Interactive Investor

Specialist investment trust tips

20th September 2013 09:25

Fiona Hamilton from interactive investor

Almost all Money Observer's aggressive investment trust tips from 2012 have had a great run this year but our defensive tips have generally fared less well.

Some strong performers have been among the eight changes made this year, with one coming in this instalment.

A charitable trust makes it into our specialist sector tips, as does a high-yielding commodities offering.

Defensive

The Battle Against Cancer Investment Trust is our new defensive choice. Launched last October, it is a fund of long-only funds and hedge funds, with a shrewd and experienced board and panel of advisers, and it has a special twist. The funds in which it invests have all agreed to work effectively for free while BACIT's own managers, board and advisory panel similarly charge no fees.

This means its costs are exceptionally low for this sort of vehicle, even though it donates 1% per annum of net asset value (NAV) to charity and can invest a similar amount in cancer research.

Shareholders are therefore helping a good cause, and on the evidence so far they should enjoy worthwhile returns and below-average volatility. With more than half its assets in hedge funds, plus a bit in private equity and infrastructure, BACIT is liable to lag a rapidly rising market but should be relatively resilient in a setback. Its NAV per share almost kept up with the FTSE All-Share index in the first seven months of 2013, helped by strong returns on Japanese equities and northern European power prices (both hedged into sterling).

In summary, it offers low-cost managed exposure to an exceptionally diverse mix of asset classes through a range of highly regarded funds, most of which investors could not access direct.

Aggressive

City Natural Resources High Yield Trust is very different. As with other trusts in the commodities & natural resources sector, it has suffered a traumatic year, but with its discount at around 20%, it offers a lot of recovery potential.

It differs from the more highly rated BlackRock World Mining Trust in that it can invest in equities across the resources sector, so it is much less tied to mining companies.

Will Smith, who manages the equity portfolio, believes mining will take time to come back into favour, so nearly 30% of CYN's portfolio is in oil and gas companies, many in Canada and already in production and growing their dividends.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.