Friday, 17 February 2012

My new stockpicker - a global investment trust

So following on the debacle with GTL, I have set about looking for somebody else to do my investing for me. There was a timely article from Morningstar last week wrapping up the best Global Investment Trusts of 2011. Here's the chart:

Can't say that I know too much about any of these but the first thing that stands out is how few of them are making real gains on the money invested with them. Still anybody who ended up with positive returns in 2011 is obviously doing ok. I have been for some time toying with the idea of putting my money into just one fund and letting that appreciate instead of trying to be a stock picker, so this article came at a good time.

Clearly a fund / trust that has the name 'global' in it somewhere is going to have the best chance of finding success in the investing world. With all those companies and assets to choose from, surely a globally focussed manager is going to enjoy the freedom of investing outside the zero growth economies of the UK and Europe.

There's no way I'm going to investigate everyone on that list. So let's look at the top three. Past performance is no guide to future performance but it's as good a place as any to start.

Lindsell Train
Management Fee - 0.65% plus a long winded load of gobbledygook about performance fees and taking the dividend as fee?! I didn't understand it. The 0.65% sounds ok, the rest sounds bad. Interactive investor has the TER down as 1.10%
Investment Approach - mostly invests in itself and the funds Lindsell runs. The newsletters describe how brilliant the fund managers are at Lindsell and the trust they have in the excellent stock picks. They're keen on Nintendo. I'm not. One black mark against them. There's some gearing involved, up to 50% of NAV, sounds bad. Normally invested in 80% equities. The reports are a bit dull, loads of graphs and numbers. Trust runs at a premium.
Returns - pretty good. Since 2005, they've increased share price by 145%. Yield is a paltry 1.4%.
Website doesn't have a lot of information.

Personal Assets
Management Fee - 1.15% TER - not so good.
Investment Approach - tends to run at a premium to NAV which is a pretty good sign of investors trust in the returns. They invest in only the biggest, safest stocks in the world plus gold and cash investments. Nice safe stuff.
Returns - not too bad. Since 2005, they've increased share price by 58%. Yield is a paltry 1.6%.
Not such a fancy website, but the reports and presentations on the site are brilliant stuff. Full of good quotes, feelings about stocks and investment judgement. Well worth a read. The only real black mark against Personal Assets is that its stock trades at £350-ish. Woah. One for the wealthy amongst us.

is the new kid on the block. Terry Smith (who the fund is named after) is the boss of Tullet Prebon, the super successful brokers in the City. He knows his eggs and the fund has got off to a stellar start. Their website is by far the most open and honest thing you've ever seen in finance. Also not sure why it made the Morningstar list as it is a fund not a trust but never mind.
Management Fee - 1% - hmmm... seems quite a bit.
Investment Approach - taken straight from the website. Invests in equities on a global basis, be a long-term investor in its chosen stocks. It will not adopt short-term trading strategies. The Company has stringent investment criteria: -
high quality businesses that can sustain a high return on operating capital employed;
businesses whose advantages are difficult to replicate;
businesses which do not require significant leverage to generate returns;
businesses with a high degree of certainty of growth from reinvestment of their cash flows at high rates of return;
businesses that are resilient to change, particularly technological innovation;
businesses whose valuation is considered by the Company to be attractive.
There's a bunch of other good stuff which I like too on the front page: No performance fees, no hedging, no shorting, no leverage, no derivatives. These are all mega positive things.
Returns - Fund has only been in operation since November 2010 so not a lot of long term success to judge. It's up 20% from launch though. Yield is 2.5%.

Here's the returns for the last 12 months according to Trustnet.

The first two trusts will incur trading costs each time I put money into them on my normal trading platform. Personal Assets loses even further as I've got to find £350 just to buy one share, although they do have a savings scheme that allows you to put money in and they buy a share once you have enough funds. All can be held in ISAs. Personal Assets run their own one as do Fundsmith. The Personal Assets ISA you have to chuck in £10k all in one go. Phew. Fundsmith demand just £1000 at a time or monthly savings of £100. Nice for the personal investor. As a fund, Fundsmith has no trading fees, just the annual management fee which while high isn't that bad. 

So for me it's a no-brainer. Fundsmith clearly have the greatest potential to succeed. The fund is gaining popularity rapidly, has a genius at the helm, is starting to produce results and has the right investment attitude for long term gains and hopefully to make me wealthy. I think I'm in on this.