Investment trust best buys: What Investment asks three investment trust specialists to recommend their favourite investment trust shates fir a cautious, a balanced and an aggressive investment

What Investment, June, 2006

What Investment asks three investment trust specialists to recommend their favourite investment trust shares for a cautious, a balanced and an aggressive investment

CAUTIOUS OPTION

Daniel Lockyer, investment trust analyst at iimia, points more cautious investors to a broadly based absolute return portfolio. The shares of Midas Income & Growth are ranked 4th out of 6 in the Global Growth & Income sector over three years to 28 April 2006. They have returned 17.45 per cent over that period, compared to a sector average of 13.07 pet cent.

"Midas Income & Growth is a fairly new trust that took over the mandate of the old Taverners Trust in August last year," says Lockyer. "The new mandate seeks an absolute return with low volatility through investing in a multi-asset portfolio. The people running it have a good track record in the pension fund area, with the funds at the top of their respective league tables."

It is a managed fired investing across a range of asset classes, so can take a broad-brush approach and basically invest where it likes, though the main focus is on a mix of UK equities and fixed-interest securities. It will, however, hold things like property assets and structured products for greater stability.

"Cautions investors should be reassured both by the trust's absolute return approach and by its discount-control mechanism. At the moment, Midas Income & Growth's shares stand at a slight premium to NAV, but the stated intention is to maintain the value of the shares at close to NAV and automatically buy back shares if the discount ever exceeds 5 per cent."

Contact Midas Capital Partners on 0151 906 2450 or visit www.midascapital.co.uk

BALANCED OPTION

Paul Harris, of stockbroker Goy Harris Cartwright, focuses on a potential turnaround situation. The shares of ISIS UK Select Trust are ranked 14th out of 19 in the UK Growth sector over three years to 28 April 2006. Over the period, they have returned 92.31 per cent, compared to a sector average of 128.37 per cent.

"I would suggest that investors look at ISIS UK Select, where Jamie Hooper took over as fund manager in October last year," says Harris. "Its performance has been slightly under the average for its sector over the last 12 months or so, and its longer-term, three to five-year performance is relatively poor, but the current manager has only been in place for a few months."

Harris says the trust is designed to deliver capital growth from a portfolio of UK equities but pays no dividends, so there is no yield. "Currently, the shares are on an 11.3 per cent discount, and if the UK market continues to do well and his performance at least stays where it is, then you will move up with the market," says Harris. "But the interesting thing, which makes it a more balanced option, is that there is a continuation vote due by October 2007 and, whichever way that goes, the board has said that shareholders will have an opportunity to exit at that point at no less than a 5 per cent discount to NAV. So if the NAV stays the same, you will get a more than 50 per cent uplift by next October."

Contact F&C Asset Management on 0800 136 420 or visit ww.fandc.com

AGGRESSIVE OPTION

John Moore, manager of the collective investment service at Brewin Dolphin, likes the distinctive approach of one of the self managed trusts. The shares of Aurora Investment Trust are ranked 11th out of 19 in the UK Growth sector over three years to 28 April 2006. Over the period, they have returned 100.14 per cent, compared to a sector average of 128.37 per cent.

"This is a high-conviction trust, with a UK growth focus, which is effectively self-managed," says Moore. "Mars Asset Management was set up by James Barstow, the fired manager, to run the trust and it seeks to deliver sustained growth through a mixture of thematic growth and more general growth-orientated companies. So, for example, one of the themes the portfolio follows is that we are all getting older, so it will hold Macarthy & Stone or the makers of buggies to help the elderly get around.

"He also looks for areas that deliver growth, for example the Irish economy. So it has major investments in Anglo Irish Bank and the Gartmore Irish Growth Trust. There are also some interesting technology companies in the portfolio."

Moore says the trust hasn't been performing spectacularly well, but it is due a good year and performance is starting to pick up. "As a result, it's an interesting portfolio, and you can buy in on around a 10 per cent discount. We hold a significant investment in this trust. The trust launched in 1997 at 1 [pounds sterling] and it is now 2.30 [pounds sterling], so Barstow must be doing something right."

Contact Mars Asset Management on 0207 410 0025 (no website)

Investment trust: performance tables

What the tables show

The figures show the value of 100 [pounds sterling] over six months, one, three, five and 10 years to 30 April 2006, on an offer-to-bid basis with net income reinvested. Funds are listed by sector so that you can compare them against trusts with similar investment objectives. An average performance figure is shown for each sector. Each trust is ranked according to its sector.