For good returns, add some zeros

My favourite investment: Top tips from a City expert


Nigel Sidebottom is a director at BFS Investments in Surrey, an independent group specialising in running investment trusts.

Nigel Sidebottom is a director at BFS Investments in Surrey, an independent group specialising in running investment trusts.

Nigel Sidebottom was born into a stockbroking family. His father was a partner in a small firm looking after private clients. "I made aconscious decision not to join him, being happy in town planning, until he told me about the difficulty his firm was having in recruiting ajunior assistant," he says.

"When I found how much was being offered - more than I was getting after nine years in my own profession - I decided to change careerand moved into stockbroking."

When it comes to looking after his own investments Mr Sidebottom is cautious: "I've stayed mainly with the investment trust sector. I'venow spent too many years in the business to fall for any whispered stories about individual stocks. With my own money I tend to investin a mix of very low and very high-risk investment trust shares. I buy zero-dividend preference shares, where my money is very safe, andalso warrants and other highly geared funds."

One of his best decisions was buying shares in what was then known as TR Technology: "The fund was very highly geared, meaning ithad a large amount of borrowings, and I felt it was undervalued. It was on a discount of around 20 per cent to net asset value. Investing inhi-tech stocks was obviously a high-risk strategy, but I felt the investment trust was very attractively priced."

Its price went on to rise 14-fold. Last year, at the end of the fund's life, investors had the chance to roll up into its successor fund, nowrenamed Henderson Technology, or take out their money at net asset value. "I felt my hand had played out, and sold up," says MrSidebottom. "But I should have moved into the new fund as it has more than doubled in price since I took my money out."

He recently bought warrants in Herald Investment Trust, a fund that invests in smaller UK technology firms. "I'm not really a technologyfan. The reason I bought the warrants is that the fund is managed by Katie Potts, a former stockbroking analyst I respected. And I wasright to do so as I have more than doubled the value of my investment."

As their name suggests, zero dividend preference shares pay no dividend. But they do prom-ise a fixed payout at the end of their limitedshelf life. "These may not be exciting," says Mr Sidebottom, "but you get a good return net of tax. I'm a huge fan of the sector, where it'spresently easy to earn over 8 per cent net a year. I'd advise anyone with surplus cash to buy them. It can be far more tax efficient thansticking the money in a bank."

Not all his investments are in trusts. "I'm married to a Croatian and I've spent a lot of money on my family's holiday home on the Istrianpeninsular near Italy," he says. "It could turn into a very valuable asset. At present, foreigners aren't allowed to own property in Croatia.But in time the ownership rules could be relaxed, especially if Croatia wants to join the EU. There will probably be great demand forholiday homes then, especially from Italians. So it could be worth a lot more than it is now."

Who's who: Nigel Sidebottom

Aged 47.

Studied business and economics at Sheffield University before going on to a master's degree in town planning.

Seven years in local authority sector as a town planner.

Joined a small firm of private-client stockbrokers (where his father worked) as a junior assistant.

After two years, he moved to Gerrard Vivian Gray, which was eventually taken over by Greig Middleton, the UK's largest private-clientstockbroker.

There he began to specialise in the trust sector, setting up the firm's investment trust service, and became head of the group's assetmanagement service.

In March this year he became a Surrey-based director of BFS Investments, with £700m under management.The group specialisesin split-capital investment trusts.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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