid £1 to buy there (the biggest ever Investment Trust flotation at the time at £800million) and now just north of 32p is the price despite the latest published underlying asset value of over 60p.  We never supported it at launch and for many negative reasons but are still buying carefully now though we started that process too soon (if with the benefit of hindsight, you view a cheaper price now as a ‘mistake’ earlier). Of course, one of the suspended unitised fund’s holdings is £30million of Woodford Patient Capital Trust so guess why the share price has been marked-down so savagely and guess who loses from that.  Indeed, on the announcement day ‘Link’, the new ‘manager’ announced its stake had dropped from 9% to under 5% and it may now have sold the lot at a stupidly low price.   Really, you couldn’t write the first part of the book and then I am struggling to write the second part of the novel for which Mr Woodford is not responsible.  I fear the mishandling after the ‘revelations’ have been more costly to investors than the first issues to be honest – and that is a very sorry indictment. At the quoted funds’ peak, there was £10.5billion there and at suspension that had fallen to £3.5billion.  Investor losses could be as much as 30% or more and of course the lack of return they could have earned elsewhere.

Some are suggesting there should be ‘compensation’ but from whom and for what?  Negligent initial advice?  Negligent management or monitoring of what was held?  From whom did you receive advice or ongoing counselling?  A ‘best buy’ list is not advice after all and you weren’t paying for any advice either.  However, we are happy to try to guide if you want independent thought.

There is an interesting aside here too.  It has been easy for investors to ‘save money’ by simply relying upon sound-bites and ‘best buy’ lists to acquire funds and not to take advice (well, that might cost something too!).  Sure enough, lots of financial advisers sold the Woodford range but I bet they also diversified and didn’t have the sort of exposures which too many private, direct investors had (if yours didn’t then maybe you do have a right to complain!).  On one chat-group, one chap had invested his whole £23000 nest egg and said it is now worth only £8000.  We assume that must have been somewhere regarding the Woodford Patient Capital Trust after the launch but did these investors know what they were buying in the first place?  Most of them had no idea.  Now, not to rub salt into any wounds but how valuable was it to have an adviser and a discretionary investment manager who assessed the opportunity at the respective times and decided not to pursue them for his clients – primarily because there were better options out there anyway.  It is then realised that not only have the losses been missed but the other holdings acquired instead have risen too – in percentage terms, what value is that?  Of course, this is never a perfect science and it is very uncomfortable buying the unloved and selling the over-loved but what is likely to be the best thing to do?  And of course, we do all we do within a vast and widely diversified strategy where no single investment across all our client funds exceeds 2.5% of our totals at the present time.  It’s not because we don’t have any confidence – it’s because there is such a wealth of choice and opportunity out there and yip – when something goes wrong, as it can, our exposure is limited too.

If you feel it’s time to stop being an amateur sleuth seeking out the clues to investment, you can transfer across to our unrivalled systems covering all investment types (ISAs, Pensions, Portfolios, etc) without any subscription fees whatever and start to benefit from our economies of scale and skills and sophisticated dealing systems – and if you want advice on your personal circumstances and suitability, gladly we shall give that but for a fee you’d know in advance.


The largest investment manager in the world now looks-after $7trillion and enjoyed a mere $84billion of net flows in the third quarter when you thought investors were becoming timid.  Yes, people have been pulling-out of UK equities in the last few years but that stampede will turn-around at some point as the large cash reserves which have been accumulated by institutions and individuals alike start to look for homes in the ‘new’ known economic environment ‘post the Brexit uncertainty’.  Half of Blackrock’s new funds went towards ‘passives’ with $5.3billion into active equity funds.  When you are that size, it is hard to sustain the momentum and retain your position…  curiously, the break-up of the Woodford issue, rather than signal a cataclysmic shift towards indexation, is likely to herald the nadir for active investment in equities in the UK market – the cheapest possible time for contrarians to be able to pick and anyway, it is time that ‘momentum growth’ comes to a juddering halt.  With our strategies, we are already in front of the field ready for that and no, we have no axe to grind – we can buy ‘anything’ for our clients, whose best interests are our own.


Stock market investments can offer income through the payment of dividends and interest and good opportunities for capital appreciation over the longer term. By this, generally we mean periods in excess of five years, preferably much longer. However, we can never promise you particular returns, especially in the short-term. At any point in time but especially in the short term, your capital could be worth less than the original amount invested as some of the selected holdings may fall in value, regardless of expectations at the time of acquisition. We may also invest in funds that hold overseas securities. The value of these investments may increase or decrease as a result of changes in currency exchange rates. Returns achieved in the past cannot be relied upon to be repeated.

To remind you, why do I send out occasional emails? Because everyone can save money. We have no connection with any companies mentioned and you have to make your own contacts and satisfy your own enquiries. What is in it for us? If we can prove that we are knowledgeable and that our service and advice have good value, then you might contact us for professional financial planning and investment help. You don’t have to do that though and there’s no charge for emails. If simply they save you money, then accept them with our compliments! However, you’ll know where we are!

If you have any queries of any form or indeed any subjects you think I could include, please contact me. I also refer you to our website We celebrated our thirtieth anniversary in 2015 and have been publishing a well-respected independent column in the local Paper for most of that time and free client newsletters as well.

Do not forget however the usual caveats – this is not ‘advice’ and you are encouraged to seek that before embarking upon any financial route involving investments, etc.

My best wishes

Philip J Milton DipFS CFPCM Chartered MCSI FPFS FCIB

Chartered Wealth Manager

Fellow Of The Personal Finance Society, Fellow Of The Chartered Institute Of Bankers