investment trusts incomeSlides and audio from our event last week featuring fund managers running money in every major market in the world….



This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary


Last week we were joined for our annual ISA season conference by fifteen fund managers running money in every major market on the planet, as well as a selection of specialist managers running portfolios invested across a range of highly topical themes including healthcare, financials and commodities.

While the tragedy unfolding in Ukraine was top of the agenda for many, inflation and the effects of COVID – both negative, where it still rages, and positive, where economic activity is taking off as it recedes – were among the topics which were examined in detail.


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Our first speakers – Jonathan Brown and Robin West – joined us from Invesco Perpetual UK Smaller Companies (IPU). They described the sector which remains overlooked by most investors, despite UK Smaller Companies having outperformed the FTSE All-Share over one, three and five years. Shunned in the wake of Brexit, smaller companies even more so, the UK is now in a position where investors are returning once again, with the UK forecast to be one of the fastest growing markets in the world in 2022.

“The consumer has ended up post-pandemic with strong balance sheets,” said Robin, “and UK equities are looking pretty attractively valued.”

Next, Troy Income & Growth’s Blake Hutchins told us how he and co-manager Hugo Ure run the portfolio with an active approach which is focused on delivering a conservative, sustainable income alongside long term capital growth.

Troy as a house tends to place an emphasis on capital preservation and this trust is no different making it an interesting place to look at, at a time when volatility is so high, and when the yields available in the UK market are reaching levels which are arguably difficult to sustain.

BlackRock’s Ed Kuzcma and Sam Vecht joined us next with a very optimistic presentation about BlackRock Latin American (BRLA). “The region’s balance sheets are the strongest I’ve seen them in my career” said Ed, going on to talk about the structural tailwind provided by strong commodities prices, and the breathing room which the region’s relatively high interest rates provide for its governments. Latin America, he added, has shrunk to around 7% of emerging markets’ total weight, and could see big inflows as investors seek to boost their exposure to commodities.

Our next speaker, Tom O’Hara, joined us from Henderson European Focus Trust (HEFT). HEFT has long been a stalwart of a balanced approach to European equities, with part of their investment ‘DNA’ being to avoid structural style biases and insulate their shareholders from valuation extremes, a fact which has been of particular interest given recent European markets. We were also impressed to hear more about Tom’s genuinely nuanced and considered, if not slightly unconventional, views around ESG.

Our final speakers on Tuesday joined us from BlackRock Sustainable American Income (BRSA) – formerly BlackRock North American Income Trust – which changed its mandate in July to include a clear ESG slant.

Fund manager Scott Malatesta began by describing the key things which haven’t changed; including the trust’s exposure to an investment team running more than $65bn in US equities, and the trust’s focus on delivering an attractive long term income.

The key changes he went on to describe were the shift to a multi-cap strategy, offering more meaningful exposure to mid-caps, greater concentration in the portfolio and a switch to having specific performance and sustainability objectives.

Scott was joined on the platform by co-manager Lisa Yang, who went on to describe the opportunity the managers see for the trust and for its region in the years ahead.

Our first speaker on Wednesday, Nicholas Yeo, joined us from Hong Kong. Nicholas, head of the China and Hong Kong equities team at Abrdn and manager of the abrdn China (ACIC) investment trust began his presentation with a quote from British prime minister Winston Churchill: “If you are going through hell, keep going.”

Chinese equities have had a tough ride, he acknowledged, but sitting on P/E ratios of 12x earnings, in his view they look far better value than their US counterparts, and offer healthy earnings growth with forecasts in excess of 15%.

“The sell-off we have seen recently has been sentiment driven but it’s actually left the market on even more attractive valuations; and we think investors should keep the faith in the long-term opportunity that China offers…”

Joining us from Singapore, Asia Dragon (DGN) manager Pruksa Iamthongthong who runs the Asia-Pacific ex Japan investment trust along with co-manager Adrian Lim, gave a broader outlook than her colleague in the session before, describing a scene in Asia where risk and opportunity are finely balanced.

While China’s continued use of lockdowns to control COVID continues to be a headache for investors, the apparent mildness of Omicron means a lighter touch is increasingly likely. At the same time, countries and sectors which have been hit hard by restrictions – especially those like Thailand where tourism is a crucial element of the economy – could recover strongly as borders reopen and tourism resumes.

But rising food prices could be a crucial factor in how things turn out especially in India – one of the trust’s largest exposures – where food costs form a significant part of the CPI. India has substantial self-reliance in the form of its own food production, but a good monsoon is essential, and a bad one could make this a difficult year for continental Asia’s second largest economy. All eyes on the skies!

From Mumbai, Prashant Khemka, founder and CIO of White Oak Capital – the team behind Ashoka India Equity (AIE) – the top performing India-focused trust since its inception. Indian equities had a strong run in 2021 and, while markets have been down in 2022 the region has outperformed its emerging markets peers. Prashant puts the success of the trust down to the alpha it has generated and, indeed, it is alpha that he thinks defines success in India. Macro, he said, is largely irrelevant except as a source of risk. “India, in my view, is the most compelling market for alpha seekers and that opportunity to generate alpha is what matters most for investors in India, regardless of the macro opportunity…”

Our next speaker joined us from Ballie Gifford in Edinburgh. Thomas Patchett, part of the team behind Baillie Gifford Japan (BGFD), said that inflation could be good for many companies in Japan as it may boost consumption. The trust has had a wild ride, of late, however, after what Thomas described as the most extreme rotation in three decades as internet businesses rolled over in 2021 after a stellar performance in 2020. The trust’s exposure to internet and gaming companies put a dent in performance, but its broadly diversified portfolio – with exposure to energy, resources, auto-companies and financials – came to the rescue.

“Because we are agnostic about where we find growth, we naturally end up with a diverse portfolio which should benefit in multiple environments.”

Looking ahead, Thomas said the team was benign about recent market weakness because of the strong operational performance of the underlying companies in the portfolio; after a very strong earnings season.

Our final presentation on Wednesday came from Matthias Siller, manager of the Barings Emerging EMEA Opportunities (BEMO). This trust invests across Emerging Europe – including Russia; exposure to which the board wrote down to zero at the start of March.

This shock to the portfolio came after a period of strong performance for the trust, which broadened its mandate in 2020 to include the Middle East and frontier markets in Africa back in 2020. Matthias described the benefits this broader mandate has created for the trust, which has significant exposure to Saudi Arabia – a beneficiary of Russia’s woes, as an alternative source of oil – and the challenges of investing there from an ESG perspective.

The huge potential for better communications infrastructure in Africa is another area of optimism for the trust, which has a large holding in one of Africa’s biggest telecoms companies, and Matthias struck an upbeat tone on the opportunities which remain for Eastern Europe, despite the current calamity in Ukraine.

Poland, in particular is in a very attractive position in terms of margins and valuations, and the trust has exposure there via consumer stocks, financials and infrastructure.

Day three began with Evy Hambro, manager of the BlackRock World Mining (BRWM) which put in a barnstorming performance in 2021 and has continued to deliver strong returns so far in 2022. Evy described an outlook which he believes represents the start of a decades long ‘super-cycle’, supported by the strong structural tailwind of a world still finding its feet after the depredations of COVID-19, with huge pent-up demand for commodities. The trust offers a combination of capital growth and income, and last year was a new record for income generated by BRWM. Evy explained how this was achieved, and the strategy the team uses to ensure that income is delivered smoothly over the years, even during leaner years for underlying dividends.

Next up, BB Healthcare’s Paul Major joined us to discuss the outlook for healthcare around the world. Paul is unremittingly optimistic about the prospects for the sector, which has had a tough time in the last eighteen months despite the fact that healthcare was literally all anybody talked about between March 2020 and March 2022.

Paul thinks global demographics – ageing populations in richer countries and richer populations in poorer countries – mean there will be inexorable demand for the goods and services generated by healthcare companies. Valuations in the sector, he says, have been affected by sentiment driven by fears of inflation and more recently, war, neither of which have any impact on the long-term demand for healthcare or on the ability of companies to develop innovative solutions to healthcare problems.

ICG Enterprise fund manager Colm Walsh joined us next to describe the trust’s approach to investing in private markets. The trust invests in liquid private equity, using a more focused strategy than most of its peers, aiming to optimise risk-adjusted returns by investing exclusively in buy-outs, typically in cash-generative, mature companies.

Colm was keen to highlight the difference between this approach and that of venture capital or growth equities which, while they can offer strong returns, tend to be far more volatile. Colm described a portfolio which is currently angled toward companies which are ‘mission critical’ and have considerable pricing power, making them well-placed in an environment where inflation is likely to be a factor.

Sticking with the inflation theme, veteran fund manager Nick Brind joined us from Polar Capital Global Financials (PCFT) to discuss the outlook for the portfolio, which he runs alongside John Yakas and George Barrow.

Nick described a sector which is, in his words, ‘extremely cheap’ but well positioned to benefit from the re-opening trade as COVID recedes. Banks, particularly, are in a strong position as restrictions which were placed upon them during the pandemic are lifted, resulting in an acceleration of capital returns via buybacks and dividends.

Looking ahead, he sees inflation as the key driver of performance, but also structural drivers of returns in emerging markets among mid-cap banks and fintech.

Our final speaker, Allianz Technology Trust’s Mike Seidenberg, joined us from San Francisco to describe an outlook in which he sees various multi-year opportunities among which the migration of business software onto the cloud continues to be a long-term play. The team think this is a golden age for technology, with electric vehicles, climate change, labour shortages and growing wealth across the developing world all providing opportunities for technology companies in the long term. The recent rollover of growth versus value has, which has seen ATT move from close to par to a discount of around 7%, could make this an interesting point for investors looking to build exposure to the sector.


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