High-flyers swoop on foreign fields

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The Independent Online
Investment trusts have been offering opportunities for foreign investment for over a century. Alliance Trust, one of the first, offered an initial portfolio of mortgages against land in the US. Today, more than 40 per cent of its pounds 1.4bn portfolio is abroad.

Many investment trusts offer just UK investments, but the largest tend to have international portfolios. The biggest of them all, the pounds 1.8bn Foreign & Colonial, has just over 40 per cent of its assets in the UK, with the rest spread overseas.

All funds with overseas portfolios offer an easy and relatively cheap means of investing abroad. Almost anywhere on the globe, there is bound to be an investment trust offering a managed portfolio of investments for that region. Unlike unit trusts, which have to create and cancel units whenever investors buy and sell in large numbers, investment trust managers know how much they have to invest and can take a long-term view, which is especially useful in markets that are difficult for the private investor to trade in.

The adventurous investor, who wants more than just a tracker fund following the FT-SE 100 index or a broadly-based growth fund, is sure to find a trust that will meet their needs. However, a word of warning: the more specialised a fund, the more volatile its share price is likely to be, and the higher the associated risks.

Investment trusts can invest in virtually any country. There are a couple of funds that specialise in property, while BZW, Flemings and Mercury each run trusts that invest in commodities and natural resources.

Some investment managers, such as Templeton, have a reputation for their expertise in emerging markets. Flemings, with its long association with the Far East, is well known for its Chinese and Indian funds as well as its more conventional range. Some of the best-performing funds over the last year are in these exotic stockmarkets, with top spot going to Baring Emerging Europe trust, which specialises in the former Iron Curtain economies.

But beware. Some of the worst performers have been trusts specialising in Japan, South Korea, Thailand and companies in the former East Germany. This illustrates the risks inherent in single-country investments.

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