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The CT Managed Portfolio investment trust is a rather unique fund that may put off some investors. Still, its eclectic structure has merit – and should appeal to those who have focused goals or want to change the direction of their investments as they age.
Managed since its launch 18 years ago by Peter Hewitt, the trust offers investors two portfolios: one focused on income and the other focused on growth. Both are invested in other investment funds and are listed separately on the London Stock Exchange.
So the income stocks number 35 and have a combined market value of £56 million. The share price is £1.11.
The 40 growth companies have a total market value of £86 million and their shares trade at around £2.42.
Only three companies – Law Debenture, Lowland and TR Property – are held in both portfolios.
The nifty thing is that any income generated by the growth portfolio is transferred to the income account of the income portfolio, thereby increasing the dividend prospects for income shareholders. The counterpart is that equivalent capital is paid to growth investors, thus improving their return on capital.
The final part of the puzzle is that once a year (in October), shareholders can move their shares from the growth portfolio to the income portfolio (or vice versa) without incurring potential capital gains liability. This is an attractive arrangement given that the government is significantly reducing the annual gains that investors can crystallize without paying tax. On April 6, the start of the new tax year, this amount will increase from £6,000 to £3,000.
For investors holding income stocks, the large dividend payouts offset the portfolio’s lackluster capital performance. Over the last 12 years, the dividends they have received have increased slightly – and there is a good chance that 12 will become 13 when the final dividend payment is announced in June.
So far this financial year, three payments of a 1.8p share have been made – ahead of the 1.67p paid the previous year. “I would be surprised if the board did not approve a final split for the year, which would mean we had another year of dividend growth under our belt,” Hewitt said. The trust is one of 32 trusts that the Association of Investment Trusts has labeled “next generation” dividend heroes – with between 10 and 19 years of annual income growth.
Overall, growth-oriented investors have performed better over the past five years, generating returns in excess of 20 percent. Income investors received a total return of just under 10 percent. Hewitt says three investment themes dominate the way he manages the fund.
Firstly, both portfolios are heavily exposed to UK equity funds, as they are “very cheap” and could rebound if interest rates start to fall.
Second, he likes trusts invested in private equity.
Finally, one of the key drivers of the growth portfolio is investing in major secular investment trends such as healthcare and technology. Hewitt says some of these stocks, like Allianz Technology, JPMorgan American and Polar Capital Technology, have been key parts of the portfolio since before 2010, reaping returns at least six times their initial value.
The trust is part of global investment company Columbia Threadneedle and Hewitt manages it from its offices in Edinburgh. The Income and Growth portfolios have the respective stock identification codes B2PP3J3 and B2PP252 and the market tickers are CMPI and CMPG. The respective annual fees, excluding those charged by the underlying investment funds, are 1.2 and 1.1 percent.