Mark Dampier: It's easier to make up losses in a trust that cushions a fall

 

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The Independent Online

Investment trusts are not always suitable for the mass market, but I am a fan. I am a long-term investor in RIT Capital Partners, which seeks to deliver long-term capital growth while keeping an eye on capital preservation. It does so without the constraints of any formal benchmark, making it a truly active portfolio.

Since inception in 1988, the trust has participated in 75 per cent of the stock market upside, but only 38 per cent of market declines. Over the same period the NAV (net asset value) per share has compounded at 11.6 per cent a year.

Given its approach, the trust has been through some periods of more lacklustre performance. That said, since Ron Tabbouche was appointed investment director in October 2012, the trust has continued to capture a good portion of the return of the benchmark MSCI AC World Index in a rising market, while falling significantly less in down markets. I favour this approach – if you lose less on the downside, there is less to make up on the way back up.

The trust's focus means it has lagged the bull market since the 2008 crisis. Some investors subsequently deserted the trust and at one stage it was trading at a discount to NAV of 10 per cent. That was a bargain and it currently trades at a discount of 5.8 per cent.

It takes full advantage of the tools afforded to it as an investment trust, using gearing of 18.7 per cent while also holding alternative investments. It is an eclectic portfolio with a combination of equities, funds, currencies, private equity and assets such as gold.

Among the trust's top 10 holdings are Gaoling, a Chinese stock-picking fund, and the Findlay Park American Fund. The team is also one of the few that often gets currency calls right.

Private equity investments are also an important part of the portfolio, which Mr Tabbouche expects to remain relatively conservatively positioned in 2015. He has added to positions in high-yielding stocks but also topped up exposure to Japan, an undervalued market. This year, the portfolio will add companies expected to benefit from a resurgence of US house building.

I view RIT as a suitable core holding for any portfolio.

Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more details about the funds in this column, visit www.hl.co.uk

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