Why We Like Investment Companies

Transcription

1 Why We Like Investment Companies James Burns October 2015 For professional advisers use only

2 Contents Introduction to Investment Companies S&W Outsourcing Options Contact us 2

3 Why? Investment Management Privately-owned Limited Liability Partnership over 16 billion of assets under management* Over 170 investment managers Investment offices in London, Glasgow, Bristol, Birmingham, Dublin and Belfast Managed portfolio service capability Using a wide range of investment instruments including Investment Companies *AUM as at

4 Funds under management and advice Total Funds Under Management June % Total 15, % ( m) % Charities 1, % Corporates 1, Pension funds 1, Retail** & offshore funds 1, % 0.7% 7.6% Cash management Private clients, trusts & other* 10, Total 15, Charities Pension Funds Cash Management Corporates Retail** & Offshore Funds Private Clients, Trusts & Other* *Other includes accounts or portfolios not split out in the categories in the above table, and allows for the overlap between private clients and pooled funds. **FCA regulated/recognised. Please note there are both private client and institutional portfolios included in some of the categories in the above table. 4 Source: Investment Management (unaudited) as at

5 Long established and proven Foreign & Colonial launched Durable and adaptable A healthy and growing sector with over 400 companies listed in London 5

6 The sector Closed-ended Trade on stock exchanges Gearing Income Boards of Directors 6

7 Sector overview Market Cap 115bn, Net Assets 123bn Universe by asset class ( m market cap) 7% 6% Developed equity Asia/ Emerging Markets Sector Specialist Infrastructure Property Private Equity Hedge Funds Debt 11% 12% 40% 7% 6% 11% Source: Numis Securities Investment Companies Research, as at

8 Access to a wide range of asset classes 8

9 High profile managers Temple Bar Jupiter European Opportunities Pershing Square Holdings BlackRock World Mining Law Debenture Henderson European Focus Woodford Patient Capital Edinburgh Finsbury Growth & Income City Merchants High Yield Asian Total Return Alastair Mundy Alexander Darwall Bill Ackman Evy Hambro James Henderson John Bennett Neil Woodford Mark Barnett Nick Train Paul Causer & Paul Read Robin Parbrook 9

10 and well-known groups The above trademarks are owned by the relevant companies 10

11 The sector is growing ex AIM in millions Net inflows Total Outflows Net sector cashflows Source: JP Morgan Cazenove/Morningstar/ AIC, as at

12 Issuance in 2014 by sector Equity Alternative Source: Numis Securities Investment Companies Research, as at

13 Trade on stock exchanges Investment trusts routinely trade at discounts and premiums Opportunity to generate excess returns by exploiting discount movements Ideal scenario is to find a high quality company trading on a wide discount with catalysts for this to narrow Liquidity and volatility Discount control mechanisms 13

14 Capital returned by year since 1999 Note: excludes liquidations prior to 2013 Source: Numis Securities Investment Companies Research/ Morningstar, as at

15 Discount narrowing in practice Source: Morningstar, as at

16 Gearing double-edged sword /12/ /04/ /08/ /12/ /04/ /08/ /12/ /04/ /08/ /12/ /04/ /08/ /12/ /04/ /08/ /12/ /04/ /08/ /12/ /04/ /08/ /12/ /04/ /08/ /12/ /04/2015 Scottish Mortgage NAV MSCI World Scottish Mortgage NAV v MSCI World Source: Morningstar, as at

17 Income Ability to build revenue reserves in stronger years and use these to smooth payout levels in weaker years Investment companies are only required to distribute to 85% of their net revenues Open-ended funds are required to distribute all of their net revenues 17

18 Boards of Directors Management fees Performance fees Awarding management contracts Amending mandates and controls on management Skin in the game 18

19 The structure in action Edinburgh Investment Trust NAV Edinburgh Investment Trust Price IP Income Inc Edinburgh IT v Invesco Perpetual Income Source: Bloomberg, as at

20 ITs vs Open Ended Performance Sectors Investment Trusts 1 year 5 years 10 years OEIC/Unit trusts Investment Trusts OEIC/Unit trusts Investment Trusts OEIC/Unit trusts Global Global Equity Income UK Equity income UK All Companies North American Europe vs Europe ex UK Global Emerging Asia Pacific ex Japan Japan ITs overperforming OEICs ITs underperforming against OEICS The table s purpose is to show that, over the longer term, investment trusts have outperformed OEICs within the relevant IA sectors. This may be due to investment trusts specific characteristics and risks, as discussed elsewhere in this presentation. It is not intended to indicate that investment trusts outperform OEICs generally, because there are additional risk factors associated with investment trusts which must be considered prior to making any investment decision. Source: IA/Morningstar Direct, Canaccord as at Total return unweighted based on the IA sector and investment trust sector 20

21 Idea generation Constant monitoring of newsflow and company reporting 1-on-1 manager meetings Broker and sales output 21

22 Word of warning! Investment trust enthusiasts tend to be obsessive and fundamentally optimistic Andrew Brown, The Spectator, 22 nd February

23 Conclusion Strong performance over the long term Opportunities to generate alpha Income Encouraging governance But Some complexity Volatility Illiquidity 23

24 Challenges for you Establishment and maintenance of knowledge base Obtaining diversification Taking advantage of opportunities 24

25 Outsourcing options MultiManager Managed Portfolio Service Discretionary Fund Management Specialist Fund Management MM Endurance Balanced Fund Ascentric Verbatim Bespoke portfolios MM Cautious Growth Fund MM Global Investment Fund Novia 25

26 London investment team biographies David Amphlett-Lewis Partner t: e: David joined in 2010 as a Director from Deutsche Bank where he was an Investment Manager. David began his career with Societe Generale Investment Management in 1999 where he was involved with establishing a portfolio management service for individual and company pension schemes. A Member of the Chartered Institute for Securities & Investment, David is also a graduate of the Economics Department of Birmingham University. James Burns Partner t: e: james.burns@smith.williamson.co.uk James joined in September 1999 and started working on the investment trust desk in January James leads the Managed Portfolio Service as well as the Multi Manager team. James sits on the Asset Allocation Policy Committee and he also co-ordinates the investment trust recommended list for the Private Client department. James graduated from the University of St. Andrews in 1998 with an MA (Hons) and is a Chartered Member of the Chartered Institute for Securities & Investment. Genevra Banszky von Ambroz Associate Director t: e: genevra.banszkyvonambrozl@smith.williamson.co.uk Genevra joined the Investment Management Graduate Scheme in September 2008, and became a permanent member of the firm s Multi-Manager team in January She has been Deputy fund manager on the MM Cautious Growth Fund and MM Global Investment Fund since January 2014, and became Deputy fund manager on the MM Endurance Balanced Fund in September She is a CAIA Charter Holder. 26

27 Sales & Sales support Mickey Morrissey Partner t: e: Mickey joined in December 2012 as Head of UK IFA Sales and was appointed Head of Distribution in July He is responsible for growing intermediated sales into the DFM, Managed Portfolio Service and MultiManager business lines. Previously Mickey was Head of Distribution at Liontrust Asset Management for ten years and prior to that worked at Merrill Lynch Investment Managers for 12 years. Julian Polnik DFM Business Development t: e: Julian joined Smith and Williamson Investment Management in November 2011 as Head of Broker Desk. Julian has a BA Honours degree in Politics and Social Psychology from Loughborough University and a Diploma in Management Studies from the University of Westminster. He is a Chartered Fellow of the Chartered Institute for Securities and Investment. Lucy Mitchell Associate Director t: e: lucy.mitchell@smith.williamson.co.uk Lucy joined in April 2015 as Associate Director primarily to develop further the Managed Portfolio Service via platforms as well as the Bespoke DFM offering for the intermediary market. Lucy graduated from the University of Birmingham with a BSc in Economics and Political Science. She has also completed the IMC and Investment Advice Diploma (IAD). 27

28 Important information Risk warnings Investment does involve risk. The value of investments can go down as well as up. The investor may not receive back in total the original amount invested. Past performance is not a guide to future performance. Rates of tax are those prevailing at the time and are subject to change without notice. Clients should always seek appropriate tax advice from their financial adviser before committing funds for investment. When investments are made in overseas securities, movements in exchange rates may have an effect on the value of that investment. The effect may be favourable or unfavourable. Investing in alternative assets involves higher risks than traditional investments and may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain. Investments in emerging markets may involve a higher element of risk due to political and economic instability and underdeveloped markets and systems. Please note that bond funds may not behave like direct investments in the underlying bonds themselves. By investing in bond funds the certainty of a fixed income for a fixed period with a fixed return of capital are lost. Shares in AIM companies are likely to be high risk and volatile. Their value, and the income arising from them, may go down as well as up, and there is the possibility that investors could lose their entire investment. Shares in an AIM company may be illiquid and it may be difficult or impossible to sell them. Investors should take independent investment and taxation advice regarding AIM investments and qualifying tax relief, which can be provided by. In relation to any guided architecture investment options, Investment Management (SWIM) is unable to assess or provide advice on the suitability of any product or service for individual circumstances. No consideration has been given to the suitability of any investment or service for the particular needs of any recipient. SWIM will not be responsible to any other person for providing the protections afforded to retail investors or for advising on any investment as a result of using this service. 28

29 Disclaimer This document contains information believed to be reliable but no guarantee, warranty or representation, express or implied, is given as to their accuracy or completeness. This is neither an offer nor a solicitation to buy or sell any investment referred to in this document. Smith & Williamson Investment Management documents may contain future statements which are based on our current opinions, expectations and projections. Investment Management does not undertake any obligation to update or revise any future statements. Actual results could differ materially from those anticipated. Appropriate advice should be taken before entering into transactions. No responsibility can be accepted for any loss arising from action taken or refrained from based on this publication. The officers, directors and employees of Smith & Williamson Investment Management, and affiliated companies and/or their officers, directors and employees may own or have positions in any investment mentioned herein or any investment related thereto and may trade in any such investment. Issued by Investment Management which is a trading name of Investment Management LLP. Authorised and regulated by the Financial Conduct Authority (LLP registration number is ). Ref: 76315db 29