Article written by Jeff Prestridge for This is Money, on 25 March 2024
Investment trust CT Managed Portfolio is a rather peculiar fund that may put off some investors. Yet its eclectic structure has merit – and should appeal to those who have targeted objectives or who may wish to change the focus of their investments as they get older.
Managed since launch 18 years ago by Peter Hewitt, the trust offers investors two portfolios – one income-orientated and the other growth-driven. Both are invested in other investment trusts and are separately listed on the London Stock Exchange.
So, the income stocks are 35-strong 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 shares trade at around £2.42. Only three companies – Law Debenture, Lowland and TR Property – are held in both portfolios.
The clever bit is that any income generated by the growth portfolio is transferred to the revenue account of the income portfolio, thereby boosting the dividend prospects for income shareholders.
The quid pro quo is that an equivalent capital sum is paid over to growth investors, thereby enhancing their capital returns.
The final part of the jigsaw is that once a year (October), shareholders can transfer their shares from the growth to income portfolio (or vice versa) without incurring any potential liability to capital gains.
This is an attractive arrangement given the Government’s slashing of the annual gains investors can crystallise without incurring tax. Come April 6, the start of the new tax year, this will fall from £6,000 to £3,000.
For investors with income shares, the strong dividend payments have made up for the portfolio’s indifferent capital performance.
For the past 12 years, the dividends they have received have edged up – and there is every prospect 12 will become 13 when the final dividend payment is announced in June.
So far this financial year, three payments of 1.8p a share have been made – ahead of the 1.67p paid in the previous year.
‘I would be surprised if the board didn’t sanction a final divi for the year that meant we had another year of dividend growth under our belt,’ says Hewitt.
The trust is one of 32 that the Association of Investment Companies has labelled as ‘next generation’ dividend heroes – with between 10 and 19 years of annual income growth.
Overall, growth investors have done better over the past five years, generating returns of more than 20 per cent. Income investors have received a total return of just under 10 per cent. Hewitt says three investment themes dominate the way he runs the fund.
First, the two portfolios have significant exposure to UK equity investment trusts because they are ‘dirt cheap’ and could rally if interest rates start falling.
Secondly, he likes trusts invested in private equity.
Finally, a key driver for the growth portfolio is investing in key secular investment trends such as healthcare and technology. Hewitt says some of these holdings such as Allianz Technology, JPMorgan American and Polar Capital Technology have been key portfolio components since before 2010, reaping returns at least six times their original value.
The trust is part of global investment house Columbia Threadneedle with Hewitt running it from offices in Edinburgh.
The income and growth portfolios have respective stock market identification codes of B2PP3J3 and B2PP252 and the market tickers are CMPI and CMPG. Respective annual charges, excluding those levied by the underlying investment trusts, are 1.2 and 1.1 per cent.
Investment risks
The value of your investments and any income from them can go down as well as up and you may not get back the original amount invested. Gearing is used for investment purposes to obtain, increase or reduce exposure to an asset, index or investment. The use of gearing can enhance returns to investors in a rising market, but if the market falls the losses may be greater.
There is no guarantee that dividends will continue to be paid.
Issued by Columbia Threadneedle Management Limited and approved for distribution 23/12/24.
Important information: Your capital is at risk.
The material relates to an investment trust and its Ordinary Shares are traded on the main market of the London Stock Exchange.
The Investor Disclosure Document, Key Information Document (KID), latest annual or interim reports and the applicable terms & conditions are available from Columbia Threadneedle Investments at Cannon Place, 78 Cannon Street, London EC4N 6AG, your financial advisor and/or on our website
www.columbiathreadneedle.com. Please read the Investor Disclosure Document before taking any investment decision.
This material should not be considered as an offer, solicitation, advice or an investment recommendation.
