Financial advisers’ recommendations for millennials, middle-aged and retired investors
As the end of the 2021-22 tax year approaches, time is running out to make the most of your £20,000 annual ISA allowance. Investment companies’ strong long-term performance, income advantages and ability to invest in a wide range of assets make them a compelling option, but with over 300 to choose from where should an investor start?
The Association of Investment Companies (AIC) has spoken to financial advisers and wealth managers to discover which investment companies they would recommend at three different stages of an investor’s life. Recommendations are included below for millennials, middle-aged and retired investors.
Paul Chilver, Associate and Financial Planning Manager at Birkett Long, said: “I just about scrape into the millennial category, therefore I thought a good starting point would be to look at investment trusts I’m considering and have personally invested in. The first is managed by the boutique Montanaro and is the Montanaro European Smaller Companies Investment Trust which has an excellent long-term track record against its sector.
“The second recommendation has a name many of you will recognise from investing over numerous decades – Mobius – albeit this is a relatively new investment trust, the Mobius Investment Trust. It sits in the Global Emerging Markets sector and is one I personally like, as it’s well diversified over many different emerging market regions.”
Genevra Banszky von Ambroz of Tilney Smith & Williamson said: “I think it’s important to consider that millennials, of which I am still just about one, are not as easily defined as a cohort as they used to be, given that their risk profiles and the needs from their portfolios will have evolved as they have grown older. Many will have mortgages and dependents now, and this may result in a higher degree of risk aversion relative to those who are just entering the workforce, relatively unencumbered in terms of their financial responsibilities. For those who do have the risk tolerance and the timeframe, I think Ashoka India Equity and VH Global Sustainable Energy Opportunities are really interesting; the former is a mid and small cap Indian equity trust, and the latter, which was launched this time last year, focuses on delivering a diversified portfolio of sustainable energy infrastructure investments which support the UN Sustainable Development Goals and the energy transition. The contrarian in me also thinks that Edinburgh Worldwide, which has had a horrible time of it recently, could be interesting on a long-term view.”
Neil Mumford, Chartered Financial Planner at Milestone Wealth Management, said: “For a millennial, taking a long-term view with their savings means they can put up with volatility and if investing on a regular basis, this volatility will enable them to benefit from pound cost averaging, which should hopefully provide them with well above average returns. The key is to choose a manager with an excellent track record. Spencer Adair, who manages Monks Investment Trust, fits this perfectly. The trust aims for long-term capital growth which takes priority over income by applying a patient approach to investment, principally from an actively managed global equity portfolio containing a diversified range of growth stocks. The current savage market rotation from quality growth to value has seen this trust sink to a one-year negative return of -25% and a very rare discount, currently 9%. This has not affected its longer-term, ten-year performance of over 210%.”
Philippa Maffioli, Senior Adviser at Blyth-Richmond Investment Managers, said: “I like young people to have significant exposure to pure growth stocks, and I often recommend that they invest on a monthly basis in order to benefit from pound cost averaging. Inclusion of biotechnology within a strategy is important due to the innovation and technological development within the sector. I therefore recommend the Biotech Growth Trust. 2021 was a challenging year but with strong product launches and more timely drug approvals, it looks appealing to long-term growth investors.
“I am keen for younger people to gain exposure to medium and smaller companies due to the opportunity for growth. Guy Anderson and Anthony Lynch, the investment managers of the Mercantile Investment Trust, look for well-established UK businesses outside the FTSE 100, which enjoy a strong market position and have plenty of room for growth. I like their disciplined approach to research and their stock picking style. In addition, this investment trust has an attractive yield of 3.35% which should be used for reinvestment.”
Philippa Maffioli, Senior Adviser at Blyth-Richmond Investment Managers, said: “I admire Joe Bauernfreund’s idiosyncratic style which is why I have included AVI Global Trust in my portfolios for many years. Joe joined AVI in 2002 and focuses on discount opportunities and active engagement and he is supported by a team of eight analysts. The fund’s investments fall into three broad categories: closed-ended investment funds, family-backed holding companies and thirdly, asset-backed special situations, all of which provides interesting diversification.
“I include The Brunner Investment Trust in my portfolios because I like Matthew Tillett’s management style. Matthew is supported by Marcus Morris-Eyton and Christian Schneider and between them they cover a broad range of geographic regions and have considerable experience. They favour large well-financed businesses with strong opportunities for growth and reliable dividends. This investment trust is a dividend hero and has consistently increased its dividend for 50 years.”
Genevra Banszky von Ambroz of Tilney Smith & Williamson said: “As with millennials, Generation X represents a broad spectrum of people, at different stages of their adult lives, and whose investment needs will differ accordingly. Generally, one would expect that they will have a lower tolerance for risk than millennials, and that they will be thinking much more carefully about saving for retirement. Diverse Income Trust, Finsbury Growth & Income Trust and Schroder Oriental Income are three companies which I think will generate good long-term returns for clients, whilst also delivering an income.”
Paul Chilver, Associate & Financial Planning Manager at Birkett Long, said: “For this section I am moving closer to home with my first suggestion, the Mercantile Investment Trust managed by JPMorgan. This is a UK all companies investment trust which currently looks to be at an attractive discount at about 10%.
“For my second suggestion, I am focusing on a mid-life investor who is maybe starting to think about retirement income. Scottish American Investment Company, possibly more widely known as SAINTS, looks to pay a regular dividend. This trust has a global approach and is one I personally like as it is underweight North America and this could blend well with other global investment trusts investors may hold.”
Neil Mumford, Chartered Financial Planner at Milestone Wealth Management, said: “A middle-aged investor will have one eye on growth and the other on their retirement. Therefore, an all-rounder would be ideal that will provide the dividend income that can be reinvested for more shares and can then be used as an income producer in retirement. Scottish American Investment Company’s objective is to grow the dividend at a faster rate than inflation by increasing capital and growing income. The focus of the portfolio is on global equities but investments are also made in bonds, property and other asset types. The trust currently yields 2.76% and trades at a 3% discount.”
Genevra Banszky von Ambroz of Tilney Smith & Williamson said: “Without an employment-related income, boomers will probably be most interested in those companies which are able to provide a reliable, attractive income stream and lower volatility in terms of their share price performance. For those seeking income, I think companies such as International Public Partnerships, which delivers a diversified portfolio of predominantly operational social infrastructure assets, might be interesting. Another option might be RIT Capital Partners, a diversified, international multi-asset fund which aims for, and has generally delivered long-term capital growth with capital preservation.”
Paul Chilver, Associate & Financial Planning Manager at Birkett Long, said: “For retirees, I am making the assumption that an income will be required and I am going back to a suggestion I made in recent years which, thankfully, has shown more recent outperformance after a few years of poor relative performance. This is Temple Bar which, since I last suggested it, has changed investment manager. This highlights one of the positives I feel investment trusts have which is an independent board who can change investment manager if they see fit. Temple Bar is now managed by RWC (Redwheel) and since they took over management of the investment trust, it has rebounded significantly and is still paying an attractive dividend.
“My final suggestion is a slightly unusual investment trust, Shires Income, in the UK Equity Income sector, as it invests in a mixture of UK equities and fixed income. This diversified approach has helped to keep volatility down and the trust is currently paying over 5% per annum as an income which is very attractive.”
Neil Mumford, Chartered Financial Planner at Milestone Wealth Management, said: “Retirees fall into two categories, income seekers and capital compounders. One trust that falls well into both those categories is Bankers Investment Trust. I prefer to recommend trusts with real diversification to help minimise the reliance on one particular market. This trust has the flexibility to invest in any geographic region with no set limits on country or sector exposure. The trust manager leverages off the expertise of six regional managers whose focus is on cash generative and dividend paying companies. The trust currently yields over 2% and more importantly aims to increase this by inflation. Apart from the modest 1% increase last year, it has achieved its aim in most years, and over the last five years the dividend payments have increased by a respectable 28%, whilst the share price has increased by more than 50%. The trust has been managed since 2003 by Alex Crooke.”
Philippa Maffioli, Senior Adviser at Blyth-Richmond Investment Managers, said: “I recommend Law Debenture Corporation. James Henderson and Laura Foll focus on out-of-favour equities standing at discounts to their long-term historical average. I believe that they are capable of pinpointing (predominantly UK) stocks which are good quality and have a competitive advantage. The current yield of 3.91% is obviously attractive to retirees looking for income with the possibility of growth.
“I also suggest JPMorgan Global Growth & Income for retirees as it enjoys an attractive yield which is currently 4.02%. On top of this, exposure to this investment trust provides an opportunity for growth from an unconstrained selection of companies from around the world. There are three portfolio managers who are supported by a large research team covering a comprehensive selection of global stocks.”
Follow us on Twitter @AICPRESS
Notes to editors
- The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment. Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help members add value for shareholders over the longer term. The AIC has 360 members and the industry has total assets of approximately £269 billion.
- Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investment company shares, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all.
To stop receiving AIC press releases, please contact the communications team.