Interactive Investor

Ian Cowie: four golden oldies that have stood the test of time

27th April 2023 11:34

by Ian Cowie from interactive investor

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These four investment trusts have multiplied investors’ money more than 24-fold over the past three decades.

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Longevity is no guarantee of security or success for investors, but it remains a remarkable fact that no fewer than 36 investment trusts trading today pre-date the birth of the Prince of Wales and the man who will be King Charles III next week, Deo volente. No wonder the Association of Investment Companies (AIC) dubs these funds its ‘crowning glories’.

So, whether you are a monarchist or a republican, this might be a good time to consider very long-term returns. Reassuringly, a ‘fabulous foursome’ among these long-lived funds have multiplied investors’ money more than 24-fold during the difficult past three decades.

That’s a regal return despite knavish stock market setbacks during this period, which included the bursting of the dot.gone technology bubble in 2000, the global credit crisis in 2008 and the coronavirus pandemic, which crashed the world economy in 2020. So, with thanks to independent statisticians Morningstar, and without further ado, here they are.

TR Property (LSE:TRY) was founded in 1905, has total assets above £1.2 billion and invests in the shares of currently out-of-favour office block developers, which makes it a surprising winner over the past 30 years. An investment of £1,000 in 1993 would be worth an eye-stretching £35,310 today. It mainly invests in property shares, with 8.3% of its net asset value (NAV) in UK bricks and mortar. 

Covid transformed working from home from being a fantasy into a fact for many commuters, which has been terrible news for property developers such as Land Securities Group (LSE:LAND), which is among TRY’s top 10 holdings. However, this investment trust’s international portfolio, which includes the German residential landlord Vonovia (XETRA:VNA), provides some diversification.

Another big holding is the warehouse operator Segro (LSE:SGRO), which gives exposure to the growth of online shopping. This looks a better long-term bet than, say, bricks and mortar retailers, where valuations are subsiding alarmingly.

TRY’s dividend yield of nearly 4.9%, which has risen by an annual average of 11.2% over the past five years, also underpins its share price, which is currently 7.5% below its NAV. This long-term top performer might be a bargain today if you believe that WFH will prove a passing phase.

Canadian General Investments (TSE:CGI), founded in 1930, ranks second over 30 years with a total return on £1,000 of £29,323. This self-descriptive investment trust is close to my wallet since I became a shareholder in November 2021.

Total assets of Canadian $1.25 billion are allocated across North America, including the semiconductor chip-maker NVIDIA Corp (NASDAQ:NVDA); the Canadian Pacific (TSE:CP) railway and the gold royalties group Franco-Nevada (TSE:FNV).

Exposure to a sector you won’t find in many other funds is provided by West Fraser Timber (TSE:WFG), alongside more conventional assets including the technology giant Apple (NASDAQ:AAPL) and payments processor Mastercard (NYSE:MA).

This investment trust currently yields 2.9% dividend income, rising by an annual average of 5%.

However, it’s only fair to say CGI came unstuck with a bagful of the online retailer Shopify (NYSE:SHOP), when Mr Market lost his taste for ‘jam tomorrow’ stories, and the investment trust’s shares currently trade at an eye-stretching 37% discount to their NAV.

Scottish Mortgage (LSE:SMT), founded in 1909, ranks third over 30 years with a total return on £1,000 of £27,887. This might be regarded as the most surprising result among the ‘royalty’ of investment trusts. SMT fell from favour after inflation and interest rates began to rise, increasing the opportunity cost of holding shares that pay low or no income.

Top underlying holdings include the electric car-maker Tesla (NASDAQ:TSLA), which has suffered a bumpy ride recently. Similarly, the Latin American online retailer MercadoLibre Inc (NASDAQ:MELI), has been returned by many former holders because of a reluctance to buy into hopes of growth in future, as opposed to dividends you can depend on now.

SMT’s total assets of nearly £12.6 billion also include semi-conductor chip businesses ASML (EURONEXT:ASML) and NVDA, alongside the luxury goods group Kering SA (EURONEXT:KER), which owns Gucci and Saint Laurent.

But nothing fades as fast as financial fashion and SMT now trades at a 21% discount to its NAV with a nugatory dividend yield of less than 0.6%, which looks about as hip as a pair of bell bottom trousers.

Finally, BlackRock Smaller Companies (LSE:BRSC), founded in 1906, completes our ‘fabulous four’ with a total return on £1,000 of £24,686 over the past 30 years. Top holdings include the maker of marketing bumf 4imprint Group (LSE:FOUR); the mystifyingly successful vendor of obsolete timepieces Watches of Switzerland Group (LSE:WOSG); and the Harry Potter publisher Bloomsbury Publishing (LSE:BMY).

It yields 2.7% dividend income, rising by an impressive annual average of 10.8%. But it continues to trade on a discount of more than 13% below its NAV.

Annabel Brodie-Smith, a director of the AIC, told me: “As we celebrate King Charles’ coronation, it’s reassuring to think that one in 10 investment companies that are around today were launched before he was born on November 14 1948.”

John Newlands, the financial historian, added: “Investment companies have not just proved steadfast throughout King Charles’ life but have delivered rewarding returns since the middle years of Queen Victoria’s reign. Investment companies – or investment trusts as they are sometimes still called – are unquestionably the jewel in our financial crown.”

Hoorah! Long live the king. Put out more flags!

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

Ian Cowie is a shareholder in Apple (AAPL) and Canadian General Investments (CGI) as part of a globally diversified portfolio of investment trusts and other shares.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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    Investment TrustsNorth AmericaUK sharesEurope

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