Investment Trust Edge | July 2021

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  • 52 mins 47 secs

Learning: Unstructured

In this Investment Trust Edge a panel of experts take a look at the North American sector and a cost benefit analysis of value investing. Discussing are:

  • Ryan Hughes, Head of Active Portfolios, AJ Bell
  • Doug Brodie, Managing Director, Master Adviser
  • Nick Wood, Head of Investment Fund Research, Quilter Cheviot

Learning outcomes:

  1. How investment trusts can be used to create long-term streams of income for clients in retirement
  2. The breadth of opportunity in the North American trust sector
  3. How fund buyers have been assessing manager and board performance in the light of 2020
Channel: Investment Trust Hub
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mhm. Mhm. Hello and welcome to Investment Trust Edge with me, Mark Cold in this program, a look at the Mercantile Investment Trust. We take a sneak peek at what's on offer in the north american sector. And we end with a cost benefit analysis of value investing. Well to talk us through those topics. I'm joined here in the studio by Nick would he is head of investment fund research at Quilter and I'm also joined down the line by Doug brody, who is Managing Director of Advisor for Master Advisor and by Ryan Hughes head of active portfolios platform. A J Bell, mm let's get things straight underway. Nick would, let's start with the Mercantile Investment Trust. Um give us a bit of an overview of it, what's distinct about it, Where does it invest? Well, so it invests in the UK market, specifically invest primarily in mid cap UK companies. It's got rather a peculiar index. It's puts, you will share Experts see 100 x investment companies. Um, so it does have a little bit of small cap exposure, but primarily it's mid cap, there are three midcap trust within that space. And I think where I say it differentiates itself, uh, one it has a little bit more latitude to go outside of the foot. C 2 50 second actually is its size. It's the largest by far over a couple of billion. Um, a little bit more diversified in terms of number of names. All three are looking to buy growth companies, but each does it in their own particular fashion. We mentioned three midcap trust, one of the other ones is run by jP morgan. So how differentiated is J. P. Morgan midcap from the mercantile Investment Trust? I'd say it's uh, it's at the margin in a sense. So, uh, they both look for growth companies. I'd say that J. P. Morgan uh, monitored trust is a little bit higher growth um A little bit more concentrated in terms of mercantile. Um You'll find actually that as I say, they have a small amount of foot c 100 they allow their stocks to run the J. P. Morgan funds actually uh is just purely footsie to 50 equally. There are some smaller cap names, names below the 50 to 50 so there's differentiation. Uh But you know, ultimately uh all three of those are fishing in the same pool and they've had, they've all been very successful actually. So I think you'd be happy with all three. Okay with doug brody, let's let's bring you you in, it's a pretty market mercantile, about 2.6 billion uh in size. Um Is how scalable is that, How much money do you think you can run in in UK mid and small cap before? Perhaps a little bit of that performance advantage you've been able to play with starts to dissipate. I would worry about 2.6 billion. one of the things that very quickly comes through is that when you're running that much money, uh, you to avoid the spray and pray approach to dealing with the cash, you need to make Very relevant calls. So the trust has about 82 holdings, um, at the last reporting date. However, of those 69 of those holdings are above £10 million pounds now, Uh, the very, uh, largest, they go up to healthy over 80 million. You've got liquidity issues and you've also got, uh, market due diligence issues. It doesn't take much of a headline to make, um, Bellway or, or any of the property holdings catch cold. And, and all of a sudden, if you're sitting with an 80 million uh, position, losing 10% of that is eight million quid, which is absolute. So we it's it's very much uh a long term institutional uh part of the infrastructure type uh type fund that's been around for over 130 years and it's size, we will regard it very much as the mid cap version of F N. C. Um and that due to its size, although the big plus on its size means it's relatively cheap. So it's about 45 basis points. So anyone who's got a price sensitivity in the portfolio, it's a good way to uh to to bring you prices back under control. They and Ryan Hughes. So what are your initial thoughts on it? And also perhaps you can pick up on how distinct character character it scott because it's one of the very few J. P. Morgan trust that doesn't have J. P. Morgan uh in the name. Yeah, absolutely. I think it has got some good distinctive characteristics. I mean it's the team, the UK equity team uh that jP morgan I think are strong have got a tried and tested process uh and yes, their growth tilted but they're not out and now growth. Um So I think as a way of playing the mid and small cap space in the investment trust world, you've got a lot, you've got long heritage, You've got an experienced team, uh and you've got that underpinning process which has been successfully and consistently implemented for a long period of time, that consistent implementation becomes key. I mean, picking up on Doug's point about size and I certainly think we were talking about open ended fund that invests in this way at 2.6 billion I suspect would be getting a little twitchy about it. Um, But obviously it's closed ended nature probably takes away a little bit of that twitch enough. But of course if they have to reposition the prospect would be a little bit more challenging in terms of the lack of jp morgan name. Uh, clearly it's done it no harm over over a very long period period of time, its size, its tenure. Uh, I think it's been no impediment not being called J. P. Morgan. Uh, there. So you kind of read into that what you really as ever with these, it's about kind of what's going on under the bonnet rather than than what you see across the factory and the breaker. And a long term track record says that they have done that pretty well, nick on the investment style. The managers guy Anderson and Anthony lynch, how long have they been running the portfolio? Do you get a sense they're going to be around for many more years to come because they built a really very impressive track record over the longer term on this vehicle. Yes, that's right. I mean, a guy came in around about nine years ago. Um, and if you have a look at the track record, certainly if you take the last three and five year numbers, they meaningfully ahead of the index 34% per annum. And, and I think actually, uh, when, when I look back 10 years at this trust, I think what you might have said then is, um, you know, this, uh, was a lot closer to the index than it than it is now. It was a lot more holdings. Um, it did perfectly well. Um, But what guy, uh, an anti have done is come in, um, really concentrated the portfolio down more to the best ideas. You know, 70 odd stocks is still a decent number. But they've really that stock selection has come through. Uh I think uh you know, I can see them continuing to to run this for for for many years to come actually if they continue with their success today. But picking up on Doug's point that concentration is great, running a more active portfolio. But the flip side as you are only more and more of individual stocks, do you get a sort of sense of how concentrated they'd like the portfolio to be? I mean if I looked at the report accounts about four years ago, they had about 100 stocks in it last only reporting councils that 75 76 77. Yeah, my my sense and from recent meetings with the team, you know, I think this is about as concentrated as they'd like to go, I'm sure. Never say never. But I think 75 makes sense. Um You know, we mentioned the sort of capacity issues there, I think I think, You know, running 2.6 billion having a slightly more diversified portfolio makes sense. And I think there's enough in there. Uh there's enough conviction in there. I know, I know the managers would say, you know, every every stock in this portfolio is there for a reason. And it's uh it's certainly not to uh sort of quasi track the index. So uh I think I think as it stands, I I doubt it would go much lower than the number of holdings we have today. Okay. Um Just picking up dog, you mentioned the point that the the total fees on this is pretty low, it's about not .45%. I think you said we hear a lot about the importance of keeping fees low. But what difference does that make to returns over time if you are holding a vehicle such as this over the long term? Is it meaningful? No. First, I mean, from our perspective, where we, uh, differently to a DFM, who will add the mercantile into a DFM pot, We, we look at them on an individual basis for individual retail investors. And, uh, the, the constituents of the return based on, you know, the share price return, any v and the income return. And as you know, we focus on, on income return. Uh, it's impossible to differentiate between, uh, any trust or fund on individual prices unless you've got extreme items. But within the investment trust fear, um, there is little to differentiate. You can say the capital return is being held back by, uh, by the management fees. Mm. Okay. Uh, and rather the tagline on the annual report and accounts for the trust is the home of tomorrow's UK market leaders as, as you look at the portfolio, do you think it is? And how does that stand up when we're seeing more and more trust coming up out these days saying, well, where you want to be as in private markets, that that's where the leaders of tomorrow are? Yeah, I mean, it sounds great, doesn't it sounds better than we invest in yesterday's winners, I suppose in that sense. So, so the, the marketing team have got the right strap line on it. But I mean, you actually, well, in terms of, I guess all meat cap managers being small cap focused managers would like to think that their stock will become tomorrow's Footsie 100 companies and they are going to grow and dominate their field of expertise. So yes, they got there on that journey. I think you make a really interesting point around around private equity and what's going on in that space. Clearly, a lot of those companies are earlier in their journey. All being, we are seeing fewer companies come to market over time. There's definitely a de equitization going on and companies are able to get very large now without the need to list and therefore that does provide. Yeah, not not a headwind, but I think it's just a different opportunity set for managers that are prepared to invest in private equity and some of those companies will be of a size that would have qualified for for a trust like this. I think it's not a case of, you know, one's good and one's bad, They come with different risks, different opportunities, it's about knowing what the trust does. And if you don't want to take the potential increased risk of investing in unquoted private equity stocks, however large and mature they maybe then then this may be interesting for you. If you do want that, that excitement and that opportunity set them. There are other trust out there to do that for you. Okay? And Doug, I want to move on now to gearing. I think this trust is the most heavily geared. It's been since 2012, I think it's about 12% gearing at at the moment. 12, gearing at the moment. Um, when you look at it at the vehicle, how how effectively do they use gearing? Um, The, the gearing is uh, well, it's the Sweden, sorry, isn't it depends where the market's going. So clearly when, when we're looking here at a 12 month period being a recovery from the bottom of the market, uh, from last March, you'd say the gearing is, uh, uh, it is being productive, um, and gearing only really becomes an issue when the market tends to go awry. That's when you get all the headlines in the press saying, look, stay away from investment for us to look at the hearing, look at what's going on from the managers view rather than the board of directors, whether the cash is coming in through share subscriptions or whether it is available via gearing, it's still a pot of cash for them to go and take the positions in the companies that want to take the position in. It's, it's, we believe it's more up to, we're more interested in the director's point of view on what's happening with the gearing. And in addition to that, were very keen on identifying the source of debt that they use the, Because we've got some trust who organized their debts quite a long time back. And uh, these guys at American tell they've still got a dementia that they're paying over 6% on. So that's an expensive drag. You know, if you're looking at market returns come long term overall market returns coming in at 8% for example, eight or 9% having a 6% debenture. Makes you wonder what, what's the purpose. But the, the issue then is once you've got the debt raised, the debts rates, you know, for, for, you can't switch it on and off on a daily basis. This is long term borrowing. Um, and if you go and look at american tiles figures Five years 92% were happy with that. I don't think there's an issue. I think they proved the point. Thank you. And then just a final thought on this nick, we've talked a lot about the portfolio, but is there a bit of a mismatch between the portfolio, which sounds pretty pretty growth the from what you've described and the, I guess the, the overall mandate of the trust because they seem very committed to quarterly dividend payouts. Yes. So, so I guess, I mean one of the KPs for the board is to grow the dividend in line with inflation. I think what I'd say is that the kind of companies that uh guy and Anthony are buying naturally have decent cash flow that often ends up in dividend payments, uh flowing through. And I would say that dividend is a fallout of the investment process and not driving the investment process equally. I think for the board, um, you know, that, that potentially is a challenge at times if if the manager isn't necessarily uh seeking to achieve that dividend per se, but, you know, there's a there's a there's a natural dividend that comes with the kind of mid cap companies um that they're investing in, where perhaps if you are investing much more in smaller companies, um perhaps higher, even higher growth, an earlier stage, you're gonna get less of a dividend coming through. But looking at the revenue reserves, essentially, they've have to about 32 a half million pounds, as of uh the end of january 2021 because obviously income took a hit in 2020 for a lot of the underlying portfolio. Um Is does that, is that a warning sign on the dashboard that they really eating into those revenue reserves if you're if you're a dividend shareholder, or do you think it's a good example of the trust being able to smooth dividend payments to shareholders? Yeah, well, it's certainly an advantage of the truss structure to be able to do that last year was clearly exceptional and I think you have to judge it on a going forward basis. I mean, it's interesting actually, jp morgan have a number of trust where they've they've paid income out of capital now, not to say that this trust would do that, but it's it's interesting that generally that that that's been done elsewhere, but I think I would expect going forward, I would hope that they will be able to continue to pay out that dividend naturally. Um But we'll see you're right. It's the reserves are declining and it may get to a pinch point at some point. Thank you. I want to get a final thought. Ryan Hughes if if you had to sum up the mercantile investment trust for investor, what would they be getting? Yeah, I think they're getting they're getting a well managed trust from an experienced team um that that that has proven itself over the test of time and has a growth tilt towards the faster growing elements of the U. K. Economy. I think gearing it is important that they are getting a geared portfolio here. So you've got to go into this one wanting the U. K. Economy, wanting exposure to higher growth parts of the UK economy and knowing that that's been that's been geared up to an additional level. If you're comfortable with all of that, you're getting it at a pretty pretty competitive price. And it looks like a very well managed trust. We move on now to having a little look at the north american sector for years, there weren't that many investment trusts, there was always one of the things that people complained about the investment trust sector. It wasn't covering the world's largest economy properly. Has that changed in recent years? Well, Ron he was, as you look at the North american sector, um what are your thoughts on it? Does it offer good investment opportunities for for those who like investment trusts? Well, I think the North american sector for for UK investors for years actually we've been relatively poorly served in terms of the breadth of options that we have. If we think about investing in the largest market in the world then essentially there are there have been a few generic trust covering that. I mean if we think about what what you have, if you're looking in the U. S. Should be having a whole swathe of growth trust of Value trust of a menace and trust that you could cut and slice and dice that market any which way you wanted. And there'll be a whole load of options in the investment trust world. It has been relatively poorly served there now. It feels like it might be broadening out a tiny bit and it looks like maybe there's a little bit more specialist choice uh there. But with the cost of pita getting access that U. S. Market being so so low that's been a challenge for any type of active manager. And there's effectively become a kind of structural headwinds to the getting broad market access a little bit different if you want a particular flavor of the US now with the high growth option from the Baillie Gifford for example. But the broader market exposure has really not been a place to be with the investment trust market. We're picking up on that dog brady For years. People have said the S&P 500 is an almost impossible index to be consistently. Are they right? Why is it so difficult for active managers to do well in the US, regardless of whether they got an open or a closed ended funds, there's not a lot of marketing and headlines thrown out around exactly that same subject. Whereas if you actually go in and and dig through all the funds, uh, that is not the case. I think what's happening is, uh, in the same way that we have research by the media done, uh, in the UK. They're looking there is such a huge number of US secretary funds out there. It's their identifying that half of those will ferret failed to beat the S and P. But, but actually, there, there are an awful lot her beating the S and P and, you know, jp morgan american hand handsomely does that over a five year term. So it's quite important to look through the info that's sitting there for any investor. You do your own research. It becomes really quite straightforward. The other thing, the other obvious comment on that, as everyone knows is if you're looking at the S and P, are you looking at returns that are pure tech returns? Are you looking at returns that are being boosted by global lockdowns and an enforced moving of uh consumer spending onto online? Because if you are that that can that cannot be permanent. That's not permanent rise. Yeah. Okay. Nick uh, bring you into this. But what are your thoughts of what you need to do to beat the U. S. Index and are their trust in that sector that can consistently do that rather than, as doc says, there's a danger that if you're outperforming it might because you're short term a bit of a one trick pony. Yeah. So I might add little to what Doug said there and my experience of the U. S. Market and many sort of research trips across the U. S. Um compared to many other areas of the world, there really is a bifurcation between a pure growth manager, a pure value manager, a pure small cap manager. The consultants have driven the U. S. Market that way. So So yes you know you might have style, various points will go against you and so it is hard to be a consistent winner over every calendar year for a ten-year period. For example. Now if I look at the trust that we have in there, I mean the two standout trust today, I think our Baillie Gifford us growth, which launched in 2018 has done a absolutely tremendous job style tail wind behind it. Of course it's investing growth growth has done well but it's it's grown very significantly and performed actually better than uh the much loved Scottish mortgage um last year. Both in absolute and relative terms. The other really interesting one I think for me is is J. P. Morgan american which now they changed their exactly how they managed that fund a couple of years ago and Rather than one manager with a core proposition, there are underlying, there are two managers, one is a growth manager Tim Parson, one is a value manager, Jonathan Simon, both Englishman in New York funnily enough and they and they input 20 stocks each into that portfolio and so there you've got a good example. So how do I beat the how do I beat the market consistently in an ideal world? And your growth manager beats the growth index. Your value manager beats the value index and when they come together uh that combination will always be ahead. Um And uh and uh you know style, that style impact won't won't affect you and I think they've done a very good job of that so far. So I think both of those are absolutely worthy of consideration. And by virtue of the fact that they they are the two largest. I mean that you know lots of opportunity there. Um in terms of you know investment uh don't you mentioned a little earlier your income is something that you focus on a lot for your clients. So I think three of the trusts in the north America sector our income. Um Why is that, what do you think of the U. S. Or north America more generally? Sorry. One of those trusts I think is the Middlefield Canadian income trusts. But uh north America, do you see that as a sustainable source of income for your clients? It may be, but one would have to, if you're looking at producing income for retail clients in in the UK, you would have to disregard the the entire canon of UK focused in income producers to go outside. Um And by using uh people like Bruce to Murray International, for example, you can get all the uh international exposure that you need. If you're running a large um DFM portfolio, it might be slightly different from that where you need to take a tactical tactical position. Um and certainly with black rocks, North American income there Davey yield at 4.3%. We would qualify it quite admirably for anyone who wants to uh include American income and who are also happy with any uh ongoing currency risk. Just coming back to the Baillie Gifford fund. Um Ryan I mean that was a new launch but it's been pretty difficult to get new launches off the ground in the U. S. In recent years. Why has that been the case? I think it comes back to the, what we talked about earlier is the scarcity of options and the knowledge that most people are the view that most people would have their beating the market is difficult. I mean it shows really importantly the you must choose the right benchmark comparing bailey gifted us growth against the S. And P. You're not comparing apples with apples, you're barely comparing apples with pears to be honest you're a very different type type of portfolio. So it depends what you want to do in your portfolio Baillie Gifford clearly been very successful in raising assets. They've been very clear about what they're doing in the U. S. Everyone knows their style, everyone knows that they look in the in the unlisted unquoted space. And so you go into that very much with your your eyes wide open. I think you've got it, you got a clear offering from a from a team that's well regarded. I think you've probably got a good chance of raising assets. But clearly bailey here could have been in the sweet spot for the last the last couple of years. But do you go into these things with your eyes open? You're not buying the market here, We're buying something very very different. Uh And if you're building a portfolio and you think I want some US exposure well understand what you're getting with something like Baby Gift or indeed a deeper value trust here. So Trying to compare things against the S&P 500 for most cases is a little bit of a fool's game. You need to look to the more the style diversified style tilted benchmarks to ensure you're doing some proper analysis. Uh, nick we've seen a bit of movement of mandates around jupiter had us small cap mandate that's now moved to Brown advisory. What were your thoughts on how they handle that and move that across? Yeah, we we we didn't have too much connections that one actually. But I would say, you know, uh, generally you're right. There is, there is, there is a bit of movement the black rock uh, north american income also looking to change their mandate to a sustainable funding. Um, Yeah, I think, I mean the, what I think is, you know, one of the key benefits of the investment trust space is that uh that ongoing um sort of board oversight the ability to uh to ensure that clients get the best outcomes by shifting from jupiter to Brown. And I'm sure, you know, all the all the work was done to ensure that that that was the best available option equally. It's interesting to see um, you know, Blackrock moving to a sustainable mandate because it's or potentially looking to do so because clearly that's uh you know, a lot of interest in that space equally um to the point of launching trusts and and we're not talking about North America here, but, you know, we saw Lion Trust looking at an E S. G. Trust launched the other day that that that didn't work out. So I think it's much easier to convert a trust and perhaps that's the way forward. You know, it's uh if things aren't working out as we know trust are more flexible in that way, and I think that's the advantage of clients, well, you mentioned sustainability and just as a broad point, not just about the U. S. Market, but we're seeing more and more fund managers claiming to be sustainable um as a fun buyer. How do you go about working out whether it's it's a genuine thing or this is the popular thing you've got to say at the moment, you know, it's another another box to tick that gets them on to the next meeting with you. Yeah, so um from my from my point of view as an analyst, we were having a huge amount of meetings with fund managers assessing their credentials, and you're right, there are very few that say, no, we don't do s g there the question is um you know, is it greenwashing, actually, how much depth is there to it? And we've seen a real range across the board, but but it's it's very important to understand that and both because of client interest. Um if you if you want to be very heavily East refocused, but also because, you know, all the fund managers considering the the ongoing risk, the climate risk, for example. So, um so it's a it's a very important part of what we're doing. It's it's clearly uh you know, in the last five years it's become a new element to how and how an analyst assesses uh an investment trust, an open ended fund for that matter and it will continue to be important. I just maybe add. I mean, it's it's interesting the US, I always, I think kind of leads the way in many cases, in fund management, in some in some aspects of fund management, I think in the case of E S. G on the ground, in the US that they're a little behind there, certainly behind europe and in some cases there's a little bit of pushback. So it's interesting this space, uh not necessarily, you know, that US based U. S. Managers, perhaps not the multinationals, but on the ground, they perhaps a little way to go. Okay. You mentioned that US manages, um, Ryan, when you look at the North America Sector Investment Trust, do you think that gives access not just the mandates, but are they good? Does it offer a good selection of US based managers, sort of those out there on the ground who really know their home markets? Um Not really. I think it's that it's probably the, the honest answer. I think it's interesting that given, given boards have got free reign to look anywhere in the world for their fair managers, that there probably isn't a greater depth of choice from, uh, from from different, all the different groups. So it comes back to a relatively limited range of trust, which is likely to lead to a relatively limited range of managers. Probably one follows follows the other than the other there. I mean, there are, there is a huge wealth of specialist managers in the U. S. Out there, many of which we probably have still never heard of and we discover them, they're running many, many billions, um, and that they're they're well hidden. So I think there's a lot, there's a lot out there to look at. There's a lot out there for boards to consider when they are reviewing their managers. And maybe it would be a great opportunity to bring some some new, some new blood to the UK for us to take a look at and a final thought on this topic from you Doug if if I may around, um are there any, if someone said there's actually a huge number of US funds, they're just not in the north America sector there, some of the specialist technology funds, something like Alliance Tech, um, a lot of what claimed to be global funds are really us funds with a little bit of ballast from european. Would that be a fair observation or something? Absolutely, It it's really important. Um and this stage of the development of the fund industry, which has been well established for probably 100 years now globally, You have to look past the headline, you know, it's it's not the title of the fund, it's what they actually own within it. So, for example, on the, on the Baillie Gifford fund, you look at the U. S. Growth fund and a retail investor would see it written up in the in the mainstream media. But would it Would simply not spot the fact that it can go 50% in unlisted? It's so from an advisory perspective uh educating a retail investor that would be defined as a virtual private equity fund, it's not a U. S. Equity fund. But the other thing to rule to remember is we talk about the US as a country. It's a continent. You know, if you if you travel from from maine to New Mexico, these are completely different countries. So and the size of the economy, the size of the population, it is so diverse that trying to Encapsulate all the investment opportunities under one banner calling it, this is us secretary is just wrong. We now move on to our final part of the program, which is a look, cost benefit analysis. When it comes to value investing. I'm going to start by having a little bit of a focus on what happened to Temple Bar, that really well known investment trust, operating in the UK equity space. Um, as lockdown and Covid hit the markets. Uh, doug brody. If I can start with you on that before we go to the detail. Could you stop? Just give you a little bit of a sense of what Temple Bar under manager Alistair Monday was doing before Covid and lockdown struck. Yeah. When you Alistair, uh, really quite well because of the track record that Temple Bar has had for decades. And Alistair was the custodian at that, uh, at the time that he was running it very much based on cash flow. So value can be written off in in lots of different ways for us. It's about cash flow. And the lovely thing about working with Investment Trust is as companies, you've got all the accounts available so you can track back through companies House and and and look through the accounts. And we would talk accounts with uh, with Alistair for the best will in the world, the markets will go up and down. We know there are going up and down. Do we understand what the manager is doing? And Alistair who is a very simple check when it came to investing. And he uh, he followed um uh clear economic drivers that he saw on. He would happily explain that to you and underpin that. Underpinning that is the balance sheets, the companies that he would go and invest them. So it was very straightforward. You could see how he was putting the portfolio together, but then in turn formed the balance sheet of uh Temple Bar And Nick would very much a value style that he was running there. Despite the fact value has been out of favor for a decade. I was looking at the temple bar annual report up to the end of 2019. So just before things struck share price and a navy beat his benchmark, the foot steel share. It was it was a good diversify their um what were your thoughts on it at at that point? It's very clear what it was. It was a value bias trust, I think you know, you've you've pointed out the obvious fact that uh there was a style headwind growth was in favor, but he outperformed. Um there was some very good stock picking there and that's what you know, when you're thinking about different kinds of managers, Growth and value managers we touched upon earlier, Um you know, if your if your value manager is uh in line or slightly behind the index over the last 10 years, clearly this was ahead, you know, actually, is that a bad result? And uh you know, I I would say I would always say you want diversification within your portfolios. You want a combination of the two because As much as in March 2020, all you wanted with those growth names, those covid winners, you know, when it came around to october suddenly everyone was turning their mind to value. And in the in the in the subsequent six months, that would have that would have served you very well. Actually. It's surprising how quickly those those things change. So you would argue there's always there's there's still a place for value investing even though it's been all of this long term growth. That's uh that's been popular. Absolutely. I mean I mean the two sides of this coin on the on the one hand, uh the headlines that the value is dead uh that's never the case. Um equally, you know, I I recall uh even back in 2012 looking at what I was doing some research on the A value value investing. A couple years ago, I found a presentation back in 2012 that suggested value had was so out of favor that you could it could only outperform from here. And we and we saw in the subsequent 56 years that that just wasn't the case. So both sides always have their their their strong view. I I I think there is absolutely no reason to to have both. But what I would focus on is less by the style, more focused on get the stock pickers right? You know, there are some excellent stock pickers out there as much as each side will tell you that their way is the only way. I think if you get a great stock picker, a growth stock picker and a great value manager, put them together that there's, there's, you know, that potentially is a source of out performance. Uh, Ryan, I suppose one of the things, uh, Nick alluded to that was the markets went, I mean, essentially everything went off a cliff in in March 2020 very rapidly. Um, from your perspective was that was at a time when you were looking at the markets that you thought you had views that growth was going to be the best strategy, certainly in the short term or if you were in value, if you're in value holdings, did you hang on to them or how did you play it? I have a nice easy answer, which is, we're long term investors and don't try and second guess short term moves in markets, let alone trying to get them in the midst of a pandemic when nobody knew what was happening. We run style diversified portfolios across the board, so we will always have exposure to a value manager, uh, and the growth manager. And so we held value into the run up of that and it was painful. And then we subsequently held in the coded belt and it was painful and we subsequently held it, uh, in the vaccine rally and it's been fantastic. So I couldn't have called any of those Inflection points. Um, I'm not sure I've ever met anyone that has and therefore, as Nick said, it shows the importance of, of running a style diversified portfolio, maybe having exposure to the likes of a temple bar. But of course you have to be patient, particularly value. It can be very, very painful for a long period of time and then it can be fantastic for a short period of time. And that's kind of what we've seen with the performance of this trust. Uh And just out of interest when value was doing really badly and as you said, it was very, there were periods in 2021. That was incredibly painful. Did you top up value and cut from growth and put it into value? Or did you, you know if value have been, I don't know 30% of the portfolio and had crunched down to say 12. Did you just leave it at 12 and say it's going to have to recover by itself? We have a natural rebalancing process that will enable us to tops life the winners and top up top up the losers. So that would be a natural evolution through time. So we'll be adding to our value investments as they're underperforming incidentally with this trust with Temple Bar. We did actually have it on our investment trust select list. Uh, and then we removed it when, when Alistair uh, sadly had to step down and then subsequently there was the review. So it was one we were looking at very, very closely. It wasn't used in the portfolios, but it was on our select list at that time. Thank you. Doug you obviously an investor in the trust on behalf of your clients uh, alluded to there by by Ryan. Alistair stepped away from the portfolio. What what did you do? Did you sell? Did you hold wait to see what the board did next? Well, some dilemmas there. It's uh, we are a lot more restricted than Ryan. And so my job is a lot easier. They have a very tough job because they have to cover a much broader mandate because we are income specialists. We only focus on individual uh, income assets. Now with Temple Bar, one of the reasons it's been a core holding amongst our clients is if you roll back Over the last 30 years out of our main research pool of 30 trusts, Temple Bar had the highest income payout above anyone. Um, City of London was a little bit behind them. So as the markets collapsed, we simply rick unpicked all the portfolios that we could see and recalculated what the income was that we, we estimated would come through to clients. And this is why we work in investment trust because we could see the collapse in the, uh, the income as the dividends were cut off by the government, the reserves, revenue reserves are there for a purpose. We knew they would be used. And then we could calculate, uh, one plus, uh, the other to work out how strong we thought the dividend covered is likely to be of the next couple of years. And this year it is more of the test of the investment trust of his than last year with Temple Bar last year. We were not, ah, we were not overly happy with the holdings in capita are Easyjet, mainly capita. Um, only because we're a consumer of capital as output in the financial services market. And it's not our, it's not our favorite, uh, stock. Um, Alistair took a very, very big position in that. Then what happened is when it, when they, when capital in an Easyjet fell and they were a forerunner to what happened in March. the board stepped in and sold the stock to get rid of all of Oliver's gearing and they did it very quickly and very bluntly. Um, our natural position when we see something go off like that is we sit in our hands till we can work out what's actually happening, what happened? Uh, This is real people with real money talking about their holdings in Temple Bar. We had a couple of clients who took fright and sold out with all the others. Um, everything has actually come back. So the first thing that we did was we got hold of the R. R. W. C. Team and had a chat with them. And to ascertain are we happy with what they're going to be doing and they're rebuilding? So with the core that Alistair had in the trust from before plus the repair work that are W. C. Uh we're bringing in we were happy to maintain it and I would suggest anyone looking back over the figures now ignored the monthly collapses that you saw in 2020 because Temple power came roaring back at the At the back end of last year. So if you look at 12-month performance figures from one April 2022, 21, it's incredibly misleading because they've come back from from the trough they were in at that time and uh nick, I mean the board obviously uh as alluded to there, but I sort of thought about moving the mandate and did from from 91 to RBC. But they were very keen to keep it as a as a as an income and value mandates. How tough is that for a board? Do you think to stick with their principles in the middle of this extraordinary sort of period of carnage? Yeah, I mean, I mean I'm sure for we will remember sort of how tough that period was and uh, you know, I think all of us, however large or small and exposure you had to value probably felt that, you know, you wish you didn't have it. I would say, you know, from a, from the point of view of the, the end client of which there are many, um, you know, I bought something which was value biased and income orientated and um, I think in many cases, well actually, you know, as it turns out the exact right thing to do was to stick, stick to that strategy. Um, but you know, making it making a shift probably at the wrong time and uh, you know, let's say, I don't know given it to Baillie Gifford, shall we say who I'm sure would have run a very uh you know, decent portfolio. But making that shift after a significant drawdown I think is something that you know, for the in client might not have been at all palatable and obviously everyone has their own reasons for buying it. But I think I think keeping to the similar strategy for me kind of makes sense in this case. And they did reset the dividend, they did cut the dividend again when you look at that, did you you supportive of that? Was that the right thing to do for the portfolio? Well, I got from a from a portfolio investment perspective, I mean personally as a firm, you know, we're looking at total return, so um we we want uh you know we're looking at whether a manager can outperform because of a combination of capital and income and uh we're not buying income for income sake. So if it's an income biased mandate and that's that's the reason is going to perform great. But uh what we wouldn't ever want to happen is that the underlying investments are uh are a result of a need for income. So then I think it goes to the board, um you know, can, you know, do we have the reserves available uh to uh to keep this going? And I think if the answer is no, then then it does make sense to to to reset that again, you know, underlying clients, I'm sure would be a little disappointed uh if they're very focused on that income. But I think, you know, if it makes sense for investment reasons, then then I think that's the right thing to do. Um Doug one quick question. Look, just to be slightly controversial, Growth investor might look at that and said, you know, this is a classic example of why value doesn't work as a style. These are businesses that are big today, the historic they're on their way out. And when you get a period of stress in the markets, those are the those are the businesses that really, really hurt your playing greater fool theory, holding stocks for a couple of years, we'll say chuck off a bit of income before they go on. That's no way to run a portfolio long term. What would you say? Well, you know, it's it's the growth investors there, the clever guys, you know, because we're not sure how they do that. You know, that was we switched to income investing 10 years ago, having had 20 years of just not being able to follow any liner guidance uh, to get stuff right in. You're talking about growth versus value. We talk about growth versus income and perhaps income is a subset of value. So our mandates are for income production. So we we build quasi annuities for clients. We build clients their own uh defined benefit schemes. So we're interested about the payments that come out. Almost all our businesses in Is in pensions and the majority of it is for people who are over the age of 50 50. So it's income that we're looking for and the strands of income are and the reliability of that is a lot easier to measure than growth. For a very simple reason, the income in investment trust in any company, uh Those income payments are determined by the border directors. The share price is determined by all the share traders on the different markets 24 hours a day. So clearly one is going to be a lot more volatile than the other. So yeah, we've taken a cop out. We go down the easy route where we're just specializing in the income part of the share return. Thank you. And Ryan, he's a final thought from you on this. Uh, as you look at Temple Bar today and the new management, the newish portfolio, do you think that's a that's a product trust that set set fire on a good stable basis for for years to come? Yeah, I think it's it's in good shape. I'm really pleased that the board didn't ask themselves a question and I think the answer's Baillie Gifford. Uh I think it's important that they stuck to their principles. They found a team of value managers are W. C. That are really really strong are true to their principles and are consistent with the Temple Bar approach and as such, those investors that start with it I think will be pleased with the transition and anyone that's newly looking at it well, will be very clear in what they're getting. So, so yeah, I think actually it looks it looks in very good shape for the future. Well, on that note, we have to leave it. Thank you so much for watching. My thanks Too far are fantastic panelists doug brody Ryan Hughes and nick would from all of us here. Goodbye for now. Yeah.

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