12 Apr 2011
Monks Investment Trust - Global Investing
Monks Investment Trust - A flexible and intelligent
take on global stock markets
The Monks Investment Trust PLC is one of the big boys of the global sector with total net assets of around £1bn (at end March 2011). The Trust was founded in 1929 by a group of investors headed by Lord Geddes, who became President of the Board of Trade. One might assume he knew a good opportunity when he saw it. In the early days, Monks sat alongside brother trusts Friars and Abbots and invested in UK and US railway and energy companies. From the beginning, it had significant holdings in international bonds including those emanating from Latin America and China. Baillie Gifford became managers in 1931 and in 1968, Abbots and Friars were merged into Monks.
Today Monks stands alongside, but follows a different path to, its fellow global generalist Scottish Mortgage within the Baillie Gifford stable. Scottish Mortgage resolutely picks stocks building a portfolio from the bottom up and taking a five-year view. Monks is managed in a more pragmatic way. Its manager Gerald Smith, whilst primarily a stock picker cast from the Baillie Gifford mould, adds a top-down element to his investment style. He will have an eye to the prevailing economic situation and as a result takes strong investment decisions to reflect his view of the world in the shorter or medium term. Monks aims purely to increase capital returns. The Trust does not invest with any consideration given to income distribution. It will tend to pay out income when it has it and this means that investors should be aware that dividends will fluctuate from year to year. Gerald Smith is unconstrained by benchmarks and indexes. As mentioned, he is happy to take strong views and current themes include an ongoing enthusiasm for oil services companies, a position reflecting attractive valuations and yields for global telecoms companies and direct exposure to Chinese stocks which should benefit from increased domestic consumption. Monks also has a bet on a short-term rise in Japan, and this comes in the form of a Nikkei 225 call option representing around 1% of net asset value, as at end March 2011.
Monks is aware of the potential threats that surround investors at the moment such as sovereign debt, inflation, deflation, slowing Chinese growth and continuing consumer problems in the US. Rest assured the Trust will be doing its level best to steer a profitable course for its shareholders by attempting to avoid these traps and making the most of the opportunities that come along. This approach has proved attractive to investors seeking a flexible and intelligent take on world stock markets. Monks has also rewarded its followers over the long-term, returning an annualised 9.9% over the last 20 years to 31 March 2011 against 7.7% offered by the MSCI World index over the same period. An added bonus to this sort of performance is its low total expense ratio. Shareholders are being asked to pay just 0.62%* for active, astute and aware investment management.
* Total expense ratio as at 30 April 2010.
Standardised Past Performance
Source: Morningstar, share price mid to mid, total return.
Past performance is not a guide to future performance. Stock market investments and any income from them can fall as well as rise and investors may not get back the amount they invested. Changes in the rates of exchange may cause the value of investments to go down or up.
The Trust invests in emerging markets where difficulties in dealing, settlement and custody could arise, resulting in a negative impact on the value of your investment.
The Trust can make use of derivatives. Derivatives are most often used to compensate for possible unfavourable currency and market movements. As a result, there is a risk that potential gains may be restricted in a rising market. If derivatives were ever used for speculative purposes there could be a high risk of loss to the Trust due to the large and quick price movements of these contracts. They also carry a risk of the other party involved failing to meet their obligations under the contract.
The Trust is listed on the London Stock Exchange and is not authorised or regulated by the Financial Services Authority.
This article contains information on investments which does not constitute independent investment research and accordingly it is not subject to the protections afforded to independent research.
Author: James Budden
James Budden joined Baillie Gifford in November 2008 and is Director of Retail Marketing and Sales. He is responsible for the distribution of Baillie Gifford’s range of investment trusts and other collective investment funds.