Special Report on Investment Trusts (7): Confidence begins at home: Rupert Bruce asked three senior analysts to recommend areas and trusts for 1993 and found a consensus of opinion
Wednesday 20 January 1993
The Independent spoke to senior managers at three of the largest investment trust groups, who between them manage a fifth of the total pounds 27.3bn UK investment trust market. When asked which investment areas and trusts they favoured, a clear consensus emerged in favour of UK smaller companies.
The managers said they expected smaller companies' stocks to perform well in reaction to lower interest rates and improving economic conditions. They pointed out that these smaller companies were the most sensitive to domestic economic conditions because they participated in relatively little overseas trade.
Also in favour were the emerging stock markets of South-east Asia and Latin America. Managers expect these markets to offer high rewards, but warn that they are high risk.
Lord Mark Fitzalan Howard, chairman, Fleming Investment Trust Management: 'I like the UK but that is on the basis of the hoped-for recovery really being now likely to materialise, although there is still an element of hope there.
'I think the other area which we would like to suggest is the Far Eastern markets, excluding Japan, where we believe there is going to be considerable growth in 1993.
'We would include Hong Kong in the firm belief that the posturing at the moment (the diplomatic row between Chris Patten, the Governor, and China over the degree of democracy in the colony) appears perhaps more extreme during this preliminary stage of debate than perhaps is, in reality, the case and that a solution will be found.
'Undoubtedly it is going to be volatile, but I think that for those people who can look at it for the long term it is probably no bad thing to start buying.
'In all we would expect returns in excess of 15 per cent from the region including Hong Kong, Malaysia, Singapore, Philippines, Thailand, and Indonesia.
'On actual investment trusts within our portfolio, I think we would include Fleming Far Eastern Investment Trust.
'Another is Fleming Fledgling Investment Trust, the smaller companies trust. That is about 40 per cent in the UK. We believe that if we are going to see a turnaround in the UK economy then this neglected area ought to make itself felt.
'The trust also has a little under 30 per cent in the US, about 30 per cent in Europe and 8 per cent in Asia.'
Michael Moule, a senior investment manager, Touche Remnant: 'I still think the UK is going to be a good market, even though it has had a strong run. You are in an interest rate-driven market, and I am still bullish that interest rates are going to come down. That is one of the keys to it. Just like the US, you are going to have people saying, 'I cannot believe how expensive this market is'.
'It is going to be driven by money not earning enough in the bank and the building society rather than some wonderful economy and you are going to have to push out your hopes of the economy picking up until 1994.
'But personally, it is Europe and particularly France, Holland and Spain that excites me most.
'My view is that eventually the Europeans will wake up to realise that in the short term the main problem is lack of growth and rising unemployment rather than inflation.
'If I am being judged over the year I would be very happy to be in TR European Growth. It also happens to be on a 25 per cent discount to its net asset value (at time of writing), which is very high. This is because Europe is so unpopular and because it invests in smaller companies whose share prices rise later than larger ones.
'I think the UK has already had the big company effect so you really ought to go for medium and smaller companies where you have had this very big bear market. You have spent five years since October 1987, when they reached a peak, in a bear market. So I quite like TR Smaller Companies.
'I also like TR Far East Income because I still see South-east Asia doing rather well.
Jeremy Tigue, a director of Foreign & Colonial Management: 'In the American market we think smaller companies will do better than larger companies. Any improvement in the US economy will be particularly good news for US smaller companies. There are a lot of them out there, they have done very badly in the 1980s, although they have done a bit better in the last couple of years.
'We are also quite hopeful about prospects for UK smaller companies. The only caveat is that everyone seems to be thinking the same way and we saw in the States a bit of a false dawn a couple of years ago.
'One can't help feeling that there is a danger that might happen to smaller companies this year here. But the prospects for smaller companies here with lower interest rates should be good.
'Europe we think looks pretty dull at the moment with the economic situation in Europe and particularly Germany looking increasingly dire. The stock markets might take heart from a reduction in interest rates in Europe, but I doubt that will happen until later in the year.
'We are also still very keen on Latin America, although that has been very up and down this year after having had a terrific 1991. There could be terrific opportunities here.
'I would recommend our F&C Smaller Companies investment trust. That has about 45 per cent in the UK and 35 per cent in the US, so if we are right about the US and UK smaller companies both recovering that should do very well.
'If the conventional wisdom about UK smaller companies is wrong and they have a bad year at least you have the protection of the US smaller companies.
'For the brave we would say Latin American Investment Trust. It is looking quite attractive now but it is not a widows and orphans stock.'
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Olympic diver has made his modelling debut for Adidas
- 1 Daniele Watts: Django Unchained star's white boyfriend Brian Lucas confirms LAPD internally investigating 'racist' detainment
- 2 Isis release 'Flames of War' video warning Obama of attacks troops could face in Iraq
- 3 Pakistani passenger power forces two politicians off plane
- 4 Say yes to 'no-poo': It's been three years since I stopped washing my hair
- 5 John Travolta addresses former pilot's gay romance allegations publicly for the first time: 'That was the lowest I'd ever felt'
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
Scottish independence referendum: A nation divided against itself
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
Portuguese academic says British are 'filthy, violent and drunk'
iJobs Money & Business
£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...
£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...
£20000 - £25000 per annum + OTE £35,000 first year: SThree: The SThree group i...
£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...
Day In a Page
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony