Changing times INVESTING FOR A NEW WORLD ORDER?FIDELITY EUROPEAN VALUES PLC By Sam Morse, April 2018. Taking Stock alliancetrustsavings.co.uk | 5 I am naturally cautious and I am not

Changing times INVESTING FOR A NEW WORLD ORDER?

alliancetrustsavings.co.uk

SUM

MER 2018

Welcome to the latest edition of Taking Stock.

Changing times

If this edition had a theme tune it might be something like Bob Dylan’s 1960s classic The Times They Are A-Changin’. Or at least that’s how it feels to many of us.

US protectionism, Trump-style diplomacy, North Korea, Iran, Syria, Russia, China, Brexit, Facebook, Cambridge Analytica. These have all been headline makers for 2018 so far, and some have undoubtedly been implicated in increased market volatility.

Around the world the political and economic power of nation states has always ebbed and flowed. Alliances are made and undone. And the fortunes of individual corporations rise and fall. But the question for investors today is, are we just looking at a variation on a theme of business as usual for the world’s established economic power base? Or is something else going on? Are we on the cusp of some more fundamental change in the world economic order?

Keeping ahead of the curve

Views on this matter because searching for growth necessarily involves looking ahead and understanding where the longer-term opportunities and threats are likely to be.

In this edition of Taking Stock our expert contributors explore the potential implications of the developing picture. From how it’s influencing investment decisions today, to steps any investor can take to make the most of their money in uncertain times.

As always, I hope you will find it an informative read.

If you have any feedback or suggestions for future editions, please get in touch.

Sara Wilson Head of Platform Proposition Alliance Trust Savings

This information does not constitute investment advice or a personal recommendation for any particular investment and should not be used as the basis of any investment decision. If you are unsure you should consult a Financial Adviser before investing. The value of your investments and any income from them can go down as well as up and you may get back less than you originally invested. Past performance is not a guide to future performance.

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04 Looking beyond the noise

Sam Morse, Portfolio Manager for Fidelity European Values PLC, explains why he continues to look beyond the economic and political noise, concentrating instead on the real-life progress of listed businesses in Europe, and their capacity for consistent dividend growth.

06 Why aren’t we Facebook friends? The so-called FANG companies (Facebook, Amazon, Netflix

and Google) have been favoured by many investors in recent years. But Alasdair McKinnon of The Scottish Investment Trust takes the contrarian view. He reviews why these tech behemoths may now be under threat.

08 In search of safety? Earlier this year many investors flocked to ‘safety’ as the

prospect of a US vs China trade war and tensions over Syria triggered a wave of unrest. Alliance Trust Savings’ Sara Wilson takes a closer look and reviews some of the routes traditionally used for managing downside risk.

10 Finding opportunities in the chapters of Brexit Mark Barnett, Head of UK Equities at Invesco Perpetual, is not

discouraged by the Brexit gloom and doom narrative apparently undermining confidence in the UK economy. He highlights three sub-plots that he believes, by driving and distorting UK markets, are creating opportunities for investors.

14 Still finding winners in the UK Simon Gergel, Portfolio Manager at The Merchants Trust PLC

explains why he sees the corporate appetite for UK PLC undiminished by Brexit and other political shocks, backing the Trust’s own view that the UK stock market is, in fact, one of the cheapest in the developed world right now.

16 Quality control: a re-evaluation of risk As monetary policy becomes less benign to markets, Bruce

Stout, Senior Investment Manager at Murray Income Trust PLC explains why it is so important for investors to ensure that companies are genuinely delivering high and sustainable earnings rather than trading on past success.

18 Appetite for disruption With much of the developed world looking forward to longer

life expectancy, Tony DeSpirito, Portfolio Manager for the BlackRock North American Income Trust plc explains why he believes that companies embracing disruptive technologies could be a valuable source of future income.

20 Growth from different perspectives

When assessing the growth potential of a company in a globalised world, the managers of Monks Investment Trust believe it is ridiculous to focus on headquarter location, or to assume it shares similar characteristics with others in the same sector. James Budden of Baillie Gifford elaborates.

22 The search for future winners ahead of the crowd Lucy Macdonald, Portfolio Manager for The Brunner Investment

Trust PLC considers the longevity of Investment Trusts, how successfully many have navigated the market conditions history has presented them and the potential benefits to investors of a robust, bottom-up approach to stock selection.

24 Tips for uncertain times No one can ever be quite sure what political and economic

developments will mean for markets. But there are some basic tips that can help you make the most of your money whatever the future may bring. Alliance Trust Savings’ James McCafferty explains.

Taking Stock alliancetrustsavings.co.uk | 3

Contents

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Companies with the cushion of a healthy and growing dividend tend to be resilient during periods of macroeconomic

uncertainty. By investing in solid and sustainable dividend-paying stocks, I believe Fidelity European Values PLC provides core defensive exposure to European equities.

Since the launch of Fidelity European Values over 27 years ago, Europe has witnessed its fair share of political and economic upheaval. It’s important to note though, that however significant changes might be on the political stage, the corporate sector tends to carry on regardless.

4 | Taking Stock alliancetrustsavings.co.uk

The approach I take to managing Fidelity European Values PLC is to look beyond the economic and political noise and concentrate on the real-life progress of listed businesses across this large and diverse region. In running the Trust I focus on researching and investing in stocks I believe can grow their dividends consistently, irrespective of the prevailing economic backdrop. History shows that these companies tend to outperform the market over the longer-term.

LOOKING BEYOND

THE NOISE:FIDELITY

EUROPEAN VALUES PLC

By Sam Morse, April 2018


I am naturally cautious and I am not inclined to take large bets against the market in individual sectors or countries, preferring instead to focus on companies which I believe will be able to outperform their competition over the longer-term. My process is therefore built from the bottom up, looking at individual businesses, but keeping an eye on the wider market to avoid unexpected pitfalls.

Identifying future dividend growersOn this basis I look to build a portfolio of 50-60 attractively valued companies, with strong balance sheets and a track record in cash generation, which have the potential to grow dividends consistently on a three to five-year view. This type of company offers a good combination of fundamental value and therefore downside protection, as well as good growth prospects likely to be identified by the market in future. Historic data shows that companies of this nature tend to outperform, however the trick is to identify those future dividend growers before they have done so – and importantly, before the rest of the market. This requires time and discipline from me and our analyst team in London and throughout Europe.

The Trust: Adapting to changeAt the recent Annual General Meeting shareholders approved proposals by the Board of the Trust to amend the investment objective to achieving long-term growth in both capital and income,

rather than just capital growth. This change was to acknowledge my focus on dividend income as well as capital growth and did not relate to any change in investment approach. A reallocation of fees and expenses from revenue to capital will also positively affect the level of future dividend pay-outs. A lower 0.75% management fee on assets over £400m has taken effect from April 2018 and represents a valuable saving for shareholders.

What will unfold in 2018?

European equities have underperformed recently as stock markets have been impacted by weak economic data and concerns over the pace of interest rate increases in the US. The valuation of the European stock market remains high and I believe that this and expectations for continued earnings expansion leaves the market vulnerable to earnings disappointments and geo-political shocks. Markets have been aided by liquidity injections from global central banks and may be impacted by liquidity withdrawal as 2018 unfolds, particularly if this happens more quickly than expected. In such circumstances my hope is that my concentration on fundamentally strong businesses will help performance of the Trust.

Naturally the continuing process of Brexit represents an additional uncertainty at present. While the first stage of negotiations focused on the UK’s financial liability has concluded, the more complex discussions about trading relationships in the future are only getting started. It is quite possible that the arrangements will vary by sector, and they may yet fail to be agreed in their entirety.

Clearly there is potential for more geo-political shocks to come. How all this plays out is anyone’s guess. I’ve always felt trying to predict these cycles or time the market is something of a mug’s game.

So I remain focused on the individual companies we see before us, aiming to outperform across the full market cycle.

Important Information: Past performance is not a reliable indicator of future results. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser. The value of investments can go down as well as up so investors may get back less than they invest. Investors should note that the views expressed may no longer be current and may have already been acted upon.Overseas investments are subject to currency fluctuations. The investment trust can gear through the use of bank loans or overdrafts and this can be achieved through the use of derivatives. Where this is the case, their use may lead to higher volatility in the Net Asset Value and Share Price. The latest annual reports and factsheets can be obtained from our website at www.fidelity.co.uk/its or by calling 0800 41 41 10. The full prospectus may also be obtained from Fidelity.

Sam joined Fidelity in 1990 and spent seven years with the company as a research analyst, covering pan-European retail stocks, and then as a portfolio manager, running funds including the Fidelity Income Plus Fund, the Fidelity Growth and Income Fund and the Fidelity MoneyBuilder Growth Fund. He then left Fidelity to be Head of UK Equities at M&G. Sam returned to Fidelity in 2004 to manage UK equities for institutional clients. He managed the Fidelity MoneyBuilder Growth Fund from December 2006 for three years before becoming portfolio manager for the Fidelity European Fund, which he continues to run today. He assumed responsibility of Fidelity European Values PLC in January 2011.Sam has an MBA from INSEAD and a BA from the University of North Carolina.

Sam MorsePortfolio Manager Fidelity European Values PLC and Fidelity European Fund

This article is issued by Financial Administration Services Limited, authorised and regulated in the UK by the Financial Conduct Authority. Fidelity, Fidelity International, The Fidelity International logo and F symbol are trademarks of FIL limited. Fidelity Investment Trusts are managed by FIL Investments International. CSO8711/1018

This is a financial promotion from FIL limited.

“...I focus on researching and investing in stocks I believe can grow their dividends consistently,

irrespective of the prevailing economic backdrop.”


WHY AREN’T WE FACEBOOK FRIENDS?Unlike many, we don’t have holdings in Facebook, Amazon, Netflix or Google – the so-called FANGs. It’s not that we don’t see their merits: we like our YouTube clips and Prime deliveries as much as anyone. But as contrarian investors, we’re looking for the best balance of risk and reward we can find.


the US Federal Trade Commission. Google is also in the regulators’ sights, receiving a €2.4 billion fine from the European Commission in September.

Some are asking whether behemoths such as Amazon should be broken up. FANG proponents often cite the ‘network effect’ – i.e. being the only game in town and having massive scale. But monopolies are always regulated and the value ascribed to these companies may now look less certain.

The public may also become disenchanted with social media as they become less willing to share their data. Ironically, the hashtag #deletefacebook is now trending on Twitter.

An exodus of advertisers is another risk. We have already seen Mozilla pulling its ads from Facebook following the Cambridge Analytica revelations. Advertisers are worried about risks to their brands from association with the parent companies and some are increasingly sceptical of pay-per-click business models.

Some of these threats may prove to be transient. But as contrarians, we like to be thoroughly aware of potential risks when considering an investment. The dangers facing businesses beloved by the market can be just as underappreciated as the opportunities for companies that are out of favour.

Interested to learn more about the fund?Visit www.thescottish.co.uk or follow us on @ScotInvTrust the-scottish-investment-trust-plc

We don’t see that balance in the FANGs. As at the end of March 2018, shares in Facebook and Amazon cost more

than 5 times as much as they did five years previously. You’d need to pay 11 times more for Netflix shares than in 2013, and even Google costs over 2.5 times more.

So why have the FANGs continued to do so well? It’s simply human nature to assume that what has worked in the past will keep on working forever (and what has languished will continue to underperform). So, to a certain extent, the FANGs’ strong performance has created its own momentum. And there’s also a powerful fear of missing out: witness the rise and fall of Bitcoin.

A top-down factor has been at work too. Since the 2008 crisis, quantitative easing has resulted in a huge amount of money sloshing around the financial system. This has prompted investors to pile into tech-related investments in the hope that some will be long-term winners. Some of this speculation has been remarkably ill founded – as the recent Theranos scandal shows. Led by a charismatic and youthful founder the promise of a revolutionary new technology fell flat when it was discovered that scientific doubts, which had previously been ignored, were indeed well founded.

So far, the FANGs have benefited from operating in largely unregulated territory but nothing escapes regulatory attention indefinitely. We think investors have underappreciated this risk. Today, regulation of online media is very much on the political radar. There is a concerted effort to reduce the power of ‘big tech’, whether through stricter privacy regulations or tougher tax regimes.

The consequences could range from disrupted business models to jaw-dropping fines. Because of the Cambridge Analytica debacle, Facebook is facing investigation by

Important information: Please remember that past performance may not be repeated and is not a guide for future performance. The value of shares and the income from them can go down as well as up as a result of market and currency fluctuations. You may not get back the amount you invest.The Scottish Investment Trust PLC has a long-term policy of borrowing money to invest in equities in the expectation that this will improve returns for shareholders. However, should markets fall these borrowings would magnify any losses on these investments. Investment Trusts are listed companies and are not authorised or regulated by the Financial Conduct Authority.Please note that SIT Savings Ltd is not authorised to provide advice to individual investors and nothing in this promotion should be considered to be or relied upon as constituting investment advice. If you are unsure about the suitability of an investment, you should contact your financial advisor. This promotion is issued and approved by SIT Savings Limited, authorised and regulated by the Financial Conduct Authority.

For regular updates, opinions and contrarian thoughts, visit us at www.thescottish.co.uk

WHY AREN’T WE FACEBOOK FRIENDS?

Alasdair joined the Company in 2003 and became Manager in 2015.

He has 18 years of diverse global investment experience and a distinctly contrarian investment philosophy. He and his team take a highly active, differentiated approach to investment.

Alasdair has an MA (Hons) in Economic & Social History from the University of Edinburgh and an MSc in Investment Analysis (with distinction) from Stirling University. He is a CFA® charterholder and an Associate of the UK Society of Investment Professionals.

Alasdair McKinnonManager The Scottish Investment Trust

This article is issued and approved by SIT Savings Ltd, registered in Scotland No: SC91859. Registered office: 6 Albyn Place, Edinburgh EH2 4NL. T: 0131 225 7781 E: [email protected] W: www.thescottish.co.uk

This is a financial promotion from SIT Savings Ltd.

“The dangers facing businesses beloved by the market can be just as underappreciated as the opportunities for companies that are

out of favour.”


M arkets feel more nervous now than they did in 2017. They were rocked by the recent US imposition of tariffs on

China and by the latter’s retaliation,2 amid fears around the implications for global growth and economic stability.

In the UK and Europe, Brexit is an obvious source of uncertainty, while in the US there is tension around the ongoing probe into alleged collusion between Russia and the Trump 2016 campaign. There’s also the approach of mid-term elections in November that Goldman Sachs has warned represent “yet another source of policy risk and volatility” for markets.3

All of this has been interpreted by some investors, rightly or wrongly, as raising the risk of a market downturn, hence the demand for so-called ‘safe-havens’ for their money.

Earlier this year many investors flocked to ‘safety’ as the prospect of a trade war and tensions over Syria triggered a wave of unrest.1 Alliance Trust Savings’ Sara Wilson takes a closer look and reviews some of the routes traditionally used for managing downside risk.

IN SEARCH OF SAFETY?


It’s possible to access the traditional ‘safe-havens’ investments through specialist collective investment funds, including some Investment Trusts. But when considering a flight to safety, remember that diversification remains as important as at any other time.

The lower investment risk generally associated with ‘safe-havens’ reduces your potential for returns. However investing across different asset classes can allow you to take advantage of them while still maintaining exposure to equities in a way that still gives you the potential to gain from any eventual recovery.

Sara joined Alliance Trust Savings in March 2013 as Head of Platform Proposition, taking on responsibility for the products and investment choice available on the platform. Previously, she worked for Standard Life as International Proposition Manager. Before moving to Scotland Sara worked for Xansa, a technology outsourcing company. She received a BA Honours in International Business from the University of Teesside and a Post Graduate Diploma in Marketing at Napier University, Edinburgh.

Sara WilsonHead of Platform Proposition Alliance Trust Savings Limited

Important information: This information does not constitute investment advice or a personal recommendation for any particular investment and should not be used as the basis of any investment decision. If you are unsure, you should consult a Financial Adviser before investing. The value of your investments and any income from them can go down as well as up and you may get back less than you originally invested. Past performance is not a guide to future performance.

This article is issued and approved by Alliance Trust Savings Limited. Alliance Trust Savings Limited is a subsidiary of Alliance Trust PLC and is registered in Scotland No. SC 98767; registered office, PO Box 164, 8 West Marketgait, Dundee DD1 9YP; is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, firm reference number 116115.

This is a financial promotion from Alliance Trust Savings Limited.

Cash

There may be a temptation during times of turbulence to simply take money out of investments and put it in savings instead. But there are still risks. That’s partly because being out of the market means you can miss out on the benefits of any eventual market rebound, when some of the biggest investment gains can be made for those investing over the longer term. The value of savings can also be eroded significantly over time by the impact of inflation. There is the risk, too, that a bank holding your savings could fail.

Infrastructure

The long-term nature of infrastructure projects and the fact that they are typically government-backed can give them a stability even during a downturn. Spending on infrastructure also tends to rise at low points in the market cycle, as governments often see spending on transport networks as a way to boost the economy and employment5. They are a classic ‘defensive’, non-cyclical investment too, due to their typically high barriers to entry and low price sensitivity.

Gold

Gold’s status as an investment that hedges against inflation (as it’s priced in US dollars) and tends to perform quite differently to equities is a big driver of demand during periods of volatility. Some of the biggest price spikes have occurred at times of geopolitical tension. The escalation of diplomatic disputes between the US and Russia, triggered by events in Syria, pushed the gold price up to a recent high in the first half of April 4.

When it comes to gold, investor demand isn’t necessarily for growth, but for a hedge against risk when expecting losses in other parts of a portfolio. The price of gold is driven primarily by that investment demand and sentiment however, meaning it can go down as sharply as it goes up. It’s worth noting too that it doesn’t provide an income.

Gilts

Government bonds have traditionally enjoyed safe-haven status as they can provide both a regular income and a known level of capital return. They can be especially popular during an economic crisis because of their government backing (hence strong demand even when they offer negative yields6).

But while government backing may seem attractive when markets are wobbling, broader economic conditions mean the lure of gilts has faded a little in recent times. For example, the benchmark 10-year UK gilt had a yield of 1.49% in early April,7 but with the consumer prices index at 2.5% in March (a 12-month low), investors in these gilts were effectively losing money to inflation.8

1. CityAM, Investors dump equity in favour of safe havens, 11 April 2018.

2. Investment Week, ‘A policy mistake of gigantic proportions’, 4 April 2018.

3. MarketWatch, Stock market investors brace for months of political uncertainty, 21 April 2018.

4. The Hindu Business Line, Gold prices rise on tensions over Syria, 13 April 2018.

5. Money Observer, 16 top safe haven investments for stormy markets, 27 July 2016.

6. Financial Times, Negative-yielding gilt sale signals investor confidence in UK economic outlook, 11 July 2017.

7. Nasdaq, UK bond prices surge after Carney comments curb rate hike bets, 20 April 2018.

8. BBC, UK inflation falls to lowest in a year, 18 April 2018.


performance has diverged sharply. But although UK GDP growth may lag that of many countries, it is positive, and the Office of Budget Responsibility has recently raised its forecasts for 2018 to 1.5%, and expects GDP to continue growing close to this level beyond 2022.

Looking at domestic stocks versus a basket of UK exporters underlines just how much they have been punished by the perception of impending Brexit-induced recession. Post-referendum, domestic stock prices plunged sharply and have continued to grind down. A recent uptick suggests a reappraisal of this market divergence might be underway. This could gather pace if a sensible Brexit deal is reached.

At current valuations, some of these domestic stocks may offer both opportunity and some mitigation against a swing in sterling. Exporters, or overseas earners, benefited from sterling devaluation, but many are now vulnerable as the performance of sterling to the US dollar has largely reversed. In January, for example, British multinational Diageo downgraded its sales growth forecasts for the coming year, citing the pound’s strength. Some export-led companies may also be susceptible to the threat of international tariff skirmishes.

S ince the referendum vote in 2016, the UK equity market has been battered by a strong Brexit doom and gloom theme, with uncertainty undermining

confidence in the UK economy, in British companies and, initially, in sterling. Within this broad narrative a number of sub-plots are at play: here I have focused on three that are driving and distorting UK markets – and why I believe each has created opportunities.

“UK domestic stocks are doomed”

A prevailing macroeconomic theme suggests that export-led companies or those with a high percentage of revenues generated overseas will cope best post-Brexit. Over the past 18 months I have reduced and exited some long-held companies with international earnings in the portfolios I manage, largely for valuation reasons. Now within my portfolios, over 50% of earnings are sterling denominated. Why?

Historically, the performance of domestically focused UK stocks against the wider market (as represented by GDP growth) are quite closely correlated, but since mid-2016

FINDING OPPORTUNITY IN THE CHAPTERS OF BREXIT


For more information on our products, please refer to the relevant Key Information Document (KID), Alternative Investment Fund Managers Directive document (AIFMD) and the latest Annual or Half-Yearly Financial Reports. This information is available on www.invescoperpetual.co.uk

“London property prices due a tumble”Financials is my strongest overweight position, representing c35% of my holdings within each of the Edinburgh Investment Trust plc and Perpetual Income and Growth Investment Trust plc, compared with c27% for the FTSE All-Share Index. I don’t hold any banking stocks, preferring sub-sectors such as insurance, financial services companies and real estate investment trusts (REITs). The latter have been affected by the Brexit storyline that London is set to lose its allure as one of the world’s great financial centres. A corollary of this is that much of the international wealth that has flowed into London’s premium commercial and residential property markets is set to exit, fuelling price falls that will permeate the whole market. The promised recession will also affect regional shopping centres and the office market countrywide. I believe both these anxieties have been exaggerated.

The discount to net asset value (NAV) has widened significantly in the REIT sector. British Land’s share price plunged following the Brexit referendum and has struggled to recover. Yet its property portfolio, encompassing prime locations nationwide, has 97.6% occupancy, a high-quality tenant base and an average lease length of eight years. The company’s management has taken advantage of the share price discount to NAV, announcing over £300m of share buy-backs. We have found similar opportunities in a number of names, including Derwent London1, NewRiver REIT1, Assura1 and Secure Income REIT1.

“Amazon will kill High Street retailers”Stock prices suggest markets are also giving unwarranted credence to the myth that Amazon and other online retailers are suffocating their more traditional competitors. Fashion and home product business Next1 has been challenged by this narrative in the past three years. It is also facing the ‘domestic gloom’ headwind, with investors assuming it will fall prey to a plunge in discretionary spending in the predicted UK recession.

Next has a track record of consistently delivering to analyst expectations and shareholder value.

Notwithstanding the ongoing structural challenges from online retail, Next’s online Directory and logistics infrastructure equip the business in my view to navigate the shift to online better than its rivals, reinforced by increasingly confident recent updates from the company.

ConclusionShrewd investors buy companies, not stories. My responses to each of these chapters in the Brexit story helps illuminate my approach to managing portfolios. I use rigorous bottom-up research to identify businesses I believe are capable of delivering a growing dividend stream into the future. Regular engagement with companies’ management often highlights contrarian opportunities, where the experience of a business runs counter to macroeconomic narratives.

Exploiting these opportunities means sometimes I look out of step with my peers and may underperform in the short term, but I believe this investment approach will be rewarded in the long term.

Investment risksThe value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

When making an investment in an investment trust you are buying shares in a company that is listed on a stock exchange. The price of the shares will be determined by supply and demand. Consequently, the share price of an investment trust may be higher or lower than the underlying net asset value of the investments in its portfolio and there can be no certainty that there will be liquidity in the shares.

The Edinburgh Investment Trust plc and the Perpetual Income and Growth Investment Trust plc use derivatives for efficient portfolio management which may result in increased volatility in the NAV.

The use of borrowings may increase the volatility of the NAV and may reduce returns when asset values fall.

Mark is responsible for the management of a number of UK equity portfolios, with a focus on the management of open and closed ended vehicles.

Mark began his investment career with Mercury Asset Management in 1992. Mark joined our company in 1996. Since then, he has become one of the team’s most experienced fund managers, specialising in UK equity income investing.

He graduated in French and Politics from Reading University in 1992 and has passed the associate examinations of the Association for Investment Management and Research (AIMR).

Mark BarnettHead of UK Equities Invesco Perpetual

This article is issued by Invesco Fund Managers Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH, UK. Authorised and regulated by the Financial Conduct Authority.

This is a financial promotion from Invesco Fund Managers Limited.

Important information: Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.This article is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.

1. Held in Mark Barnett’s portfolios.


Miton Global Opportunities plcADVERTORIAL

In order to generate returns, we believe investors will increasingly need to look for alternative investments, away

from funds, which invest in company shares and bonds1. One such area is the investment trust sector, where there are an increasing number of investment opportunities following a series of significant structural changes.

For the moment, we remain in an environment where very low interest rates are triggering rising asset prices through a lack of alternative options. We believe the high valuations on which global company shares currently trade is a direct result of the very low returns available from bonds. Should bond yields2 rise, stockmarkets would be undermined. Moving on from a period of unconventional monetary policy would be healthy in the long term, however, share prices are likely to undergo a period of turmoil whilst investors adapt to the new reality. Under such a scenario, investors would be able to obtain measurable income from conventional sources such as bonds. They would be less inclined to own “income manufacturing” trusts such as those which invest in aircraft leasing or infrastructure funds. The damage to the share prices would come from a change in demand patterns rather than from significant damage at a portfolio level.

Since 2000, those investment companies that traditionally bought investment trusts have undergone a process of consolidation. Consequently, many companies have merged to form vast wealth management chains. The impact of this consolidation has meant that a large proportion of the investment trust sector has become effectively off limits to such firms as they are unable to cope with the huge capacity and liquidity levels required by these new mega-chains whose assets under management number in the billions.

This dynamic has in effect served to ‘orphan’ hundreds of investment trusts, many of whom are now under-researched and increasingly illiquid as demand has naturally slowed, despite there being no critical issue with the trusts, assets or their overall strategies. Without demand, the share prices of these investment trusts have slowly drifted lower than the value of their underlying assets creating a significant opportunity for the diligent and specialist investor to buy.

Miton Global Opportunities Trust plc (MIGO) is, we believe, a unique investment proposition that specifically seeks to exploit opportunities in this part of the investment trust

IMPORTANT INFORMATION

The views expressed are those of the fund manager at the time of writing and are subject to change without notice. They are not necessarily the views of Miton and do not constitute investment advice.

Miton has used all reasonable efforts to ensure the accuracy of the information contained in the communication, however some information and statistical data has been obtained from external sources. Whilst Miton believes these sources to be reliable, Miton cannot guarantee the reliability, completeness or accuracy of the content or provide a warrantee.

Investors should read the Trust’s product documentation before investing including, the latest Annual Report and Accounts and the Alternative Investment Fund Managers Directive (AIFMD) Disclosure Document as they contain important information regarding the trust, including charges, tax and specific risk warnings and will form the basis of any investment.

This financial promotion is issued by Miton, a trading name of Miton Trust Managers Limited. Miton Trust Managers Limited is authorised and regulated by the Financial Conduct Authority and is registered in England No. 220241 with its registered office at 6th Floor, Paternoster House, 65 St Paul’s Churchyard, London, EC4M 8AB. MFP 18/01.

RISKS

Forecasts are not reliable indicators of

future returns.

The value of investments can fall as well as rise and investors may

not get back the full amount invested.

Miton Global Opportunities plc

may borrow money which can then be

used to make further investments (gearing). In a rising market, this ‘gearing’ can magnify

the gains or losses on your investment.

DEFINITIONS1Bond – A loan in the form of a security, either

issued by a UK or overseas government (government bonds) or company (corporate bonds), which pays a fixed rate of interest

over a given time period, at the end of

which the initial amount borrowed is repaid.

2Bond yield – The interest received

from a fixed income security and is usually expressed annually as a percentage based on the investment’s cost,

its current market value or its face value.

3Liquidy risk – The risk stemming from the

lack of marketability of an investment that cannot be bought or sold quickly enough

to prevent or minimize a loss.

sector. MIGO’s patient investment approach allows it to extract the embedded value in those investment trusts that are trading at a lower price to the value of the underlying assets in order to realise gains over the medium to long term. The key driver is the fact that in the current climate, investors are being paid royally for accepting liquidity risk3. The fact that we enjoy closed ended protection (investment trusts have a fixed number of shares) is crucial in allowing us to fish away from the crowds. It allows us to take patient decisions knowing that there is no risk of having to meet short term redemption requests.

To provide an idea of the scale of MIGO’s investment universe, there are currently over 400 investment trusts listed on the London Stock Exchange with an aggregate value of over £130 billion. Over 300 of these investment trusts are currently less than £400 million in size, and offer exposure to a broad range of alternative asset classes from the likes of property to natural resources. MIGO is therefore able to offer significant diversification across this pool of potential opportunities.

We expect the continued consolidation of the wider investment community to precipitate further structural change for investment trusts under £250 million in size. Furthermore, there appears to be no let-up in the growth of alternative asset classes creating future opportunities, many with an income bias. This development should lead to an increasing supply of future opportunities going forward.

In summary, we are focused on extracting embedded value, which already exists, not trying to generate returns from trying to second guess unpredictable future share price or market movements. We believe there is good scope for this latent value to be realised. We are excited by the opportunities and believe MIGO’s research-led approach has the ability to make gains over the long-term, in a significant but under exploited segment of the UK market.

In addition to the natural defensive buffer created by owning deeply discounted assets, owning shares in MIGO offers useful diversification given some of the current themes. Specific opportunities in the Indian stockmarket, residential property in Berlin and Forestry all feature prominently in the portfolio. Miton does not give investment advice, so if you are unsure of the suitability of this investment you should speak to a financial adviser.

Miton Global Opportunities: Bargain hunting in the investment trust sector

Seeking embedded value in alternative areas

VinaCapital Vietnam Opportunity FundADVERTORIAL

IMPORTANT INFORMATION: VinaCapital Vietnam Opportunity Fund Limited (the “Company”) is a Guernsey domiciled closed-ended investment company listed on the London Stock Exchange and is a member of the Association of Investment Companies. Past performance is not a guide to future performance. The value of investments and the income from them may fall as well as rise and is not guaranteed. An investor may not get back the original amount invested. There can be no assurance that the Company’s investment objective will be achieved and investment results may vary substantially over me. This document is for information purposes only and does not constitute an offer or invitation to purchase shares in the Company and has not been prepared in connection with any such offer or invitation. Investment Trust share prices may not fully reflect underlying net asset values.There may be a divergence between the prices at which you may purchase (“the offer price”) or sell (“the bid price”) a share on the stock market which is known as “bid-offer” or “dealing “spread”. This is set by the market makers and varies from share to share. This spread typically averages 1-2% each way on the mid-market price (the price halfway between the bid and offer prices), and can fluctuate and at times be higher than average. Net Asset Value per share is calculated in accordance with the guidelines of the Association of Investment Companies. Net assets are stated inclusive of income received. Any opinions on individual stocks are those of the Company’s Portfolio Manager and no reliance should be given on any such views. Any research in this document has been procured and may have been acted upon by VinaCapital Investment Management Ltd for its own purposes. The results are being made available to you only incidentally. The views expressed herein do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of VinaCapital Investment Management Ltd and no assurances are made as to their accuracy. This is distributed by Frostrow Capital LLP on behalf of VinaCapital Investment Management Ltd, the investment manager of VinaCapital Vietnam Opportunity Fund Limited. Frostrow Capital LLP is authorised and regulated by the Financial Conduct Authority (“FCA”). Before investing in an investment trust referred to in this advertorial, you should satisfy yourself as to its suitability and the risks involved, and you may wish to consult a financial adviser.

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In 2017, its GDP grew 6.8%, and in 2018 is expected to grow around 6.7%. Foreign direct investment reached a record US$36 billion, mostly from

companies looking to establish or expand manufacturing operations – Vietnam has quickly become the manufacturing hub of Southeast Asia. These companies are driving export growth, and in 2017 export value rose 21% to reach US$214 billion, much of that consisting of high-tech items such as mobile phones and microchips going to the EU and UK, the US, and China. Vietnam’s aggressive efforts to integrate into the global economy via free trade agreements, including the recently signed CPTPP, are reaping dividends.

Investment is also creating more and better paying jobs for Vietnam’s 95 million people, half of whom are under the age of 35. Many are moving from rural areas to cities – Vietnam boasts Asia’s highest urbanisation rate – to seek better incomes and opportunities for themselves and their families. This in turn has created solid demand for new homes, better education, healthcare, and financial services, and discretionary spending, as the rapidly growing middle class, expected to reach 33 million people by 2030, looks to spend increased disposable income.

Spurred on by strong international investor interest, private sector IPOs and a newly aggressive push by the Vietnamese government to privatise state-owned enterprises, the benchmark VN Index rose 48% in 2017, ranking it among the world’s fastest growing stock markets. And in the first few months of 2018, the stock market’s rise has continued, albeit with a bit more volatility, on the back of robust earnings growth at listed companies. The total market cap for the nearly 1,500 companies listed on Vietnam’s three exchanges is approximately US$174 billion, giving the frontier market a higher valuation than some emerging markets such as Pakistan (US$97 billion).

Add in low inflation, a stable currency and a government committed to further reforming the economy for continued sustainable growth and it is easy to see why growing numbers of international investors have been attracted to Vietnam.

How to invest in Vietnam? The VinaCapital Vietnam Opportunity Fund Launched in 2003, the VinaCapital Vietnam Opportunity Fund (VOF) is one of the largest and most successful investment vehicles focused on Vietnam. VOF is unique from other funds in that it can invest across asset classes, such as listed equities, private equity, and government privatisations, enabling it to participate in all segments of Vietnam’s vibrant economy.

Vietnam is thriving.

VOF believes that the most compelling investment opportunities are in companies participating in Vietnam’s domestic consumption growth story, sectors such as consumer discretionary, education, financial services, construction and materials, and infrastructure. Examples of some of our key investments include Vinamilk, the country’s largest food and beverage company, with a US$13 billion market capitalisation; VietJet Air, Asia’s fastest growing low-cost airline; Hoa Phat Group, the leading steel manufacturer; and most recently, Ba Huan, the largest producer of pasteurised eggs and poultry, applying international standards of safety and hygiene to meet the higher expectations of local consumers.

With extensive investment experience in Vietnam and internationally, VOF’s senior leaders have developed an expansive network that gives the fund exposure to opportunities not available to others, contributing to the fund’s strong results. In 2017, VOF’s share price and net asset value/share both increased 32%. VOF also became the only Vietnam-focused fund to pay dividends.

VOF’s recent promotion to the FTSE 250 Index is a testament to both the strength of our model and the tremendous opportunities available in Vietnam today.

Andy HoVinaCapitalVietnam Opportunity Fund

145XX Advertorial MoneyWeek_Vietnam Opportunity Fund_V2.indd 1 29/03/2018 17:29


Miton Global Opportunities plcADVERTORIAL

In order to generate returns, we believe investors will increasingly need to look for alternative investments, away

from funds, which invest in company shares and bonds1. One such area is the investment trust sector, where there are an increasing number of investment opportunities following a series of significant structural changes.

For the moment, we remain in an environment where very low interest rates are triggering rising asset prices through a lack of alternative options. We believe the high valuations on which global company shares currently trade is a direct result of the very low returns available from bonds. Should bond yields2 rise, stockmarkets would be undermined. Moving on from a period of unconventional monetary policy would be healthy in the long term, however, share prices are likely to undergo a period of turmoil whilst investors adapt to the new reality. Under such a scenario, investors would be able to obtain measurable income from conventional sources such as bonds. They would be less inclined to own “income manufacturing” trusts such as those which invest in aircraft leasing or infrastructure funds. The damage to the share prices would come from a change in demand patterns rather than from significant damage at a portfolio level.

Since 2000, those investment companies that traditionally bought investment trusts have undergone a process of consolidation. Consequently, many companies have merged to form vast wealth management chains. The impact of this consolidation has meant that a large proportion of the investment trust sector has become effectively off limits to such firms as they are unable to cope with the huge capacity and liquidity levels required by these new mega-chains whose assets under management number in the billions.

This dynamic has in effect served to ‘orphan’ hundreds of investment trusts, many of whom are now under-researched and increasingly illiquid as demand has naturally slowed, despite there being no critical issue with the trusts, assets or their overall strategies. Without demand, the share prices of these investment trusts have slowly drifted lower than the value of their underlying assets creating a significant opportunity for the diligent and specialist investor to buy.

Miton Global Opportunities Trust plc (MIGO) is, we believe, a unique investment proposition that specifically seeks to exploit opportunities in this part of the investment trust

IMPORTANT INFORMATION

The views expressed are those of the fund manager at the time of writing and are subject to change without notice. They are not necessarily the views of Miton and do not constitute investment advice.

Miton has used all reasonable efforts to ensure the accuracy of the information contained in the communication, however some information and statistical data has been obtained from external sources. Whilst Miton believes these sources to be reliable, Miton cannot guarantee the reliability, completeness or accuracy of the content or provide a warrantee.

Investors should read the Trust’s product documentation before investing including, the latest Annual Report and Accounts and the Alternative Investment Fund Managers Directive (AIFMD) Disclosure Document as they contain important information regarding the trust, including charges, tax and specific risk warnings and will form the basis of any investment.

This financial promotion is issued by Miton, a trading name of Miton Trust Managers Limited. Miton Trust Managers Limited is authorised and regulated by the Financial Conduct Authority and is registered in England No. 220241 with its registered office at 6th Floor, Paternoster House, 65 St Paul’s Churchyard, London, EC4M 8AB. MFP 18/01.

RISKS

Forecasts are not reliable indicators of

future returns.

The value of investments can fall as well as rise and investors may

not get back the full amount invested.

Miton Global Opportunities plc

may borrow money which can then be

used to make further investments (gearing). In a rising market, this ‘gearing’ can magnify

the gains or losses on your investment.

DEFINITIONS1Bond – A loan in the form of a security, either

issued by a UK or overseas government (government bonds) or company (corporate bonds), which pays a fixed rate of interest

over a given time period, at the end of

which the initial amount borrowed is repaid.

2Bond yield – The interest received

from a fixed income security and is usually expressed annually as a percentage based on the investment’s cost,

its current market value or its face value.

3Liquidy risk – The risk stemming from the

lack of marketability of an investment that cannot be bought or sold quickly enough

to prevent or minimize a loss.

sector. MIGO’s patient investment approach allows it to extract the embedded value in those investment trusts that are trading at a lower price to the value of the underlying assets in order to realise gains over the medium to long term. The key driver is the fact that in the current climate, investors are being paid royally for accepting liquidity risk3. The fact that we enjoy closed ended protection (investment trusts have a fixed number of shares) is crucial in allowing us to fish away from the crowds. It allows us to take patient decisions knowing that there is no risk of having to meet short term redemption requests.

To provide an idea of the scale of MIGO’s investment universe, there are currently over 400 investment trusts listed on the London Stock Exchange with an aggregate value of over £130 billion. Over 300 of these investment trusts are currently less than £400 million in size, and offer exposure to a broad range of alternative asset classes from the likes of property to natural resources. MIGO is therefore able to offer significant diversification across this pool of potential opportunities.

We expect the continued consolidation of the wider investment community to precipitate further structural change for investment trusts under £250 million in size. Furthermore, there appears to be no let-up in the growth of alternative asset classes creating future opportunities, many with an income bias. This development should lead to an increasing supply of future opportunities going forward.

In summary, we are focused on extracting embedded value, which already exists, not trying to generate returns from trying to second guess unpredictable future share price or market movements. We believe there is good scope for this latent value to be realised. We are excited by the opportunities and believe MIGO’s research-led approach has the ability to make gains over the long-term, in a significant but under exploited segment of the UK market.

In addition to the natural defensive buffer created by owning deeply discounted assets, owning shares in MIGO offers useful diversification given some of the current themes. Specific opportunities in the Indian stockmarket, residential property in Berlin and Forestry all feature prominently in the portfolio. Miton does not give investment advice, so if you are unsure of the suitability of this investment you should speak to a financial adviser.

Miton Global Opportunities: Bargain hunting in the investment trust sector

Seeking embedded value in alternative areas

VinaCapital Vietnam Opportunity FundADVERTORIAL

IMPORTANT INFORMATION: VinaCapital Vietnam Opportunity Fund Limited (the “Company”) is a Guernsey domiciled closed-ended investment company listed on the London Stock Exchange and is a member of the Association of Investment Companies. Past performance is not a guide to future performance. The value of investments and the income from them may fall as well as rise and is not guaranteed. An investor may not get back the original amount invested. There can be no assurance that the Company’s investment objective will be achieved and investment results may vary substantially over me. This document is for information purposes only and does not constitute an offer or invitation to purchase shares in the Company and has not been prepared in connection with any such offer or invitation. Investment Trust share prices may not fully reflect underlying net asset values.There may be a divergence between the prices at which you may purchase (“the offer price”) or sell (“the bid price”) a share on the stock market which is known as “bid-offer” or “dealing “spread”. This is set by the market makers and varies from share to share. This spread typically averages 1-2% each way on the mid-market price (the price halfway between the bid and offer prices), and can fluctuate and at times be higher than average. Net Asset Value per share is calculated in accordance with the guidelines of the Association of Investment Companies. Net assets are stated inclusive of income received. Any opinions on individual stocks are those of the Company’s Portfolio Manager and no reliance should be given on any such views. Any research in this document has been procured and may have been acted upon by VinaCapital Investment Management Ltd for its own purposes. The results are being made available to you only incidentally. The views expressed herein do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of VinaCapital Investment Management Ltd and no assurances are made as to their accuracy. This is distributed by Frostrow Capital LLP on behalf of VinaCapital Investment Management Ltd, the investment manager of VinaCapital Vietnam Opportunity Fund Limited. Frostrow Capital LLP is authorised and regulated by the Financial Conduct Authority (“FCA”). Before investing in an investment trust referred to in this advertorial, you should satisfy yourself as to its suitability and the risks involved, and you may wish to consult a financial adviser.

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In 2017, its GDP grew 6.8%, and in 2018 is expected to grow around 6.7%. Foreign direct investment reached a record US$36 billion, mostly from

companies looking to establish or expand manufacturing operations – Vietnam has quickly become the manufacturing hub of Southeast Asia. These companies are driving export growth, and in 2017 export value rose 21% to reach US$214 billion, much of that consisting of high-tech items such as mobile phones and microchips going to the EU and UK, the US, and China. Vietnam’s aggressive efforts to integrate into the global economy via free trade agreements, including the recently signed CPTPP, are reaping dividends.

Investment is also creating more and better paying jobs for Vietnam’s 95 million people, half of whom are under the age of 35. Many are moving from rural areas to cities – Vietnam boasts Asia’s highest urbanisation rate – to seek better incomes and opportunities for themselves and their families. This in turn has created solid demand for new homes, better education, healthcare, and financial services, and discretionary spending, as the rapidly growing middle class, expected to reach 33 million people by 2030, looks to spend increased disposable income.

Spurred on by strong international investor interest, private sector IPOs and a newly aggressive push by the Vietnamese government to privatise state-owned enterprises, the benchmark VN Index rose 48% in 2017, ranking it among the world’s fastest growing stock markets. And in the first few months of 2018, the stock market’s rise has continued, albeit with a bit more volatility, on the back of robust earnings growth at listed companies. The total market cap for the nearly 1,500 companies listed on Vietnam’s three exchanges is approximately US$174 billion, giving the frontier market a higher valuation than some emerging markets such as Pakistan (US$97 billion).

Add in low inflation, a stable currency and a government committed to further reforming the economy for continued sustainable growth and it is easy to see why growing numbers of international investors have been attracted to Vietnam.

How to invest in Vietnam? The VinaCapital Vietnam Opportunity Fund Launched in 2003, the VinaCapital Vietnam Opportunity Fund (VOF) is one of the largest and most successful investment vehicles focused on Vietnam. VOF is unique from other funds in that it can invest across asset classes, such as listed equities, private equity, and government privatisations, enabling it to participate in all segments of Vietnam’s vibrant economy.

Vietnam is thriving.

VOF believes that the most compelling investment opportunities are in companies participating in Vietnam’s domestic consumption growth story, sectors such as consumer discretionary, education, financial services, construction and materials, and infrastructure. Examples of some of our key investments include Vinamilk, the country’s largest food and beverage company, with a US$13 billion market capitalisation; VietJet Air, Asia’s fastest growing low-cost airline; Hoa Phat Group, the leading steel manufacturer; and most recently, Ba Huan, the largest producer of pasteurised eggs and poultry, applying international standards of safety and hygiene to meet the higher expectations of local consumers.

With extensive investment experience in Vietnam and internationally, VOF’s senior leaders have developed an expansive network that gives the fund exposure to opportunities not available to others, contributing to the fund’s strong results. In 2017, VOF’s share price and net asset value/share both increased 32%. VOF also became the only Vietnam-focused fund to pay dividends.

VOF’s recent promotion to the FTSE 250 Index is a testament to both the strength of our model and the tremendous opportunities available in Vietnam today.

Andy HoVinaCapitalVietnam Opportunity Fund

145XX Advertorial MoneyWeek_Vietnam Opportunity Fund_V2.indd 1 29/03/2018 17:29


H istoric as recent events may seem, with time their significance may fade. As Manager of The Merchants Trust, I am

investing mainly in higher-yielding large UK companies, so I’m often asked about my views on Brexit and its current and eventual impact on the UK economy and stock market. I don’t have concrete answers, of course, but the risk profile for the UK economy has clearly risen and the current political and economic uncertainty is challenging. Although the UK stock market had a decent 2017, UK shares lagged those of other global markets. And 2018 has been tricky so far.

Politics and Brexit have been concerning potential investors. Global exposure to UK equities has been falling as investors have been taking their money out of the UK and investing it elsewhere. Yet, corporate buyers seem to have ignored the doom and gloom and have been targeting UK companies. We have seen several takeover approaches or full bids for UK mid-cap companies in the last few months. Corporate appetite for ‘UK PLC’ backs up our own view that the UK stock market is one of the cheapest markets in the developed world right now with many domestically exposed sectors trading on

There have been so many ‘speed bumps’ threatening to impact the global economy over the last couple of years, it’s easy to assume that unprecedented, fundamental change in the world economic order may be inevitable. Certainly, for the last year or so we have been in unchartered – and potentially choppier – waters, with various global developments threatening to ‘rock the boat’. Torturous Brexit negotiations, dramatic elections across Europe, the first full year of the Trump presidency (and the politically divisive implications of the ‘America First’ policy) come to mind immediately, but there are many more. But do seemingly momentous events like these really signify a fundamental economic turning point or rather just the latest chapter in an ongoing story?

STILL FINDING WINNERS IN THE UK


Simon Gergel is CIO of UK Equities at Allianz Global Investors and is portfolio manager of The Merchants Trust PLC. Merchants has for many years focused on a simple proposition to deliver a high and rising income together with capital growth for its shareholders. Although past performance is no guide to the future, Merchants has paid a rising dividend to shareholders for 36 consecutive years.

Simon GergelPortfolio Manager The Merchants Trust PLC

This is a marketing communication issued by Allianz Global Investors GmbH, an investment company with limited liability, incorporated in Germany, with its registered office at Bockenheimer Landstrasse 42-44, D 60323 Frankfurt/M, registered with the local court Frankfurt/M under HRB 9340, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht (www. bafin.de). Allianz Global Investors GmbH has established a branch in the United Kingdom, Allianz Global Investors GmbH, UK branch, which is subject to limited regulation by the Financial Conduct Authority (www.fca.org.uk). This communication has not been prepared in accordance with legal requirements designed to ensure the impartiality of investment (strategy) recommendations and is not subject to any prohibition on dealing before publication of such recommendations. The Merchants Trust PLC is incorporated in England and Wales (Company registration no. 28276). Registered Office: 199 Bishopsgate, London, EC3M 3TY.

This is a financial promotion from Allianz Global Investors.

low valuations due to concerns about Brexit, political risk or structural factors. For corporate buyers willing to look longer term, these valuations can represent rare opportunities to buy sound businesses at bargain prices.

Many domestically exposed stocks have been feeling the pain, partly because of concerns that the nature of post-Brexit trading arrangements may cause the domestic economy to slow down. Although we take account of macro-economic trends, our focus is on the fundamental qualities of individual businesses and we have been able to unearth sound companies in out-of-favour sectors. The Trust’s portfolio has a high exposure to modestly rated companies and their underperformance over recent months has made this a fertile investment area for us.

Differentiation is crucial. As a stock picker I would say there are lots of opportunities out there right now. You must do your homework, of course, analysing and understanding the specific issues that could affect specific companies. However, in many cases, Brexit may not play out to be such a big issue although the knock-on effect on the economy overall is something we will always need to bear in mind.

In uncertain times it can be helpful to look back. During my career there have been some incredibly tough times, like the 1987 crash and, more recently, the 2008 bear market and recession,

which many consider to be the worst financial crisis since the Great Depression of the 1930s. I’ve been running The Merchants Trust for 12 years but the Trust itself was established in the 19th century and will celebrate its 130th birthday next year. Not only has it survived global conflicts and crises, but its resilience through markedly different market conditions has enabled it to generate notable long-term returns for its investors. I’m sure there must have been many a time along the way when investors felt they too were embarking on an era of fundamental change.

The UK economy may be under a cloud right now but, as well as domestically focused businesses, the UK is home to some of the world’s largest and best known “mega cap” businesses so investing in UK stocks can still provide access to the global economy. These companies choose to call the UK ‘home’ because, structurally, we have some of the highest standards of stewardship and corporate governance anywhere in the world. And for those UK stocks that are truly domestically focused (i.e. deriving most of their revenues from within the UK and where clouds have gathered since the June 2016 EU referendum result) there will still be long-term winners, even though they may be almost universally lowly valued today.

Looking ahead, the outlook is tough to call. Losing access to the EU’s free trade area may be an economic negative but it will give the UK the opportunity to change the way it trades with the rest of the world, potentially for the better. I’m certainly not ready to write off the long-term prospects for the UK economy and, in the meantime, my focus remains on strong franchises with distinct businesses models – companies that have a good chance to do well, even if the short-term environment is uncertain.

To find out more about Simon’s investment philosophy and stock selection process, view the latest Merchants annual report which is available at www.merchantstrust.co.uk.

“Corporate appetite for ‘UK PLC’ backs up our own view that the UK stock market is one of the cheapest markets

in the developed world right now.”

Important information: This is no recommendation or solicitation to buy or sell any particular security. Any security mentioned above will not necessarily be comprised in the portfolio by the time this document is disclosed or at any other subsequent date. Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors may not get back the full amount invested. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer and/or its affiliated companies at the time of publication. The data used is derived from various sources, and assumed to be correct and reliable, but it has not been independently verified; its accuracy or completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from its use, unless caused by gross negligence or wilful misconduct. The conditions of any underlying offer or contract that may have been or will be made or concluded shall prevail.

since the start of the year is testament to how benign conditions have been. The Vix index of volatility 2 has only hit the level seen throughout much of 2012-2014 and is less than a third of its level during the financial crisis. This is not significant volatility by historic standards. It only feels painful because investors have become so unused to it.

For a period of time in the wake of the global financial crisis, investors sought reliability above all. While this sometimes led them to quality companies, it made them agnostic on valuations and indifferent and the earnings picture for some of those companies weakened. They weren’t seeking ‘quality’ so much as historic stability – and, as we know, past performance is no guide.

This environment may be about to change, as we move from a falling interest rate environment to one where rates are rising. It should be said that for the time being, the US the only major market in a rising cycle. However, outstanding US government debt is around twice as high as that of its nearest rival (Japan) so its position is important 3. Equally, it would only take one or two of the world’s major central banks – the UK, Japan or Eurozone – to shift its position for over half of global bond markets to be in tightening mode. This would be mark a major change in the risk environment.

As Warren Buffett famously said, it is only when the tide is going out, that you see who is swimming naked. As liquidity conditions tighten, weaker companies may find themselves starved of capital as investors become more discerning, more indebted companies may find their debt burden increases and they can no longer sustain their business model. Suddenly ‘quality’ matters a great deal more than it did before.

F or the best part of a decade, investors haven’t had to worry too much about risk. Loose monetary policy helped float all boats: Taking risk paid off

for investors, with little downside in the form of higher volatility. As the environment changes, however, this benign environment may not endure and risk could become real rather than theoretical.

Quantitative easing and low interest rates sprinkled their magic on companies. Like champagne cascading down a tower of glasses, eventually it reached the bottom of the heap. Investors didn’t need to pay too much attention to metrics such as corporate balance sheets or higher leverage because loose monetary policy bailed them out. Companies that were weak and indebted could generally refinance at lower rates. Companies that would have gone bust, or been forced to restructure, were supported.

Recently, Claudio Borio, head of the Monetary and Economic Department of the Bank for International Settlementsraised concerns about the tendency of low interest rates to sustain ‘zombie companies’1. He defined these as older companies, unable to service their debts under normal circumstances. In a standard cycle, they would have been gone bust or been taken over and new, better companies would have emerged to fill the void.

There is now a whole generation of investors who have never seen an interest rate rising cycle, or even a recession. Volatility has been so low for so long, that it appears to have skewed investor perception of what constitutes normal market volatility. The furore around the turbulent markets


– Loose monetary policy has allowed investors to take risk with little fear for the consequences

– The shift in the monetary policy environment is likely to change this, exposing companies with high debt and weaker business models

– In this new environment, investors will have to ensure that companies are genuinely resilient

QUALITY CONTROL:A re-evaluation of risk


A secondary risk, but one that shouldn’t be ignored, is that of recession. The global economy has been in expansion mode for some time, and this year no major economy is

forecast to be in recession. This can create an illusion

of invincibility. Investors are often seduced by rising

prices to believe that risk has diminished. While recession is

not our central position, it remains a possibility and the flattening of the US yield

curve – typically an auger of recession – should give investors pause for thought.

Companies can – and do – go bust. The difficulties experienced by, variously, UK high street retailers, and government outsourcing companies, or European airlines shows that even large companies can be laid low by changing market conditions, excessive debt or poor management. A less benign monetary environment will expose these weaknesses.

In this context investors need ‘wiggle room’, a margin of safety. They need to ensure that companies are genuinely delivering high and sustainable earnings rather than trading on past success. Those who can truly claim the stamp of ‘quality’ need to be able to back that up with real business strength, thoughtful management and attentiveness to shareholder value. A lot of traditionally defensive companies look over-valued, without the earnings to sustain their current share prices. Investors need to tread carefully in this environment.

Within the Murray International Trust, we aim to direct capital to those parts of the world experiencing real growth. Almost a quarter of our portfolio is in the Asia Pacific ex Japan region, with Latin America and other emerging markets making up a further 17%. We believe that fundamentals look increasingly fragile in some areas, particularly within developed markets, and the companies in which we invest need to be genuinely and demonstrably resilient. At this inflection point, we are making sure that ‘quality’ means exactly that.

Risk warnings• The value of investments and the income

from them can fall and investors may get back less than the amount invested.

• Past performance is not a guide to future results.

• Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.

• The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.

• The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.

• The Company may charge expenses to capital which may erode the capital value of the investment.

• Movements in exchange rates will impact on both the level of income received and the capital value of your investment.

• There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.

• As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen.

• Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.

• The Company invests in emerging markets which tend to be more volatile than mature markets and the value of your investment could move sharply up or down.

Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. You should obtain specific professional advice before making any investment decision.

Bruce Stout is a senior investment manager on the Global equities team. Bruce joined Aberdeen in 1987 via the acquisition of Murray Johnstone. Bruce has held a number of roles including investment manager on the emerging markets team.

Bruce graduated with a BA in Economics from the University of Strathclyde and completed a graduate training course with General Electric Company UK.

Bruce StoutSenior Investment Manager Murray Income Trust PLC

This article is issued by Aberdeen Asset Managers Limited which is authorised and regulated by the Financial Conduct Authority in the United Kingdom.Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments.Registered Office: 10 Queen’s Terrace, Aberdeen AB10 1YG. Registered in Scotland No. 108419. An investment trust should be considered only as part of a balanced portfolio. Under no circumstances should this information be considered as an offer or solicitation to deal in investments.

This is a financial promotion from Aberdeen Asset Managers Limited.

Find out more at www.murray-intl.co.uk

QUALITY CONTROL:

1. www.ft.com/content/40c44992-17c3-11e8-9376-4a6390addb44

2. https://finance.yahoo.com/quote/%5EVIX/3. www.bis.org/statistics/bulletin1803.pdf, p194

18 | Taking Stock alliancetrustsavings.co.uk18 | Taking Stock alliancetrustsavings.co.uk

The technology sector in particular has the potential to deliver income. Many innovative start-ups offer new and exciting technologies, but well-established IT companies are benefiting too, as organisations look to upgrade their systems and processes. We’re also finding that an increasing number of technology firms use cash to pay dividends, contrary to the notion that IT firms can add value to investors only via their growth potential. We believe this trend will continue, as shareholders are increasingly willing to reward mature IT companies’ management teams for dividend payments.

The opinions expressed are as of May 2018 and are subject to change at any time due to changes in market or economic conditions. The above descriptions are meant to be illustrative. There is no guarantee that any forecasts made will come to pass.

Risks

Please note you may not get back the amount originally invested. Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.

For more information on the opportunities that North America represents, please visit www.blackrock.com/uk/brna.

Capital at risk: All financial investments involve an element of risk. Therefore, the value of your investment and

any income from it will vary and your initial investment amount cannot be guaranteed.

As much of the developed world looks forward to longer life expectancy (The Lancet, February 2017), we anticipate that the ageing populations in the US, Europe and Japan will prioritise income in their investment portfolios. Yet traditional avenues are becoming less attractive or easy to find.

An alternative source can potentially be found in the US stock markets; more specifically, in companies that pay regular dividends to shareholders. We believe that companies responding positively to disruptive technologies – and upsetting traditional business models in the process – may prove significant as dividend payers.

Please remember that capital growth values may fluctuate and the level of income may vary and is not guaranteed.

Investing in shares that potentially deliver consistent dividend growth, as well as regular dividend payments, can offer investors the opportunity for long-term capital growth. A look at the S&P 500 from 1940-2017 reveals that dividend reinvestment and the effects of compounding (receiving interest on your interest) accounted for more than 40% of the index’s returns (Morningstar. Data from 1/1/1940 to 12/31/2017).

There is no guarantee that a positive investment outcome will be achieved.

Important information: Non-mainstream pooled investment products status.The Company currently conducts its affairs so that its securities can be recommended by Independent Financial Advisers to ordinary retail investors in accordance with the Financial Conduct Authority (FCA) rules in relation to non-mainstream investment products and intends to continue to do so for the foreseeable future. The securities are excluded from the FCA’s restrictions which apply to non-mainstream investment products because they are shares in an investment trust.Any research in this document has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy.The Company is managed by BlackRock Fund Managers Limited (BFM) as the AIFM. BFM has delegated certain investment management and other ancillary services to BlackRock Investment Management (UK) Limited. The Company’s shares are traded on the London Stock Exchange and dealing may only be through a member of the Exchange. The Company will not invest more than 15% of its gross assets in other listed investment trusts. SEDOL™ is a trademark of the London Stock Exchange plc and is used under licence. © 2018 BlackRock, Inc. All Rights reserved. BlackRock, BlackRock Solutions, iShares, Build on BlackRock, So What Do I Do With My Money and the stylized i logo are registered and unregistered trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners. ID: 489818.

Tony DeSpiritoPortfolio Manager BlackRock North American Income Trust plc

This article is issued and approved by BlackRock Investment Management (UK) Limited (authorised and regulated by the Financial Conduct Authority). Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Registered in England No. 2020394. Tel: 020 7743 3000. For your protection, telephone calls are usually recorded. BlackRock is a trading name of BlackRock Investment Management (UK) Limited.

This is a financial promotion from BlackRock Investment Management.

APPETITE FOR DISRUPTION:How new technology is driving dividends

Tony DeSpirito is co-manager of the BlackRock North American Income Trust plc. He is co-lead of the Equity Dividend Team and Director of Investments, US Equities within the Fundamental Active

Equity business of BlackRock’s Active Equity Group. Prior to joining BlackRock in 2014, Tony worked at Pzena Investment Management where he was Managing Principal, portfolio manager, and a member of the firm’s Executive Committee. Tony earned a BS degree, summa cum laude, from the Wharton School of the University of Pennsylvania in 1990 and a JD degree, magna cum laude, from Harvard Law School in 1993.


Success in investment doesn’t come easily.

It takes skill.

Conviction.

The determination to focus on your goals.

Whatever the conditions.

And the experience to fi nd a new route when challenges arise.

As a unique investment trust, we think differently.

Like our fi rst-ever clients, 130 years ago.

Those pioneers se ing out on the Old Oregon Trail.

Today, we’re pioneering a new investment style.

A high-conviction, multi-manager approach.

Delivered by eight of the world’s leading equity managers.

Discovering the best opportunities.

And selecting only their best investment ideas.

Navigating risk and seeking out growth potential.

Helping investors like you aim higher with their savings.

Investing for today.

Tomorrow.

And generations to come.

When investing, your capital is at risk. The value of your investment may rise or fall as a result of market fl uctuations and you might get back less than you invested.

Alliance Trust PLC is listed on the London Stock Exchange and is registered in Scotland No SC1731. Registered offi ce, 8 West Marketgait, Dundee DD1 1QN. Alliance Trust PLC gives no fi nancial or investment advice.

To fi nd out more and take advantage of this opportunity, visit alliancetrustsavings.co.uk/alliance-trust or speak to your adviser.

APPETITE FOR DISRUPTION:

Charles Plowden, Malcolm MacColl and Spencer Adair have been managing Monks Investment Trust since April 2015. But this triumvirate have been working together since 2005 on Global Alpha, Baillie Gifford’s largest institutional strategy with over £30 billion invested. Monks sets out to be a core global growth investment and could act as a cornerstone to private investors’ portfolios.

MONKS: GROWTH FROM DIFFERENT PERSPECTIVES


T he managers seek to create a differentiated, actively managed global equity portfolio containing a diversified range of growth stocks. Recognising that growth comes in

many shapes and sizes, they have identified four sub-categories of growth that they believe will generate sustainable growth and hopefully lead to the trust’s outperformance over the long term.

When analysing businesses, the managers focus on their underlying growth attributes and do not allow themselves to be distracted by the traditional habit of labelling companies by sector or domicile. For them, it is ridiculous to think that the location of a company’s headquarters matters in this globalised world, or that all financial or technology stocks share common business characteristics.

Monks categorises its investments into four growth categories: Growth Stalwarts, Rapid Growth, Cyclical Growth and Latent Growth. The team has a clear view of the inefficiencies they are exploiting within each growth category and the reasons why they expect investments to outperform. The use of these four designations also encourages diversity across the portfolio and provides a means of monitoring the operational performance of the investments.

1. Growth Stalwarts These companies have durable franchises. They are expected to deliver robust profitability in most macroeconomic environments. Within this area, the managers are often drawn to businesses where the competitive advantages include dominant local scale, customer loyalty and strong brands. An example of one such stock held in


the portfolio would be Thermo Fisher Scientific, the medical equipment, software and services company. In healthcare terms it is akin to those firms who sold picks and shovels to miners during the gold rush. It enjoys high customer loyalty and has the potential for strong structural growth. We would hope Stalwarts to produce earnings and cash flow per share growth of around 10% per annum over the long run. These are the types of long-duration businesses where the market fails to appreciate the benefits of compounding, as they may appear unexciting relative to more rapid or cyclical growth companies.

2. Rapid Growth Most frequently, these are earlier stage businesses where the market opportunity is vast. Investments in this area might expect to deliver high levels of revenue growth (at double digit per annum rates), and profit growth of 15–25%+ per annum on a five year view. Commonly, these are companies which are innovative, some attacking existing industry profit pools and some creating new markets for themselves. The AIA Group, which is one of pan-Asia’s largest insurance and investment groups, is a typical Rapid Growth company. It is capitalising on Asia’s expanding middle class tackling a huge and as yet unmet need for basic financial products.

3. Cyclical Growth Companies in this category will have material secular growth prospects, but will also be subject to the influence of macroeconomic or capital cycles, and sometimes both. Here the managers look for businesses which are adaptable, with management teams trusted to allocate capital skilfully. Typically, the earnings of these businesses are expected to increase 10–15% per annum over the course of a complete cycle. Orica would be a good example from the current portfolio. This company provides services to the mining industry. In particular Orica is the global leader in commercial explosives and blasting technologies. Its business is set to pick up as the mining industry recovers, offering a potential opportunity for significant margin improvement.

4. Latent Growth These are firms with often unspectacular recent operational records. The market expects them to either shrink or produce very low growth. However, analysis has identified a company-specific catalyst or series of catalysts, which will allow above average earnings and cash flow growth to re-emerge. The Monks managers expect to make money in these stocks if the market’s expectations for earnings growth are upgraded and higher valuation multiples are attached to the profit stream. Fiat Chrysler Automobiles fits into this category. Through a series of bold purchases (including Chrysler and Jeep) the management of Fiat have set about rejuvenating tired brands and dispelling poor market perceptions about their products.

In essence Monks offers a diverse and measured take on global growth. The managers like a flat portfolio with around 110 stocks sized according to enthusiasm. They invest with an eye to valuation levels. It is a trust that can sit comfortably at the centre of anyone’s portfolio.

This article is issued by Baillie Gifford & Co Limited and does not in any way constitute investment advice. All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.

This is a financial promotion from Baillie Gifford & Co Limited.

Important information and risk warnings: The views expressed in this article should not be considered as advice or a recommendation to buy, sell or hold a particular investment. Some of the views expressed are not necessarily those of Baillie Gifford. Investment markets and conditions can change rapidly, therefore the views expressed should not be taken as statements of fact nor should reliance be placed on them when making investment decisions. This article contains information on investments which does not constitute independent investment research. Accordingly, it is not subject to the protections afforded to independent research and Baillie Gifford and its staff may have dealt in the investments concerned. Please remember that the value of a stock market investment and any income from it can fall as well as rise and investors may not get back the amount invested. Investments with exposure to overseas securities can be affected by changing stock market conditions and currency exchange rates. The trust invests in emerging markets where difficulties in dealing, settlement and custody could arise, resulting in a negative impact on the value of your investment. Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed UK companies and are not authorised and regulated by the Financial Conduct Authority.

James graduated MA in Classics from the University of Cambridge in 1987. He joined Baillie Gifford in 2008 having worked at Witan Investment Trust and Henderson Global Investors. James is a Director of Marketing and Distribution in the Clients Department.

James BuddenDirector, Marketing and Distribution Baillie Gifford

2014 2015 2016 2017 201812.2 10.6 -3.2 53.9 20.3

Source: Morningstar. Share price, total return.

Monks Annual Past Performance To 31 March each year (%)

Past performance is not a guide to future returns.


We understand why investors may be hesitant about investing right now. Stock markets have been rising (more or less) steadily over recent years, despite the unsettling political landscape. With market valuations high, a market correction is a risk. But global political events have so far failed to dent equity markets to any significant degree because the underlying economic data has remained so robust. Capital gains have been stronger than we expected, with the possible exception of the UK, where the political uncertainty since the Brexit vote has triggered some sluggish and uncertain growth; nevertheless, UK markets have still made positive progress year-on-year and it has been possible to identify UK stock winners.

Our priority for Brunner is to build a global equity portfolio of around 70 strongly financed companies with good growth prospects that are trading on sensible valuations. I’ve always run relatively concentrated portfolios and I am comfortable with that approach as I think it concentrates the mind. You really must make sure you’re choosing the right stocks but it also means that you can have decent weightings in the stocks that you go on to buy. As Brunner’s objective is to deliver growth in both capital value and

E stablished in 1927, Brunner has demonstrated not only longevity over its 91 years but also an ability to deliver long-

term income and growth returns in a sustained manner. It is not alone in successfully navigating the variety of market conditions that history has thrown at it. However, now that we find ourselves in such a fast-moving world characterised by fundamental change, a look back at the Trust’s long and distinguished history can be both educational and reassuring.

BRUNNER: THE SEARCH FOR FUTURE WINNERS AHEAD OF THE CROWDLongevity and long-term conviction are two attributes that Investment Trusts have demonstrated over 150 years. As Portfolio Manager of The Brunner Investment Trust (and an investor in Investment Trusts myself), I know that investors considering future investment decisions find it reassuring to look back in time at their history, since these are amongst the very oldest forms of investment vehicle.


Lucy Macdonald is CIO of Global Equities at Allianz Global Investors and is portfolio manager of The Brunner Investment Trust PLC. Brunner aims to provide its investors with growing dividends and capital growth by investing in a portfolio of global equities. Although past performance is no guide to the future, Brunner has paid a rising dividend to shareholders for 46 consecutive years.

Lucy MacdonaldPortfolio Manager The Brunner Investment Trust PLC

This is a marketing communication issued by Allianz Global Investors GmbH, an investment company with limited liability, incorporated in Germany, with its registered office at Bockenheimer Landstrasse 42-44, D 60323 Frankfurt/M, registered with the local court Frankfurt/M under HRB 9340, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht (www. bafin.de). Allianz Global Investors GmbH has established a branch in the United Kingdom, Allianz Global Investors GmbH, UK branch, which is subject to limited regulation by the Financial Conduct Authority (www.fca.org.uk). This communication has not been prepared in accordance with legal requirements designed to ensure the impartiality of investment (strategy) recommendations and is not subject to any prohibition on dealing before publication of such recommendations. The Brunner Investment Trust PLC is incorporated in England and Wales (Company registration no. 226323). Registered Office: 199 Bishopsgate, London, EC3M 3TY.

This is a financial promotion from Allianz Global Investors.

dividends, the companies we choose need to meet certain criteria. As a team, we prefer companies in growing industries that can grow through their own innovation. We believe these are the sorts of companies that will allocate surplus capital well and invest wisely in both business and management. But, we also need companies that can provide a decent yield, to keep a core part of the dividend coming through. This balance is something we have achieved over time – Brunner has increased its dividend for 46 consecutive years, something that’s very important to our investors and a source of pride for us.

The last year was a strong one for Brunner. We have demonstrated that we can deliver strong overall returns in a range of market environments. It’s helpful that, since we focus on companies, the Brunner portfolio is diversified across a wide range of sectors and geographies, without being overly exposed to any one theme or sector. We always aim to discover future winners ahead of the crowd; this provides us with the prospect of real potential upside.

In recent years, we have been shifting Brunner’s portfolio overseas – with the UK now making up about 30% of the geographic portfolio breakdown, down from around 45% at the end of 2013. We felt that the income generation requirement had become too dependent on the UK and too reliant on solid, dependable but not necessarily fast-growing companies – some of

the banks, pharmaceuticals, energy companies, for example. It was time to diversify and give exposure to interesting sources of yield overseas. The UK is still important but it’s worth remembering that the vast majority of our UK investments are international businesses, meaning that our overall exposure to the domestic UK economy remains modest.

Politically and economically, we are living in unprecedented times. But, as a ‘bottom-up’-driven fund manager, we are confident that our stock selection can cope with momentary unrest in the markets. Right now, technology is a sector where we think we can find stocks with structural growth potential. Digitisation is having a massive impact on industry and commerce and we are all familiar with the digital heavyweights that have become part of our daily lives.

The Digital Economy phenomenon goes well beyond the ‘new’ digital players as it also encompasses the shift of existing businesses online, with all the cost, business model and cultural disruption this entails. Excitingly, this transformation of the corporate sector is still at a relatively early stage. We think the ability to embrace digital technology and to train workforces on how to use it will be pivotal to future corporate success stories.

Cloud computing, social networking, online travel and gaming are all represented in the Brunner portfolio. And looking ahead, as many industries continue the shift online, we think it will be our ability to differentiate between those companies that are leading, and profiting from, the digitisation trends in their industries, while at the same time avoiding the losers. This holds the key to the Trust’s future performance potential, but we are confident that our stock picking approach in these interesting times will continue to serve our valued investors well in the future.

To discover more about Lucy’s investment approach, visit www.brunner.co.uk where you can register for regular updates.

“I’ve always run relatively concentrated portfolios

and I am comfortable with that approach as I think

it concentrates the mind.”

Important information: This is no recommendation or solicitation to buy or sell any particular security. Any security mentioned above will not necessarily be comprised in the portfolio by the time this document is disclosed or at any other subsequent date. Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors may not get back the full amount invested. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer and/or its affiliated companies at the time of publication. The data used is derived from various sources, and assumed to be correct and reliable, but it has not been independently verified; its accuracy or completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from its use, unless caused by gross negligence or wilful misconduct. The conditions of any underlying offer or contract that may have been or will be made or concluded shall prevail.


TIPS FOR UNCERTAIN TIMES

Are we on the cusp of a fundamental change in the world order? What might this mean for markets? No one can say for sure. Investors and uncertainty can be a volatile mix. But there are some basic tips that can help you make the most of your money whatever the future may bring. Alliance Trust Savings’ James McCafferty explains.


James is Platform Proposition Manger at Alliance Trust Savings and has responsibility for the ongoing development of the platform and products. He has over 15 years industry experience gained in the Intermediary Business at Cornelian Asset Managers and in previous roles with F&C and Standard Life.

James McCaffertyPlatform Proposition Manager Alliance Trust Savings Limited

Important information: This information does not constitute investment advice or a personal recommendation for any particular investment and should not be used as the basis of any investment decision. If you are unsure, you should consult a Financial Adviser before investing. The value of your investments and any income from them can go down as well as up and you may get back less than you originally invested. Past performance is not a guide to future performance.

This article is issued and approved by Alliance Trust Savings Limited. Alliance Trust Savings Limited is a subsidiary of Alliance Trust PLC and is registered in Scotland No. SC 98767; registered office, PO Box 164, 8 West Marketgait, Dundee DD1 9YP; is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, firm reference number 116115.

This is a financial promotion from Alliance Trust Savings Limited.

1. USA Today, Bull market for stocks is turning 9, 7 March 2018.2. The Guardian, Dow and FTSE hit record highs as global

stock market surges continue, 4 January 2018.3. CityAM, The ‘£17,808 cost’ of mistiming your FTSE

investments, 21 March 2018.4. Quotesonfinance.com, Albert Einstein – Compound interest.5. The Association of Investment Companies, AIC dividend

heroes, 12 March 2018.

L ess than 10 years ago the banking crisis sent markets into freefall, with investors selling out of equities in fear of a once-in-

a-lifetime crash. The implications for the banking system and the global economy seemed dire.

While in many ways we’re still paying the price of the crisis, investors have since had a much better time than might have been expected. Those who resisted the temptation to sell out of stock market-related investments have been rewarded by a nine-year bull market1.

Those nine years haven’t exactly been calm though. Markets have been buffeted by all manner of events – from the fallout from the crisis and the impact of the technological revolution to political turbulence and terrorist atrocities – and there have been sharp corrections along the way. Global indices reached new highs in 2017 and early 20182, underlining what can be a stark disconnect between economies and investment markets.

So, what can an investor do to potentially benefit when investing through uncertain times?

Being patient and keeping your eye on the prize.If you’re in it for the long-term, knee-jerk reactions in response to short-term volatility can do more harm than good. Just missing out on a handful of good days may have a devastating impact on your total returns.

Research by Schroders found that a £1,000 investment left in the FTSE 250 since 1987 would have been worth almost £25,000 after 30 years. If you’d missed the best 30 days in that period – perhaps because you tried to ‘time the market’ – you would have had just £6,878 to show for your investment. Even if you’d just missed the best 10 days your investment pot would have been be around £10,000 smaller, at £14,4563.

Remember though, past performance is not a guide to future performance and may get back less than you invest.

Remembering the potential rewards of regular investingWhether you’ve invested a lump sum or you pay a modest amount in each month, the fundamentals of successful investing remain the same. But there is a particular potential advantage to regular savings, in the form of what’s known as pound-cost averaging.

This refers to the way that drip-feeding money into investments on a regular basis – usually monthly – allows you to buy assets at different prices rather that at one value. Your money will buy more units of investments when prices are

low, and fewer when they are high. In this way you can effectively smooth out the highs and lows in prices over time, giving yourself the best chance of riding out the short-term bumps while bolstering your long-term return potential.

Tapping in to the power of compoundingAlbert Einstein reportedly described compounding as “the most powerful force in the universe”4. Compounding is the snowball effect that can occur when investment income – perhaps in the form of dividends or interest – is not taken out at the time, but instead reinvested so it is available to generate further growth. The magic of compounding is that, once it starts, the potential for growth can be multiplied over time.

Investment trusts can be especially effective here, thanks to their ability to set aside up to 15% of their income in reserve each year to help maintain income payouts during leaner times. More than 20 investment trusts have provided at least 20 consecutive years of dividend increases, and four have raised their dividend every year for more than 50 years5. Investment returns do go down as well as up though, and you could get back less than you put in.

Spreading the riskThis is about diversification, the golden investment rule that, perhaps more than any other, can stand you in good stead in both good times and bad.

Diversification involves spreading your money across different assets, funds, sectors and companies to ensure you’re not over-exposed in the event of sharp falls in one or two areas. It’s important because history tells us there’s no way of predicting which asset class or sector will perform best over a certain period, and which will likely take a tumble.

Effective diversification means that if some of your holdings go down, others may remain stable and some may go up, helping manage the overall risk of your portfolio going down in value and you getting back less than you put in.

While diversification can’t prevent you from losing money, it can reduce your potential for losses and help to ensure you’re well placed to take advantage of opportunities that arise.

Take a look at which investment trusts Alliance Trust Savings’ customers have been buying.

These tables are based on the monetary value of purchases made by the our investors on the dates stated below. They do not give any indication of the investment performance of the investments trusts stated. This information is provided for educational and informational purposes only. Any commentary provided should not be considered as a personalised recommendation and no reliance should be placed on the rankings of any investment trusts in making investment decisions.

Investments can go down as well as up and investors can get back less than they originally invested. If you are unsure if a particular investment trust is suitable for you, you should seek independent financial advice before making any investment decision.

Investments trusts may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV), meaning that a relatively small movement down or up, will result in a magnified movements in the same direction, of that NAV. This may mean that you could get back nothing at all.

Investment trust

TOP 20s

Top 20 for 2018 to 30 June Top 20 in June 2018

1 Scottish Mortgage Investment Trust2 Alliance Trust3 Worldwide Healthcare Trust 4 Personal Assets Trust 5 Fundsmith Emerging Equities Trust 6 Witan Investment Trust7 City of London Investment Trust8 Merchants Trust 9 RIT Capital Partners 10 Edinburgh Worldwide11 Herald Investment Trust12 Pantheon International 13 Edinburgh Investment Trust14 F&C Commercial Property Trust15 Murray International Trust16 Monks Investment Trust 17 Finsbury Growth & Income Trust18 Picton Property Income19 Foreign & Colonial Investment Trust20 Caledonia Investment Trust


1 Scottish Mortgage Investment Trust2 Alliance Trust3 Worldwide Healthcare Trust4 Personal Assets Trust5 City of London Investment Trust6 Witan Investment Trust7 RIT Capital Partners8 Finsbury Growth & Income Trust9 Foreign & Colonial Investment Trust10 Monks Investment Trust11 Edinburgh Investment Trust12 Merchants Trust13 Fundsmith Emerging Equities Trust14 Pantheon International15 Murray International Trust16 Schroder European Real Estate Investment Trust17 HICL Infrastructure Company18 Edinburgh Worldwide19 Picton Property Income20 Baillie Gifford Shin Nippon


The flat fee differenceWe charge flat Account fees. So, as your investments grow, your Account fees won’t. We think that’s only fair.

SIPP Account

Portfolio size £50,000 £100,000 £250,000 £500,000 £1,000,000AJ Bell Youinvest £131 £256 £631 £881 £1,381Alliance Trust Savings £252 £252 £252 £252 £252Bestinvest £150 £300 £750 £1,250 £2,250Fidelity Personal Investing £175 £350 £500 £1,000 £2,000Hargreaves Lansdown £225 £450 £1,125 £1,750 £3,000

Portfolio size £50,000 £100,000 £250,000 £500,000 £1,000,000AJ Bell Youinvest £131 £256 £631 £881 £1,381Alliance Trust Savings £120 £120 £120 £120 £120Bestinvest £200 £400 £1,000 £1,500 £2,500Fidelity Personal Investing £175 £350 £500 £1,000 £2,000Hargreaves Lansdown £225 £450 £1,125 £1,750 £3,000

ISA Account

How our charges compareFlat fees can be great value at larger portfolio sizes. That’s why the comparisons below start at £50,000. The tables show the annual costs of holding your investments on Alliance Trust Savings, compared to some of our competitors who charge based on the value of your investments. Please remember that the value of your investments and any income from them can go down as well as up and you may get back less than the amount originally invested. If you are unsure as to the suitability of any particular investment or product, you should seek professional financial advice.

About the comparisons:• The comparisons are of the main Account fee or platform custody charge, including any annual product charges.• For each Platform we include the cost of four trades, other dealing and service charges are excluded. You should check

with each provider for the detail of all their charges. For Alliance Trust Savings you can find this in our Charges Guide at alliancetrustsavings.co.uk.

• Underlying investment costs (for example the ongoing fees you’ll pay a fund manager) are also excluded and the figures we give do not reflect investment returns. We assume portfolios are invested in unit trusts and OEICs and values stay the same throughout the year.

• The charges figures used for comparison were sourced by the lang cat from each provider’s website as at 25 June 2018. Charges may be subject to change in the future.

• Competitors selected for comparison are direct to customer platforms offering both ISA and SIPP accounts, and charging percentage based Account fees.

If you are looking to consolidate or simply want to get more for your money, take advantage of the flat fee difference today. Visit alliancetrustsavings.co.uk.

Alliance Trust Savings Limited is a subsidiary of Alliance Trust PLC and is registered in Scotland No. SC 98767, PO Box 164, 8 West Marketgait, Dundee DD1 9YP; is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, firm reference number 116115. Alliance Trust Savings gives no financial or investment advice.

ATS GEN MAG 0026 (Summer 2018)

Alliance Trust Savings Limited does not give advice. If you are unsure whether an investment is right for you, you should seek professional advice.The articles in this magazine from other investment trusts have been paid for and as such are published without any representation or endorsement made by or from us of any kind whether express or implied, including but not limited to the opinions expressed, appropriateness of any recommendation made, fitness for a particular purpose, compatibility with any investment strategy or accuracy.We will not be liable for any indirect or consequential loss or damage whatever (including without limitation loss of business, opportunity, data, profits) arising out of or in connection with your reliance on any article or the contents of any article contained in this Magazine.

Alliance Trust Savings Limited is a subsidiary of Alliance Trust PLC and is registered in Scotland No. SC 98767, registered office, PO Box 164, 8 West Marketgait, Dundee DD1 9YP; is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, firm reference number 116115. Alliance Trust Savings gives no financial or investment advice.

Manage your account online at alliancetrustsavings.co.uk

• Buy and sell online

• Same day set-up and trading (conditions apply)

• Online monthly dealing

Call 01382 573737

Our real-time telephone dealing service is available during normal UK market opening hours. Calls may be recorded for training and monitoring purposes.

Alliance Trust Savings Limited PO Box 164 8 West Marketgait Dundee DD1 9YP

Send us your instruction form and cheque and we’ll process your trades. For full details of all charges, please visit alliancetrustsavings.co.uk

Ways to do business

Documents

Changing times INVESTING FOR A NEW WORLD ORDER?FIDELITY EUROPEAN VALUES PLC By Sam Morse, April 2018. Taking Stock alliancetrustsavings.co.uk | 5 I am naturally cautious and I am not