The old proverbial saying ‘shirtsleeves to shirtsleeves’ cautions the wealth gained by one generation will be lost by the third. But when a family has managed to preserve significant wealth over multiple generations, it is worth looking at how they do it. This is the case with two of the oldest and grandest investment trusts – RIT Capital Partners (RCP) and Caledonia (CLDN).
Those who invest in stockmarkets are well-versed in the highs and lows they entail. However, there is always a dilemma over how long to wait for an apparently weak fund manager to come good. Have they lost their edge permanently? Or are they simply going through a bad patch? The travails of a certain high-profile fund manager in recent months illustrate the quandary for investors.
The Aberdeen Standard Asia Focus (AAS) trust has had a facelift in recent months. Previously, the Aberdeen Asian Smaller Companies investment trust, it has tightened up its portfolio, reducing the number of holdings and increasing concentration in higher conviction names. The change, so far, appears to be bearing fruit.
Just in case investors had forgotten what volatility felt like, markets issued a sharp reminder over the past 12 months. It was the type of environment in which good active managers should thrive, as share price performance grew more differentiated – but there were plenty of traps for the unwary.
The US was both the easiest place to make money and the toughest to beat the index, and that was reflected in the annual performance of our 2018 fund award selections.
On first assessment, peer-to-peer Isas – known officially as innovative finance Isas – appear to fill a hole in the Isa market. They are hybrids that operate between the relatively high-risk/high-return sphere of the stockmarket and the lacklustre but safe zone of cash. They offer a handy route to a reliable and diversified income stream. At the same time, investors can enjoy the feeling of disintermediating those nasty banks.
Medium-sized companies used to be the favoured stomping ground for active managers. Small and nimble enough to grow, but large enough to withstand the ebb and flow of the economic tide, they were seen as the sweet spot for investors. Respectable academic studies backed up this view and for many years, mid-cap-focused UK equity funds headed the pack in performance terms.
Wobbly markets may have given those contemplating retirement pause for thought. In recent years, managing a retirement portfolio has been like falling off a log: as long as the portfolio is invested in financial markets rather than cash, it’s been going up. However, recent volatility suggests this ‘in it to win it’ approach may not be as effective in future.
These are seat-of-the-pants times for investors. When the global economic and political environment is so fragile that it imperils the profitability of global titans such as Apple and Samsung, it is a time for everyone to take note. The start of 2019 may have brought more realistic stock valuations, but everything from the US/ China trade war to Brexit to the rise of global populism casts a long shadow over financial markets.
In its 2017 Patient Capital Review, the government made its position clear – tax incentives would only be on offer where capital was genuinely at risk. This has seen the venture capital trust (VCT) sector undergo a number of key changes in recent years, designed to steer it towards smaller, higher-risk companies.
Investors in the stockmarket used to recognise that they had to take the rough with the smooth: stockmarkets could be a rocky ride. But investments usually worked out well if they were held for long enough. There has, however, been so much ‘smooth’ in recent years that many investors have forgotten about the ‘rough’ bit. The past year has been an abrupt reminder that stockmarkets are not without risk.