Growth and income portfolios: Leaders and laggards April 2014
8th April 2014 17:28
With a view to helping investors who like to make their own decisions, Money Observer, in conjunction with Interactive Investor, designed a series of model investment portfolios at the beginning of 2012, some for those who want to grow their capital and others for investors seeking to generate income.
Here, we take a look at some of the best and worst-performing holdings over the first quarter of 2014 and explain the reasons behind their respective performances.
For a more in-depth review of the performance of all 12 of our model portfolios, read: Longer-term model income portfolio hits 57% gain, or six model growth portfolios make solid progress.
Leading growth holding - Marlborough UK Micro Cap Growth
The has had a particularly strong year to date. It is included in the higher-risk, longer-term (15-years plus) growth portfolio. It is managed by Giles Hargreave, with co-manager Guy Field, and invests primarily in UK companies with a market capitalisation of £250 million or less at the time of purchase. Risk is spread by holding a large number of companies: there are currently over 200 in the portfolio.
Click here to view the constituents and factsheets of all 12 Money Observer Model Portfolios.
Hargreave recently pointed out that the market in small companies has excellent momentum now the UK economy is clearly improving and interest rate rises are still some way off. He suspects that after years of net withdrawals there will begin to be net inflows of capital into the small company sector, which will help sustain further progress.
Lagging growth holding - First State Asia Pacific Leaders
Asia-Pacific markets have been out of favour over the past year and consequently this fund has suffered. However, we still think it is a good holding for three of our growth portfolios.
The management team of led by Angus Tulloch has a strong focus on capital preservation and only invests in high-quality companies with good growth prospects. They believe the Asia-Pacific region still continues to offer good opportunities to invest in such companies.
They also point out that these economies continue to benefit from high levels of growth relative to Western economies, which should provide a positive environment in which to boost sales and deliver profits growth. They believe this should continue to provide positive returns for investors over the medium to long term.
Leading income holding - Scottish Mortgage Investment Trust
The giant , managed by James Anderson and Tom Slater, has produced good performance this year. The £2.75 billion trust's portfolio consists of around 70 holdings with the top 10 accounting for 48% of assets. Its largest sector weighting is technology, at nearly a third of its assets, followed by consumer services.
Anderson believes that the key to investment success involves making long-term decisions and ignoring short-term noise, but this does mean the trust's performance can be volatile. Producing an income is not the trust's prime objective, as it seeks to maximise total returns. Nevertheless, it also aims to generate "real" dividend growth and has managed to increase its payouts for every one of the past 31 years.
Lagging income holding - Bankers Investment Trust
is one of only three holdings in our income portfolios that fell slightly in value over the quarter, and we believe it is a temporary blip.
The trust has a strong long-term performance record. It is unique within the global sector in aiming to provide both capital appreciation and dividend growth above the Retail Prices Index. Its dividend was raised by 6% during 2013, which was the trust's 47th consecutive annual dividend increase.
Its largest geographical exposure is to the UK, and the highest sector weighting is financials; its holdings in life insurers were hit recently by the chancellor's pension proposals and may have contributed to the trust's setback. But Alex Crooke, the trust's manager, seems generally optimistic about the future.
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