Join our community of smart investors
OPINION

The joy of the old

The joy of the old
October 23, 2015
The joy of the old

A case in point is investment trusts, the subject of this week's extended cover feature. Investment trusts have been around for approaching 150 years now, since Foreign & Colonial set up shop in 1868 (almost as long as the IC, but not quite - for anyone interested in financial history John Newlands' study of the investment trust industry is an excellent read). It's still going strong, and so are many of those trusts that followed in its pioneering wake. Take Scottish Mortgage for example - founded in 1909 as the Straits Mortgage & Trust Company by lawyer TJ Carlyle Gifford and landowner Colonel Baillie, it now has total assets of £3.6bn, the biggest trust bar 3i.

But, as anyone who came to our recent private investor seminar will have heard, there is nothing particularly old-fashioned about the way the trust invests, making high conviction bets on companies at the leading edge of disruptive technology. In an interesting parallel with its original strategy of investing in the rubber industry to capitalise on the then-very-new car boom, electric carmaker Tesla is one of them - the trust's managers believe that we are approaching a tipping point in the adoption of electric cars, and that with its massive investment in lithium battery technology via its so called Gigafactory Tesla will lead the way.

Scottish Mortgage is, understandably, one of the most popular investment trusts among IC readers, not just because it offers the allure of the new in its investments - although its "optimistic" approach, as one reader put it, is refreshing - but because it has backed up its strategy with strong returns while lowering charges all the while, quadrupling in three years and charging just 0.48 per cent a year. More generally, trusts are easily the most popular investments among IC staff, appealing to our stockpicking sensibilities (thanks to the closed-ended structure and potential for value to emerge) and also our desire for decent returns and reasonable charges. Popular columnist John Baron only uses investment trusts.

And, if we dig into the archives again, we find that there is something inherently democratic behind the philosophy of investment trusts that chimes with the mission of Investors Chronicle. F&C's stated objective on its creation was "to provide the investor of moderate means the same advantage as the large capitalist in diminishing risk". Use investment trusts and you'll find those advantages persist to this day.