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Trusts that have reigned longer than the Queen

Any investment that has generated wealth since before the Coronation must have a firm foundation. That is true for the 36 investment trusts that predate the Queen’s accession to the throne.

They have survived the stock market crashes that dotted the early 1970s, October 1987 (Black Monday), 2000 (the dot-com bubble burst), 2008, and 2020 in the wake of the pandemic. Some of the oldest trusts have invested client money during the reign of six monarchs.

So what is the secret to its longevity?

Looking ahead: Among the 36 trusts that exist beyond the Queen's reign, some could provide excellent future returns

Looking ahead: Among the 36 trusts that exist beyond the Queen’s reign, some could provide excellent future returns

The first trusts were created under Queen Victoria to allow ordinary investors to benefit from global industrial expansion.

Foreign & Colonial was the first, established in 1868 and investing in government bonds from around the world, including South America. Scottish American later financed the construction of American railways, while Scottish Mortgage offered mortgages to Malaysian plantation owners who produced the rubber used in the tires of the Ford Model T automobile.

Several trusts have the word ‘Scottish’ in their name because they were founded so that Dundee merchants benefiting from booming sales of jute, a natural fiber, would have a place to store their money.

John Newlands, a historian of mutual funds, says that F&C was started to give the investor of “moderate financial means” a chance to make money. It is a role that trust still fulfills. He says: ‘Fads, fads and arcane financial schemes have come and gone in the last 70 years, but mutual funds have survived and thrived, built on foundations of granite.’

Since their inception, the assets of the UK’s oldest trusts have changed. For example, the biggest F&C holdings are now shares in tech giants Microsoft, Alphabet and Apple, while Scottish Mortgage has Covid vaccine maker Moderna and electric car giant Tesla in its portfolio.

Myron Jobson, head of personal finance at investment platform Interactive Investor, says that trusts’ “agility to adapt to fundamental economic changes” in changing the investments they favor confirms “the soundness of their strategy”.

Annabel Brodie-Smith, director of the Association of Investment Firms, says the portfolio changes demonstrate the adaptability of these stalwarts. She adds: “It is reassuring for investors to see that for the last 70 years, investment companies have survived episodes of market turmoil.”

platinum performances

According to investment platform AJ Bell, over the last 20 years, Scottish Mortgage has turned £1,000 into £13,150. BlackRock Smaller Companies, founded in 1906 as the North British Canadian Investment Company, has converted the same sum to £9,349. No trust prior to the Queen’s accession would have lost money for 20 years. The lowest return is 106.3% from Aberdeen Diversified Income & Growth.

James Carthew, investment trust specialist at fund data group QuotedData, agrees that the flexibility that older trusts have shown has been key to their success, saying: “One of the strengths is their ability to adapt to changing market environments.

An independent board runs the trust, hires and fires investment managers, tailors goals and lowers management fees.

However, Carthew says that most of the older trusts focus on shares. Therefore, investors looking to invest in different types of assets, such as property, infrastructure, and renewable energy, will need to look to newer trusts.

Kyle Caldwell, a fund specialist at Interactive Investor, says people should also be aware that mutual funds have characteristics that make them riskier than competing vehicles, such as mutual funds or open-ended investment companies. Managers can borrow money to increase a trust’s exposure to stocks, improving returns if stock markets are rising but perpetuating losses if stock prices are falling. And because trusts are traded on the stock market, their share price may not fully reflect the value of the underlying assets.

He says: “They were once derided as ‘dinosaurs’ led by fools, but, 70 years after the Queen’s accession to the throne, they are thriving rather than dying out.”

1653171433 485 Trusts that have reigned longer than the Queen

Funds to choose

Among the 36 existing trusts beyond the reign of the Queen, some could provide excellent future returns.

Caldwell likes the UK-centric city of London, founded in 1891 and run by Job Curtis since 1991. Curtis focuses on high-yield, cash-generating businesses. Major holdings include Diageo, Shell, AstraZeneca, GlaxoSmithKline, National Grid and HSBC.

Over the past three years, the trust has generated an overall return of 17 percent. His income is equivalent to 4.6 percent per year.

Caldwell also rates Bankers due to its global diversity. Major holdings include American Express, Microsoft and AstraZeneca. Three-year yields are 20 percent and earnings are equal to 2 percent per year.

Scottish Mortgage shares have almost halved since their November 2021 high. But three-year yields are still 52 percent. Carthew says the company’s focus on “identifying and supporting future market leaders” should ensure strong long-term returns.

He adds: ‘The longevity of these trusts and the strong corporate governance that keeps them focused on the needs of investors makes them ideal long-term savings vehicles.

“I hope most of them will still be around 70 years from now.”

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