STO CKS | FUNDS | I NVESTMENT T RU STS | P E NS I ONS AND SAVI N GS

SHARES
VOL 20 / ISSUE 45 / 15 NOVEMBER 2018 / £4.49

WE MAKE INVESTING EASIER

TURN
PATIENCE
INTO
PROFIT
How reinvested dividends unlock the
benefits of a buy and hold approach

PLUS BREXIT
STOCKPILING:
COULD
LOGISTICS
FIRMS BENEFIT?

PENSION
TAX
RELIEF:
UNDERSTANDING
HOW IT WORKS

TOP OF
THE CHARTS:
BLUE WHALE
FUND SOARS
 EDITOR’S VIEW

Are we entering a
bear market and does
it matter?
We look at a new piece of research from Morgan Stanley as supplier warnings
take a bite out of Apple

US
stocks are experiencing ƚŚĞůĂƚĞƐƚƐĞůůͲŽīďĞŝŶŐĂďĞĂƌŵĂƌŬĞƚ͛͘
ƌĞŶĞǁĞĚǀŽůĂƟůŝƚLJ ŵĞƌŐŝŶŐŵĂƌŬĞƚƐĂƌĞĂůƌĞĂĚLJŝŶďĞĂƌ
ĂŌĞƌƐĞǀĞƌĂůŽĨƉƉůĞ͛Ɛ ŵĂƌŬĞƚƚĞƌƌŝƚŽƌLJŝŶŝƚƐǀŝĞǁ͘
ƐƵƉƉůŝĞƌƐǁĂƌŶĞĚŽŶƉƌŽĮƚ;ϭϮEŽǀͿ͘dŚŝƐ /ŶǀĞƐƚŽƌƐƐŚŽƵůĚďĞŝŶƚĞƌĞƐƚĞĚŝŶ
ŚĂƐƌĂŝƐĞĚĐŽŶĐĞƌŶƐŽǀĞƌƚŚĞŐƌŽǁƚŚ ƚŚĞƐĞƚƌĞŶĚƐ͘zŽƵŵƵƐƚŶŽƚŝŐŶŽƌĞǁŚĂƚ
ƌĂƚĞĂƚƚŚĞĐŽŶƐƵŵĞƌĞůĞĐƚƌŽŶŝĐƐŐŝĂŶƚ ŝƐŚĂƉƉĞŶŝŶŐŝŶƚŚĞǁŝĚĞƌŵĂƌŬĞƚĂŶĚ
ĂŶĚƐĞǀĞƌĂůŽĨŝƚƐďŝŐƚĞĐŚŶŽůŽŐLJƉĞĞƌƐ͕ ŝĨLJŽƵƉůĂŶƚŽĚŝƉŝŶƚŽLJŽƵƌŝŶǀĞƐƚŵĞŶƚ
ƐĞŶĚŝŶŐƐŚĂƌĞƐŝŶƉƉůĞĂŶĚŽƚŚĞƌƚĞĐŚ ƉŽƚƐŽŽŶĞƌƌĂƚŚĞƌƚŚĂŶůĂƚĞƌ͕ƌĞĚƵĐŝŶŐ
ĐŽŵƉĂŶŝĞƐŝŶƚŽƌĞǀĞƌƐĞ͘ LJŽƵƌĞƋƵŝƚLJĞdžƉŽƐƵƌĞŵŝŐŚƚďĞĂƐĞŶƐŝďůĞ
tŽƌƌŝĞƐŽǀĞƌƉƉůĞ͛ƐŐƌŽǁƚŚ ĐŽŶƐŝĚĞƌĂƟŽŶ͘
ƉƌŽƐƉĞĐƚƐĂƌĞŶŽƚŚŝŶŐŶĞǁĂŶĚĂƌŐƵĂďůLJ ,ĂƐƚLJĂĐƟŽŶŝƐĚĞĮŶŝƚĞůLJƚŽďĞĂǀŽŝĚĞĚ
ŝƚŝƐĂůƌĞĂĚLJŵĂŬŝŶŐƚŚĞƚƌĂŶƐŝƟŽŶĨƌŽŵ ĨŽƌƐŽŵĞŽŶĞǁŚŽŝƐůŽŽŬŝŶŐƚŽƐƚĂLJ
ŐƌŽǁƚŚƐƚŽĐŬƚŽĂŵĂƚƵƌĞĐĂƐŚŐĞŶĞƌĂƟŶŐŵĂĐŚŝŶĞ͘ ŝŶǀĞƐƚĞĚĨŽƌƚŚĞůŽŶŐͲƚĞƌŵ͘KƵƌŵĂŝŶĨĞĂƚƵƌĞƚŚŝƐ
dŚŝƐŚĂƐďĞĞŶƌĞŇĞĐƚĞĚŝŶŝƚƐǀĂůƵĂƟŽŶĨŽƌƐŽŵĞ ǁĞĞŬĞdžĂŵŝŶĞƐƚŚĞƉŽǁĞƌŽĨĐŽŵƉŽƵŶĚŝŶŐĂŶĚ
ƟŵĞ͕ǁŝƚŚĂŶĞĂƌŶŝŶŐƐŵƵůƟƉůĞŽĨϭϱͲƟŵĞƐŵƵĐŚ ŚŽǁƐƚĂLJŝŶŐŝŶǀĞƐƚĞĚŝŶĂƐƚŽĐŬ͕ƉĂƌƟĐƵůĂƌůLJŝĨŝƚ
ůŽǁĞƌƚŚĂŶƚŚŽƐĞĞŶũŽLJĞĚďLJƚŚĞůŝŬĞƐŽĨŵĂnjŽŶŽƌ ƉĂLJƐĚŝǀŝĚĞŶĚƐ͕ĐĂŶďĞƌĞĂůůLJůƵĐƌĂƟǀĞ͕ĞǀĞŶŝĨƚŚĞ
'ŽŽŐůĞ͛ƐŽǁŶĞƌůƉŚĂďĞƚ͘ ƐŚĂƌĞƉƌŝĐĞŝƐŵŽǀŝŶŐƵƉandĚŽǁŶ͘;d^Ϳ
^ŽǁŚLJŝƐƚŚĞƚĞĐŚƐĞůůͲŽīƌĞůĞǀĂŶƚ͍dŚĞƐƚŽĐŬ LATEST SELL-OFF PEAK TO TROUGH
ŵĂƌŬĞƚƌƵĐƟŽŶƐĂĚĚƐŽŵĞĨƵĞůƚŽƚŚĞĚĞďĂƚĞŽǀĞƌ
ǁŚĞƚŚĞƌƐŚĂƌĞƐĂƌĞĞŶƚĞƌŝŶŐĂďĞĂƌŵĂƌŬĞƚ͘/ƚŝƐ  ŽƌƌĞĐƟŽŶ   Ͳϵ͘ϵй ^ΘWϱϬϬ
ŽŌĞŶƚŚĞƐĞĐƚŽƌĚƌŝǀŝŶŐƐŚĂƌĞƐŝŶĂďƵůůŵĂƌŬĞƚ  ĞĂƌDĂƌŬĞƚ Ͳϭϭ͘ϭй D^/ƵƐƚƌĂůŝĂ
;ƚĞĐŚŶŽůŽŐLJͿǁŚŝĐŚĚƌĂŐƐƐƚŽĐŬƐůŽǁĞƌŝŶĂďĞĂƌ 

^ĞůůͲKī



Ͳϭϭ͘ϭй
Ͳϭϭ͘ϵй
^ΘWd^yŽŵƉŽƐŝƚĞ
&d^ϭϬϬ
ŵĂƌŬĞƚ͘    ͲϭϮ͘ϭй D^/tŽƌůĚ
/ŶǀĞƐƚŵĞŶƚďĂŶŬDŽƌŐĂŶ^ƚĂŶůĞLJŚĂƐĞdžĂŵŝŶĞĚ  /ŶƚŚĞŵŽƐƚƌĞĐĞŶƚ
  ͲϭϮ͘Ϯй ϰϬ

ŵŽƌĞƚŚĂŶϵϬϬďŝŐƐĞůůͲŽīƐĂĐƌŽƐƐϮϴŵĂƌŬĞƚƐ  ƐĞůůͲŽī͕^ΘWŝƐ
  ͲϭϮ͘ϯй D^/ƵƌŽƉĞ
   Ͳϭϰ͘Ϭй D^/t/
ƚŽĚĞƚĞƌŵŝŶĞŝĨǁĞĂƌĞŝŶĚĞĞĚŝŶĂďĞĂƌŵĂƌŬĞƚ͕ 
ƚŚĞŽŶůLJŵĂũŽƌ
  Ͳϭϱ͘ϯй hZK^dKyyϱϬ
ĐŚĂƌĂĐƚĞƌŝƐĞĚĂƐǁŚĞŶĞƋƵŝƟĞƐĨĂůůďLJϮϬйŽƌŵŽƌĞ  ŵĂƌŬĞƚǁŚŝĐŚ   Ͳϭϲ͘ϯй D^//ŶĚŝĂ
 ŚĂƐŶŽƚĞŶƚĞƌĞĚ
  Ͳϭϲ͘ϯй D^/dĂŝǁĂŶ
ĨƌŽŵƚŚĞŝƌƉĞĂŬ͘ 
͚ĐŽƌƌĞĐƟŽŶ͛   Ͳϭϲ͘ϴй dKW/y
ďƵůůŵĂƌŬĞƚŝƐĂƌŝƐŝŶŐŵĂƌŬĞƚĐŚĂƌĂĐƚĞƌŝƐĞĚďLJ  
ƚĞƌƌŝƚŽƌLJ;ŝ͘Ğ͕͘
 Ͳϭϳ͘ϱй yϯϬ
   Ͳϭϴ͘ϳй D^/&
ŽƉƟŵŝƐŵ͕ŝŶǀĞƐƚŽƌĐŽŶĮĚĞŶĐĞĂŶĚĞdžƉĞĐƚĂƟŽŶƐ  ƐĞĞŶĂϭϬйн   Ͳϭϵ͘Ϯй D^/^ŝŶŐĂƉŽƌĞ
ƚŚĂƚƐƚƌŽŶŐƌĞƐƵůƚƐǁŝůůĐŽŶƟŶƵĞ͘ďĞĂƌŵĂƌŬĞƚ  ƉĞĂŬͲƚŽͲƚƌŽƵŐŚ
  ͲϮϮ͘ϭй /yϯϱ
ŝƐƚŚĞŽƉƉŽƐŝƚĞǁŝƚŚƉƌŝĐĞƐĨĂůůŝŶŐ͕ĂŐĞŶĞƌĂůůLJ 
 ĚƌĂǁĚŽǁŶͿ͘ 

ͲϮϮ͘ϳй
ͲϮϯ͘ϵй
D^/<ŽƌĞĂ
D^/^ŽƵƚŚĨƌŝĐĂ
ƉĞƐƐŝŵŝƐƟĐŽƵƚůŽŽŬĂŶĚŝŶĐƌĞĂƐĞĚĨĞĂƌŽĨůŽƐƐĞƐ͘   ͲϮϰ͘ϳй &d^D/
DŽƌŐĂŶ^ƚĂŶůĞLJƐĂLJƐƚŚĂƚǁŚŝůĞƚŚĞh^ŵŝŐŚƚďĞ   ͲϮϰ͘ϴй D^/Wdž:
  ͲϮϱ͘ϴй Hang Seng
ĞdžƉĞƌŝĞŶĐŝŶŐĂĐŽƌƌĞĐƟŽŶǁŝƚŚŝŶĂŶŽŶŐŽŝŶŐďƵůů   ͲϮϲ͘ϲй D^/DĞdžŝĐŽ
ŵĂƌŬĞƚ͕ƚŚĞƌĞƐƚŽĨƚŚĞĚĞǀĞůŽƉĞĚǁŽƌůĚŝƐŚĞĂĚŝŶŐ   ͲϮϲ͘ϲǀ D^/D
ĨŽƌĂďĞĂƌŵĂƌŬĞƚ͕ǁŝƚŚ͚ƚŚĞĚĞŐƌĞĞƚŽǁŚŝĐŚ  
Ͳϱϱ͘ϰй
ͲϯϮ͘ϵй D^/ŚŝŶĂ
D^/ŚŝŶĂ
ǀĂůƵĂƟŽŶƐŚĂǀĞƌĞƉƌŝĐĞĚ͛ůĞĂŶŝŶŐ͚ŵŽƌĞƚŽǁĂƌĚƐ Source: Bloomberg, Morgan Stanley Research; Note: Showing markets which have troughed within
the last month only. Markets not shown include MSCI Brazil, MSCI Russia and MSCI Switzerland

2 | SHARES | 15 November 2018

As with all investing, your capital is at risk. Past performance is not a reliable indicator of future results.
Orbis Investments (U.K.) Limited is authorised and regulated by the Financial Conduct Authority
Contents VIEWING
SHARES AS
A PDF?
CLICK ON PAGE
NUMBERS TO JUMP
TO THE START OF
THE RELEVANT
EDITOR’S Are we entering a bear market SECTION
02 VIEW and does it matter?

UK economic outlook/ Dividend relief lifts Vodafone / Speculation of US

BIG
06 NEWS ban on menthol cigarettes / Tracsis rules out cash return / Supermarket
sales slow after summer surprise

GREAT New: AstraZeneca / National Grid

10 IDEAS Updates: Experian / On The Beach

TALKING
16 POINT Stockpiling for Brexit

MAIN
18 FEATURE Turn patience into profit

MONEY
22 MATTERS How to save money when you’re investing

25 ASK TOM ‘How does pension tax relief work?’

27 FUNDS Blue Whale goes straight to the top end of the fund chart

INVESTMENT Do capital preservation funds perform as planned? / Can retail

29 TRUSTS investors bag a unicorn?

35 ETFS Find out how ETFs are getting active

38 AEQUITAS Why Warren Buffett seems to be running scared of bonds

40 FEATURE Which UK companies are profitable in the small cap pharma sector?

43 INDEX Shares, funds, ETFs and investment trusts in this issue

securities, derivatives or positions with spread betting organisations that they

DISCLAIMER
IMPORTANT
Shares publishes information and ideas which are of interest to investors. It
does not provide advice in relation to investments or any other financial matters.
Comments published in Shares must not be relied upon by readers when they
make their investment decisions. Investors who require advice should consult a
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do not, under any circumstances, accept liability for losses suffered by readers as
a result of their investment decisions.
Members of staff of Shares may hold shares in companies mentioned in the
magazine. This could create a conflict of interests. Where such a conflict exists it
will be disclosed. Shares adheres to a strict code of conduct for reporters, as
set out below.
1. In keeping with the existing practice, reporters who intend to write about any
have an interest in should first clear their writing with the editor. If the editor
agrees that the reporter can write about the interest, it should be disclosed to
Index of companies and funds in this issue
readers at the end of the story. Holdings by third parties including families, trusts,
self-select pension funds, self select ISAs and PEPs and nominee accounts are
included in such interests.
2. Reporters will inform the editor on any occasion that they transact shares,
derivatives or spread betting positions. This will overcome situations when the
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magazine. This notification should be confirmed by e-mail.
3. Reporters are required to hold a full personal interest register. The whereabouts
of this register should be revealed to the editor.
4. A reporter should not have made a transaction of shares, derivatives or spread
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on-sale date of the magazine.

4 | SHARES | 15 November 2018

Pioneering
150 years ago,
pioneering
today

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Whatever your investment goals contact us to help you achieve them. As with all investments, the value can go
down as well as up and you may not get back your original investment.

To find out more:

Call F&C Investments 0800 915 6016 quoting 18PFC/1 (weekdays, 8.30am – 5.30pm). Calls may be recorded.
L Contact your usual financial adviser
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© 2018 BMO Global Asset Management. All rights reserved. Issued and approved by BMO Global Asset Management, a trading name of F&C Management Limited, which is authorised and regulated by the Financial
Conduct Authority. CM15222 (10/18) UK.
 BIG NEWS

UK economic outlook
flags risks for banks and
consumer-facing businesses
Consultant PwC takes the country’s economic temperature

A new report from consultant PwC suggests

the UK economy could remain on a modest
growth path in the years ahead but
highlights some key pressure points including rising
levels of debt.
MIND THE DEBT

2017
Debt as % of GDP
2023
Households 94 100
tŚŝůĞĂƌĞĚƵĐƟŽŶŝŶŐŽǀĞƌŶŵĞŶƚďŽƌƌŽǁŝŶŐƐŝƐ General government 75 69
expected, households and companies are expected EŽŶͲĮŶĂŶĐŝĂůĐŽŵƉĂŶŝĞƐ 83 91
to borrow at faster rate than economic growth. Total 252 259
ƐĂƌĞƐƵůƚ͕ĂŶŝŶĐƌĞĂƐĞŝŶƚŚĞŽǀĞƌĂůůƌĂƟŽŽĨ Source: ONS, PwC main scenario
debt-to-GDP from 252% in 2017 to 260% in 2020 ƉƌŽũĞĐƟŽŶƐĨŽƌϮϬϮϯ
is forecast.
ĞƐƉŝƚĞƚŚĞŵŽƵŶƟŶŐďŽƌƌŽǁŝŶŐƐ͕ƚŚĞ This represents the weakest performance in any
researchers expect the Bank of England to boost decade since the Second World War and longer-
interest rates from 0.75% to 1% in mid-2019. Under term into the 2020s the consultant expects UK
ƚŚĞĂƐƐƵŵƉƟŽŶƚŚĂƚƚŚĞĂŶŬŽĨŶŐůĂŶĚŐƌĂĚƵĂůůLJ growth to remain at around 1.75% thanks to the
increases rates back to 2% by 2023, total debt ĞīĞĐƚƐŽĨĂŶŽůĚĞƌƉŽƉƵůĂƟŽŶ͘
servicing costs could rise from 7.7% of GDP in 2017 PwC believes growth could be pushed back
to around 9.6% in 2023. up towards the historical average of 2.1%
dŚŝƐĐŽƵůĚŚĂǀĞŝŵƉůŝĐĂƟŽŶƐĨŽƌďĂŶŬƐ͕ŝĨƚŚĞ ƚŚƌŽƵŐŚƐƵƉƉŽƌƟŶŐƚŚĞĂƉƉůŝĐĂƟŽŶŽĨĂƌƟĮĐŝĂů
ƐŝƚƵĂƟŽŶƌĞƐƵůƚƐŝŶĂŚŝŐŚĞƌƉƌŽƉŽƌƟŽŶŽĨďĂĚ ŝŶƚĞůůŝŐĞŶĐĞ͕ŵŽƌĞĞĸĐŝĞŶƚƚĂdžĂŶĚƌĞŐƵůĂƚŽƌLJ
debt, as well as consumer-facing businesses if systems, encouraging older people to remain in the
households are forced to rein in spending to get ǁŽƌŬĨŽƌĐĞĂŶĚŵĂŝŶƚĂŝŶŝŶŐ͚ŽƉĞŶƚƌĂĚŝŶŐƌĞůĂƟŽŶƐ
ŽŶƚŽƉŽĨƚŚĞŝƌĮŶĂŶĐĞƐ͘/ŶǀĞƐƚŽƌƐŝŶƚŚĞƐĞƐĞĐƚŽƌƐ with the EU and the rest of the world’.
should therefore be watching these trends closely. dŚŝƐĮŶĂůƉŽŝŶƚĐŽƵůĚďĞĐƌƵĐŝĂůĂƐƚŚĞƐĞ
WǁŶŽƚĞƐƚŚĂƚŝƚƐƉƌŽũĞĐƟŽŶƐŵĞĂŶĂǀĞƌĂŐĞ ĞƐƟŵĂƚĞƐĂůůŚĂǀĞƚŚĞĐĂǀĞĂƚƚŚĂƚƚŚĞLJĚĞƉĞŶĚ
levels of growth will be comfortably below 2% in ŽŶƚŚĞŽƵƚĐŽŵĞĨŽƌƌĞdžŝƚǁŚŝĐŚƐƟůůƌĞŵĂŝŶƐ
ĞĂĐŚŽĨƚŚĞĮƌƐƚƚǁŽĚĞĐĂĚĞƐŽĨƚŚŝƐĐĞŶƚƵƌLJ͘ uncertain. (TS)

6 | SHARES | 15 November 2018

 BIG NEWS
BIG NEWS

Dividend relief lifts

Vodafone
Mobile telecoms giant lifts guidance while maintaining first-half payout

F irst-half year results from Vodafone (VOD),

which helped the share price to strong gains
on 13 November, tell us one thing loud and
ĐůĞĂƌ͘dŚŝƐŝƐĂƐƚŽƌLJǁŚĞƌĞůŝƩůĞĞůƐĞŵĂƩĞƌƐ
outside the dividend.
A typical sea of adjustments and footnotes, new
ĐŚŝĞĨĞdžĞĐƵƟǀĞEŝĐŬZĞĂĚ͛ƐĂŵďŝƟŽŶŝƐƚŽĐůĞĂŶƵƉ
and simplify the company and how it presents its
ƉĞƌĨŽƌŵĂŶĐĞďƵƚsŽĚĂĨŽŶĞŝƐĞǀŝĚĞŶƚůLJƐƟůůĂǁŽƌŬ
in progress.
/ƚŵĂLJďĞŽŶĞŽĨƚŚĞǁŽƌůĚ͛ƐůĂƌŐĞƐƚŵŽďŝůĞ
network companies but to be a shareholder
through 2018 has been a thoroughly
ŵŝƐĞƌĂďůĞĞdžƉĞƌŝĞŶĐĞ͘/Ŷ:ĂŶƵĂƌLJƚŚĞ
share price changed hands at 238p, so Vodafone
at the price they traded at before the trades on a
interims – 144.36p – it had lost 40%
of its value in 2018. dividend yield of
By contrast, the FTSE 100 was
down just 7% over the same 8.7%
period making Vodafone’s shabby based on current
performance abundantly clear.
ǀĞŶĂƚƚŚĞĐƵƌƌĞŶƚϭϱϱƉ͕ŝƚ͛ƐƐƟůů
consensus MODEST ENCOURAGEMENT
an ugly year-to-date performance and forecasts Vodafone was able to hand investors
arguably even more staggering given that some cheer by nudging up full year
this is a FTSE 100 mega-cap valued at more than guidance, even if that relies on a new swathe
£41bn even at today’s depressed levels. ŽĨĐŽƐƚĐƵƚƐĂŶĚĞĸĐŝĞŶĐŝĞƐƌĂƚŚĞƌƚŚĂŶĂŶLJƌĞĂů
improvement to how the business is trading.
zĞƚƚŚĞŽŶůLJƚŚŝŶŐƚŚĂƚƌĞĂůůLJŵĂƩĞƌƐƚŽŝŶǀĞƐƚŽƌƐ

“ ŝŶsŽĚĂĨŽŶĞŝƐƚŚĂƚŝƚĐĂŶŬĞĞƉƐƉĞǁŝŶŐŽƵƚŚĞŌLJ

“
dividends. Fears of a cut to that payout have
weighed heavily on the minds of investors with
It may be one of the world’s many presuming, so far incorrectly, that with a
largest mobile network ŶĞǁŵĂŶĂƚƚŚĞƚŽƉĂƌĞͲďĂƐŝŶŐŽĨĞdžƉĞĐƚĂƟŽŶƐ
companies but to be a was coming.
dŚĂƚŝƚŚĂƐŶ͛ƚƐŽĨĂƌŝƐĂƐŽƉĨŽƌƚŚĞŽƉƟŵŝƐƚƐ͘
shareholder through 2018 has But given the current debt pile of €31bn and
been a thoroughly miserable costly new 5G spectrum licences to be funded, we
experience
ience wonder for how long.
A forward yield of nearly 9% suggests the market
ƌĞŵĂŝŶƐƐĐĞƉƟĐĂůŽŶƚŚĞƐƵƐƚĂŝŶĂďŝůŝƚLJŽĨƚŚĞ
dividend. (SF)

15 November 2018 | SHARES | 7

 BIG NEWS
Are investors overreacting to
talk of a possible US ban on
menthol cigarettes?
Analysts stress a ban could take years to enforce and may not even happen
I ŶǀĞƐƚŽƌƐŵĂLJďĞŽǀĞƌƌĞĂĐƟŶŐƚŽĐŚĂƩĞƌĂďŽƵƚ
ĂƉŽƚĞŶƟĂůďĂŶŽŶŵĞŶƚŚŽůĐŝŐĂƌĞƩĞƐĨƌŽŵ
ƚŚĞh^&ŽŽĚĂŶĚƌƵŐĚŵŝŶŝƐƚƌĂƟŽŶ;&ͿĂƐ
part of its drive to crack down on smoking among
young people.
ŝŐĂƌĞƩĞƐĞůůĞƌƌŝƟƐŚŵĞƌŝĐĂŶdŽďĂĐĐŽ;d^Ϳ ƐǁŝƚĐŚŽǀĞƌƚŽƉŽƚĞŶƟĂůůLJƌĞĚƵĐĞĚͲƌŝƐŬ
took a near-10% hit to its share price on the
ƐƉĞĐƵůĂƟŽŶ͘/ƚŽǁŶƐƚŚĞEĞǁƉŽƌƚďƌĂŶĚŽĨŵĞŶƚŚŽů vapour products.
ĐŝŐĂƌĞƩĞƐĨŽůůŽǁŝŶŐŝƚƐĂĐƋƵŝƐŝƟŽŶŽĨZĞLJŶŽůĚƐ
American in 2017.
h^ŵĞŶƚŚŽůĐŝŐĂƌĞƩĞƐŐĞŶĞƌĂƚĞƐĂƌŽƵŶĚĂ
ƋƵĂƌƚĞƌŽĨƚŚĞĐŽŵƉĂŶLJ͛ƐĂŶŶƵĂůŐůŽďĂůƉƌŽĮƚ͘
ZŝǀĂůImperial Brands (IMB) dipped 2.1% on
the news as its exposure to US menthol is
ƐŝŐŶŝĮĐĂŶƚůLJůŽǁĞƌ͘
:ĞīĞƌŝĞƐĂŶĂůLJƐƚKǁĞŶĞŶŶĞƩĂƌŐƵĞƐ
ƚŚĞƌĞĂĐƟŽŶƚŽƚŚĞŶĞǁƐ͕ƉĂƌƟĐƵůĂƌůLJĨŽƌ
ƌŝƟƐŚŵĞƌŝĐĂŶdŽďĂĐĐŽ͕ŝƐ͚ĞdžƚƌĞŵĞĂŶĚ BATS falls 10% challenges can be made and could
overdone’. on speculation ĚƌĂŐŽƵƚĂŶLJƉƌŽƐƉĞĐƟǀĞůĞŐŝƐůĂƟŽŶ
8 | SHARES | 15 November 2018
ĞŶŶĞƩƐĂLJƐĂďĂŶŝƐƵŶůŝŬĞůLJƚŽŚĂƉƉĞŶ
ĂŶLJƟŵĞƐŽŽŶĂƐĞǀŝĚĞŶĐĞǁŝůůďĞŶĞĞĚĞĚƚŽ
ĞŶĨŽƌĐĞƚŚĞďĂŶ͕ǁŚŝĐŚǁŽƵůĚƚĂŬĞƟŵĞĂŶĚŵĂLJ
not be conclusive.
KŶĞŽĨƚŚĞĞīĞĐƚƐŽĨĂďĂŶĐŽƵůĚďĞĂ
ƉƌŽĚƵĐƚƐ;ZZWƐͿ͕ŝŶĐůƵĚŝŶŐƚŽďĂĐĐŽŚĞĂƟŶŐĂŶĚ
WHY THE MARKET IS REACTING NEGATIVELY
ǀĞŶŝĨƚŚĞďĂŶŚĂƉƉĞŶĞĚ͕ƌŝƟƐŚŵĞƌŝĐĂŶ
Tobacco is ‘well placed’ to gain market share thanks
ƚŽŝƚƐZZWƉŽƌƞŽůŝŽ͕ŝĨƉĞŽƉůĞƐǁŝƚĐŚŝŶƐƚĞĂĚŽĨ
ƋƵŝƫŶŐ͕ĂĐĐŽƌĚŝŶŐƚŽĞŶŶĞƩ͘
h^ŝŶǀĞƐƚŵĞŶƚďĂŶŬWŝƉĞƌ:ĂīƌĂLJ
Up in ĂůƐŽďĞůŝĞǀĞƐƚŚĞŵĂƌŬĞƚƌĞĂĐƟŽŶ
smoke – ƚŽďĞĞdžĐĞƐƐŝǀĞ͕ŇĂŐŐŝŶŐƚŚĂƚůĞŐĂů
by at least eight years.
menthol ^ŽƵůƟŵĂƚĞůLJĂŶLJďĂŶĐŽƵůĚƚĂŬĞ
ban LJĞĂƌƐƚŽďĞĞŶĨŽƌĐĞĂŶĚƉŽƚĞŶƟĂůůLJ
may not even happen if legal challenges
are successful.
tŚŝůĞŝƚĐĂŶďĞĂƌŐƵĞĚƚŚĞƐƉĞĐƵůĂƟŽŶŚĂƐŶŽƚ
done much damage to the tobacco industry yet,
ƵŶĐĞƌƚĂŝŶƚLJŽǀĞƌƌĞŐƵůĂƚŽƌLJĂĐƟŽŶĐŽƵůĚĐŽŶƟŶƵĞ
ƚŽǁĞŝŐŚŽŶĂƐĞĐƚŽƌƚƌĂĚŝƟŽŶĂůůLJŬŶŽǁŶĨŽƌŚŝŐŚ
dividend yields.
dŚĞ&ŚĂƐĂůƐŽŶŽƚĞĚƚŚĂƚƚƌĞŶĚLJŇĂǀŽƵƌĞĚ
vaping products such as mango and cucumber
ĐŽƵůĚĞŶƟĐĞƚĞĞŶĂŐĞƌƐĂŶĚLJŽƵŶŐƉĞŽƉůĞŝŶƚŽ
the habit.
The FDA’s focus on this part of the market could
put a dent in the prospects of fast-growing rival
:ƵƵůǁŝƚŚϳϬйŽĨƚŚĞh^ĞͲĐŝŐĂƌĞƩĞŵĂƌŬĞƚƐŝŶĐĞŝƚƐ
launch only three years ago.
dŚŝƐĐŽƵůĚďĞĂďĞŶĞĮƚƚŽƚŚĞŵŽƌĞŵĂƚƵƌĞ
ĮƌŵƐŝŶƚŚŝƐŵĂƌŬĞƚůŝŬĞ/ŵƉĞƌŝĂůƌĂŶĚƐĂŶĚƌŝƟƐŚ
ŵĞƌŝĐĂŶdŽďĂĐĐŽ͘;>D:Ϳ
 BIG NEWS
BIG NEWS

Tracsis rules out cash return

as acquisition pipeline bulges
More than £22m is ready for deployment as company pursues M&A value strategy

T ransport infrastructure technology company

Tracsis (TRCS:AIM) is categorically ruling
out returning any of its £22.3m cash pile to
shareholders.
/ŶƐƚĞĂĚ͕ĐŚŝĞĨĞdžĞĐƵƟǀĞŽĸĐĞƌ:ŽŚŶDĐƌƚŚƵƌ
has told Shares that he wants to put that money
ƚŽďĞƩĞƌƵƐĞďLJĐŽŶƟŶƵŝŶŐŝƚƐůŽŶŐͲƌƵŶƉŽůŝĐLJŽĨ
ĂĐƋƵŝƌŝŶŐǀĂůƵĞͲĂĚĚŝŶŐďƵƐŝŶĞƐƐĞƐǁŝƚŚŵŽƟǀĂƚĞĚ
management.
Tracsis provides a range of technology and
services to the rail industry, including remote
ĐŽŶĚŝƟŽŶŵŽŶŝƚŽƌŝŶŐŽĨƚƌĂĐŬƐ͕ƉŽǁĞƌůŝŶĞƐ͕ƉŽŝŶƚƐ
ĂŶĚŽƚŚĞƌǀŝƚĂůďŝƚƐŽĨĞƋƵŝƉŵĞŶƚ͘dŚĞŽƚŚĞƌŚĂůĨ
ŽĨƚŚĞďƵƐŝŶĞƐƐŝƐĂŝŵĞĚĂƚƌĞĂůͲƟŵĞƚƌĂĸĐĚĂƚĂ
ĂŶĚĂŶĂůLJƐŝƐƚŽŽůƐƵƐĞĚďLJŽƌŐĂŶŝƐĂƟŽŶƐĨƌŽŵƌŽĂĚ
planners to large event organisers.
KǀĞƌƚŚĞƉĂƐƚĚĞĐĂĚĞŽƌƐŽdƌĂĐƐŝƐŚĂƐďŽƵŐŚƚ
and integrated more than a dozen businesses,
funded by cash generated internally by the
business. This is popular with shareholders because
ŝƚŚĂƐůĞĚƚŽǀŝƌƚƵĂůůLJĚŝůƵƟŽŶͲĨƌĞĞǀĂůƵĞĐƌĞĂƟŽŶ
over the years.
Since early 2012 the Tracsis share price has
more increased more than 10-fold from 56p
ƚŽƚŚĞĐƵƌƌĞŶƚϲϭϱƉ͕ĂŶĚƚŚĂƚ͛ƐĂŌĞƌƐĞůůŝŶŐŽī
ƚŚƌŽƵŐŚŵƵĐŚŽĨKĐƚŽďĞƌĂƐŵŽƐƚŽĨƚŚĞƐƚŽĐŬ
market did.
McArthur says there is a bulging pipeline of
ƉŽƚĞŶƟĂůďƵLJŽƵƚƚĂƌŐĞƚƐĂůƚŚŽƵŐŚŚĞĂĚŵŝƚƐƚŚĂƚ
ƚŚĞĞdžĂĐƚƟŵŝŶŐŽĨĚĞĂůƐƌĞŵĂŝŶƐƵŶƉƌĞĚŝĐƚĂďůĞ͕
although he hopes to complete two by the end of
ƚŚĞĐƵƌƌĞŶƚĮŶĂŶĐŝĂůLJĞĂƌƚŽϯϭ:ƵůLJϮϬϭϵ͘;^&Ϳ

Supermarket sales slow supermarket sales.

after summer surprise
Groceries firms are struggling according
to the latest round of sector data
AFTER FEASTING on better sales over
the summer thanks to extraordinarily
good weather and the FIFA World
Cup, it seems the big supermarkets
are back to lean times ahead of
Christmas.
The latest Kantar Worldpanel data
shows UK supermarket spending
rose by 2.6% in the 12 weeks to 4
November compared with growth
of 3.8% as recently as the 12-week
period to mid-September.
Meanwhile data from Nielsen
shows four-week spending to 3
November grew just 1.5% despite
better sales of Halloween goods.
Both sets of data show hard
discounters Aldi and Lidl continuing to
eat into the Big Four’s market share.
Five years ago less than half of
British households visited Aldi or
Lidl once or more in three months.
Today almost two-thirds of us
do and they account for 13% of
By comparison Morrison
(MRW), recently (6 Nov) saw its
shares slammed after flagging a
slowdown in the market.
Sainsbury’s (SBRY), which
is aiming to merge with Asda,
saw sales fall according to the
latest data as did Waitrose which
saw its first negative reading
since February 2009, ending a
remarkable run of positive growth.
Market leader Tesco (TSCO)
reported its slowest sales growth
for over a year. Despite the fanfare,
we doubt that the new Jack’s
discount concept will cause
the discounters to lose much
beauty sleep. (IC)

15 November 2018 | SHARES | 9

 GREAT IDEAS
Time to load up on
AstraZeneca for capital
gains and dividends
The FTSE 100 pharma giant is now looking more attractive after a long period
in the doldrums
ASTRAZENECA È BUY
(AZN) £63.00
Stop loss: £47.00
Market cap: £80bn
P
ŚĂƌŵĂĐĞƵƟĐĂůŐŝĂŶƚ
AstraZeneca (AZN)ŝƐ
ůŽŽŬŝŶŐŵŽƌĞĂƩƌĂĐƟǀĞĂƐ
ŝƚĞŶũŽLJƐŵŽŵĞŶƚƵŵǁŝƚŚĚƌƵŐ
ĚĞǀĞůŽƉŵĞŶƚƐĂŶĚƐƚƌĞĂŵůŝŶĞƐ
ŝƚƐďƵƐŝŶĞƐƐ͘
/ƚƐƐŚĂƌĞƉƌŝĐĞŝƐƐƚĂƌƟŶŐƚŽ
ƉŝĐŬƵƉĂŌĞƌďĞŝŶŐƐůƵŐŐŝƐŚĨŽƌ
ĂůŽŶŐƟŵĞ͘ŶĂůLJƐƚƐŚĂǀĞĂůƐŽ
ƐƚĂƌƚĞĚƚŽƵƉŐƌĂĚĞĞĂƌŶŝŶŐƐ
ĨŽƌĞĐĂƐƚƐǁŚŝĐŚŝƐŝŵƉŽƌƚĂŶƚĨŽƌ
ƐƵƐƚĂŝŶŝŶŐƵƉǁĂƌĚƐŵŽŵĞŶƚƵŵ
ŝŶƚŚĞƐƚŽĐŬ͘
ƌƵŐĐŽŵƉĂŶŝĞƐŚĂĚďĞĞŶ
ŽƵƚŽĨĨĂǀŽƵƌĨŽƌƐĞǀĞƌĂůLJĞĂƌƐ
ĂŵŝĚĐŽŶĐĞƌŶƐŽǀĞƌƉŽůŝƟĐĂů
ŝŶƚĞƌĨĞƌĞŶĐĞŽŶƉƌŝĐŝŶŐĂŶĚ
ďůŽĐŬďƵƐƚĞƌƉƌŽĚƵĐƚƐůŽƐŝŶŐ
ƉĂƚĞŶƚƉƌŽƚĞĐƟŽŶ͘
^ĞŶƟŵĞŶƚŝƐŶŽǁŝŵƉƌŽǀŝŶŐ͕
ŚĞůƉĞĚďLJƐƵĐĐĞƐƐǁŝƚŚ
ĂƉƉƌŽǀŝŶŐŶĞǁĚƌƵŐƐĂŶĚƚŚĞ
ŽŶŐƌĞƐƐŝŽŶĂůŐƌŝĚůŽĐŬĨŽůůŽǁŝŶŐ
ƚŚĞh^ŵŝĚƚĞƌŵĞůĞĐƟŽŶƐ
ƌĞĚƵĐŝŶŐƚŚĞƌŝƐŬŽĨĚŝƐƌƵƉƟǀĞ͕
ŐŽǀĞƌŶŵĞŶƚͲĚŝĐƚĂƚĞĚƉƌŝĐĞ
ĐŚĂŶŐĞƐŝŶƚŚĂƚƉĂƌƚŽĨƚŚĞ
ǁŽƌůĚ͘
ƐƚƌĂĞŶĞĐĂŝƐďŝŐŝŶŽŶĐŽůŽŐLJ
ǁŚŝĐŚŝƐƚŚĞƐƚƵĚLJŽĨĐĂŶĐĞƌ͘
dŚĞĐŽŵƉĂŶLJĂĐŚŝĞǀĞĚĂŵĂũŽƌ
10 | SHARES | 15 November 2018
ďƌĞĂŬƚŚƌŽƵŐŚĂĨĞǁŵŽŶƚŚƐĂŐŽ ƉƌŝĐĞ͘/ŶǀĞƐƚŵĞŶƚďĂŶŬƌĞĚŝƚ
ǁŝƚŚŽŶĞŽĨƚŚĞŵŽƐƚŝŵƉŽƌƚĂŶƚ ^ƵŝƐƐĞĨŽƌĞĐĂƐƚƐƐƚƌĂĞŶĞĐĂǁŝůů
ĚƌƵŐƐŝŶŝƚƐĐĂŶĐĞƌƉŽƌƞŽůŝŽ͕ ĂĐŚŝĞǀĞΨϯϭďŶŽĨƐĂůĞƐŝŶϮϬϮϯ͕
/ŵĮŶnjŝ͕ǁŚŝĐŚŚĂƐƐŚŽǁŶƚŽ ĂĚĚŝŶŐƚŚĞĨƵůůƚĂƌŐĞƚǁŽƵůĚŽŶůLJ
ŝŵƉƌŽǀĞƉĂƟĞŶƚƐƵƌǀŝǀĂůƌĂƚĞƐ͘ ďĞŚŝƚŝĨŝƚƐĞŶƟƌĞĚƌƵŐƉŝƉĞůŝŶĞŝƐ
ƐƵĐĐĞƐƐĨƵů͘
STRENGTH IN ONCOLOGY tŚŝůĞǁĞ͛ƌĞĮǀĞLJĞĂƌƐĂǁĂLJ
/ŶKĐƚŽďĞƌƐƚƌĂĞŶĞĐĂƌĞƉŽƌƚĞĚ ĨƌŽŵŶĞĞĚŝŶŐƚŽŵĞĂƐƵƌĞ
ƉŽƐŝƟǀĞƉƌŽŐƌĞƐƐǁŝƚŚƚƌŝĂůƐ ƚŚŝƐƚĂƌŐĞƚ͕ŝƚŝƐƐŽŵĞƚŚŝŶŐĨŽƌ
ŝŶǀŽůǀŝŶŐŝƚƐ>LJŶƉĂƌnjĂŽǀĂƌŝĂŶ ŝŶǀĞƐƚŽƌƐƚŽǁĂƚĐŚĐůŽƐĞůLJ͘
ĐĂŶĐĞƌĚƌƵŐ͘dŚŝƐǁĞĞŬƚŚĞh^ dŚĞŶĞĂƌͲƚĞƌŵĨŽĐƵƐŝƐŽŶ
&ŽŽĚĂŶĚƌƵŐĚŵŝŶŝƐƚƌĂƟŽŶ ĐŽŶƟŶƵĞĚƐƵĐĐĞƐƐǁŝƚŚŝƚƐ
ŐƌĂŶƚĞĚ>LJŶƉĂƌnjĂƉƌŝŽƌŝƚLJƌĞǀŝĞǁ ĐĂŶĐĞƌĚƌƵŐƐ͕ĂƐǁĞůůĂƐƉƌŽĚƵĐƚ
ƐƚĂƚƵƐʹƐŽŵĞƚŚŝŶŐŐŝǀĞŶƚŽ ŶĞǁƐůŝŶŬĞĚƚŽƚƌĞĂƚŵĞŶƚƐĨŽƌ
ŵĞĚŝĐŝŶĞƐƚŚĂƚ͕ŝĨĂƉƉƌŽǀĞĚ͕ ĂŶĂĞŵŝĂ͕ůƵƉƵƐĂŶĚĚŝĂďĞƚĞƐ͘
ǁŽƵůĚŽīĞƌĂƐŝŐŶŝĮĐĂŶƚ &ŝŶĂůůLJ͕ĚŽŶ͛ƚďĞƐŚŽĐŬĞĚ
ŝŵƉƌŽǀĞŵĞŶƚŝŶƚŚĞƚƌĞĂƚŵĞŶƚ͕ ǁŚĞŶƐƚƌĂĞŶĞĐĂƌĞƉŽƌƚƐŝƚƐ
ĚŝĂŐŶŽƐŝƐ͕ŽƌƉƌĞǀĞŶƟŽŶŽĨ ϮϬϭϴĮŶĂŶĐŝĂůƌĞƐƵůƚƐĂƐƉƌĞͲ
ƐĞƌŝŽƵƐĐŽŶĚŝƟŽŶƐ͘ ƚĂdžƉƌŽĮƚŝƐĨŽƌĞĐĂƐƚƚŽĨĂůůďLJ
/ŶǀĞƐƚŽƌƐƐŚŽƵůĚĂƉƉƌĞĐŝĂƚĞ ϭϰ͘ϴйƚŽΨϱ͘ϴϰďŶ͘dŚĞŵĂƌŬĞƚ
ƚŚĂƚƉŚĂƌŵĂĐŽŵƉĂŶŝĞƐĂƌĞŚŝŐŚ ŝƐĨƵůůLJĂǁĂƌĞŽĨƚŚĞƚƌĞŶĚǁŝƚŚ
ƌŝƐŬ͕ĞǀĞŶŽŶĞƐǁŽƌƚŚďŝůůŝŽŶƐŽĨ ĞĂƌŶŝŶŐƐĂŶĚƚŚĞĨŽĐƵƐŝƐŽŶƚŚĞ
ƉŽƵŶĚƐ͘dŚĞƌĞŝƐŶŽŐƵĂƌĂŶƚĞĞ ĨƵƚƵƌĞǁŚĞƌĞƉƌŽĮƚŝƐĨŽƌĞĐĂƐƚƚŽ
ƚŚĂƚĚƌƵŐĚĞǀĞůŽƉŵĞŶƚƐ ƌĞĐŽǀĞƌƚŽΨϱ͘ϵϲďŶŝŶϮϬϭϵĂŶĚ
ǁŝůůďĞƐƵĐĐĞƐƐĨƵůĂŶĚƚŚĞ ƚŚĞŶŚŝƚΨϲ͘ϯϳďŶŝŶϮϬϮϬ͘
ƐĞĐƚŽƌŝƐĂƚƌŝƐŬŽĨĚŝƐƌƵƉƟŽŶ dŚĞĚŝǀŝĚĞŶĚŝƐĨŽƌĞĐĂƐƚƚŽƐƚĂLJ
ĨƌŽŵƌĞŐƵůĂƚŽƌLJĂŶĚƉŽůŝƟĐĂů ŇĂƚĂƚΨϮ͘ϴϬ;Ϯϭϲ͘ϲϲƉͿĨŽƌƚŚĞ
ŝŶƚĞƌĨĞƌĞŶĐĞ͘ ĨŽƌĞƐĞĞĂďůĞĨƵƚƵƌĞ͕ŝŵƉůLJŝŶŐĂ
ƐƚƌĂĞŶĞĐĂŚĂƐƐĞƚŝƚƐĞůĨ ĚĞĐĞŶƚϯ͘ϰйLJŝĞůĚ͘;Ϳ
ΨϰϬďŶƐĂůĞƐƚĂƌŐĞƚŝŶϮϬϮϯ͘
/ƚƐƚĞŵƐďĂĐŬƚŽǁŚĞŶ 6400 ASTRAZENECA
ŵĂŶĂŐĞŵĞŶƚĨŽƵŐŚƚŽīĂ 6200
ƚĂŬĞŽǀĞƌďŝĚĨƌŽŵWĮnjĞƌŝŶϮϬϭϰ 60005800
ĂŶĚŶĞĞĚĞĚƚŽďĞƐĞĞŶĂƐŚĂǀŝŶŐ 5600
5400
ƐƚƌŽŶŐĂŵďŝƟŽŶƐ͘ 5200
ŝŐƐĂůĞƐƚĂƌŐĞƚƐĂƌĞĂůǁĂLJƐĂ 5000
4800
ƌŝƐŬĂƐĨĂŝůƵƌĞƚŽŚŝƚƚŚĞŵĐĂŶďĞ 4600
N D J F M A M J J A S O N
ŶĞŐĂƟǀĞĨŽƌĂĐŽŵƉĂŶLJ͛ƐƐŚĂƌĞ
 TEMPLETON EMERGING MARKETS INVESTMENT TRUST

HOW CAN A CHINESE

CAR MAKER DRIVE
GROWTH IN YOUR
INVESTMENTS?
Emerging markets such as China have a rapidly growing
pool of affluent consumers able and eager to buy high-end
goods and services. Our emerging markets experts find the
companies best positioned to capitalise on this growth:
whether a Russian bank, Korean technology company, or
Chinese luxury car maker.
Visit temit.co.uk to learn how you can invest in
the companies that we believe have the strongest
potential to drive growth.

The value of shares in Templeton Emerging Markets Investment Trust (TEMIT) and any income from it can fall in
value and investors may not get back the full amount invested. Performance may also be affected by currency
valuations. There is no guarantee that TEMIT will meet its objective. Full details of the risks of investing in TEMIT
can be found in the Risk and Risk Management section of the current TEMIT Annual Report.
Issued by Franklin Templeton Investment Management Limited (FTIML), Cannon Place, 78 Cannon Street, London EC4N 6HL. FTIML is authorised and regulated by the Financial Conduct Authority.
© 2018 Franklin Templeton Investments. All rights reserved.
 GREAT IDEAS
Why we think National
Grid is a firm buy for
the future
Inflation-benchmarked dividend is a powerful value creator for investors
T ŚĞh<ƐƚŽĐŬŵĂƌŬĞƚ
ŚĂƐďĞĞŶďĞƐĞƚǁŝƚŚ
ƵŶĐĞƌƚĂŝŶƟĞƐĂůůLJĞĂƌǁŝƚŚ
ƌĞdžŝƚŶĞŐŽƟĂƟŽŶƐĚƌĂŐŐŝŶŐ
ŽŶ͕ƚŚĞƉŽƵŶĚƉůƵŶŐŝŶŐĂŶĚh<
ĚŽŵĞƐƟĐŐƌŽǁƚŚƐƚƵĐŬŝŶĂƌƵƚ͘
dŚŝƐĐŽƵůĚĂůůĐŚĂŶŐĞŝŶϮϬϭϵ
ďƵƚŝŶƚŚĞŵĞĂŶƟŵĞƚŚĞƌĞŝƐ
ŽŶĞǀĞƌLJĐŽŵƉĞůůŝŶŐƌĞĂƐŽŶƚŽ
ŽǁŶƐŚĂƌĞƐŝŶEĂƟŽŶĂů'ƌŝĚ
(NG.)ʹŝŶŇĂƟŽŶͲƉƌŽƚĞĐƚĞĚ
ĚŝǀŝĚĞŶĚƐ͘
ZW/ŝŶŇĂƟŽŶ;ƌĞƚĂŝůƉƌŝĐĞ
ŝŶĚĞdžͿŝŶ^ĞƉƚĞŵďĞƌĐĂŵĞŝŶĂƚ
ϯ͘ϯй͕ĂĐĐŽƌĚŝŶŐƚŽĮŐƵƌĞƐĨƌŽŵ
ƚŚĞKĸĐĞŽĨEĂƟŽŶĂů^ƚĂƟƐƟĐƐ
;KE^ͿĂŶĚĨŽƌĞĐĂƐƚƐƐƵŐŐĞƐƚƚŚĂƚ
ĮŐƵƌĞƚŽƐĞƩůĞĂƚĂƌŽƵŶĚϯйŽƵƚ
ƚŽϮϬϮϯ͘
ƐƚŚĞĐŽƐƚŽĨůŝǀŝŶŐŝŶ
ƌŝƚĂŝŶƌŝƐĞƐŝƚŵĂŬĞƐŝŶĐŽŵĞ
ďĞŶĐŚŵĂƌŬĞĚƚŽŝŶŇĂƟŽŶŽƌ
ďĞƩĞƌŝŶĐƌĞĂƐŝŶŐůLJĂƩƌĂĐƟǀĞ͘
EĂƟŽŶĂů'ƌŝĚ͕ƌŝƚĂŝŶ͛ƐůĂƌŐĞƐƚ
ƵƟůŝƚLJƐƵƉƉůŝĞƌ͕ƌĞŶĞǁĞĚŝƚƐ
ĐŽŵŵŝƚŵĞŶƚƚŽŐƌŽǁŝƚƐ
ĚŝǀŝĚĞŶĚƚŽŵĂƚĐŚZW/ŝŶŇĂƟŽŶ
ŽƌďĞƩĞƌ͚ĨŽƌƚŚĞĨŽƌĞƐĞĞĂďůĞ
ĨƵƚƵƌĞ͛ĞĂƌůŝĞƌƚŚŝƐLJĞĂƌ͘
dŚŝƐŝƐŝŵƉŽƌƚĂŶƚĨŽƌŝŶǀĞƐƚŽƌƐ
ǁŚŽƌĞůLJŽŶŐƌŽǁŝŶŐŝŶĐŽŵĞƚŽ
ŚĞůƉƉĂLJƚŚĞŝƌŵŽŶƚŚůLJďŝůůƐďƵƚ
ŝƚĂůƐŽƐŚŽƵůĚĂĐƚĂƐĂŵĂŐŶĞƚ
ĨŽƌĂŶLJŽŶĞůŽŽŬŝŶŐƚŽďĞŶĞĮƚ
ĨƌŽŵƚŚĞƉŽǁĞƌĨƵůĞīĞĐƚŽĨ
ĐŽŵƉŽƵŶĚŝŶŐŽǀĞƌƟŵĞ͘
ƐĨƵŶĚŵĂŶĂŐĞƌDĂƌŬ
ĂƌŶĞƩƐĂŝĚƌĞĐĞŶƚůLJ͕ĂƌŽƵŶĚ
ϲϬйŽĨƚŚĞƚŽƚĂůƌĞƚƵƌŶ;ƐŚĂƌĞ
12 | SHARES | 15 November 2018
NATIONAL GRID È BUY
(NG.) 856.5p
Stop loss: 685p
Market cap: £29.1bn
ƉƌŝĐĞŐĂŝŶƐĂŶĚĚŝǀŝĚĞŶĚƐ
ĐŽŵďŝŶĞĚͿĞĂƌŶĞĚďLJƚŚĞ
WĞƌƉĞƚƵĂů/ŶĐŽŵĞΘ'ƌŽǁƚŚ
Trust (PLI)ƚŚĂƚŚĞƌƵŶƐĐĂŵĞ
ĨƌŽŵƌĞŝŶǀĞƐƟŶŐĚŝǀŝĚĞŶĚƐ͘
INFRASTRUCTURE FOCUS
EĂƟŽŶĂů'ƌŝĚƌƵŶƐŵƵĐŚŽĨ
ƚŚĞh<͛ƐĞůĞĐƚƌŝĐŝƚLJĂŶĚŐĂƐ
ƐƵƉƉůLJŝŶĨƌĂƐƚƌƵĐƚƵƌĞ͕ǁŝƚŚ
ƐŝŵŝůĂƌůLJƌĞŐƵůĂƚĞĚŽƉĞƌĂƟŽŶƐ
ŝŶƚŚĞh^͘/ƚŚĂƐĂůŽŶŐƚƌĂĐŬ
ƌĞĐŽƌĚŽĨƐƚĞĂĚŝůLJŝŶĐƌĞĂƐŝŶŐŝƚƐ
ĂŶŶƵĂůƉĂLJŽƵƚƚŽƐŚĂƌĞŚŽůĚĞƌƐ
ĚĂƟŶŐďĞLJŽŶĚƚŚĞϮϬϬϮŵĞƌŐĞƌ
ǁŝƚŚ>ĂƫĐĞ͕ǁŚŝĐŚĨŽƌŵĞĚĂŶ
ĞůĞĐƚƌŝĐŝƚLJĂŶĚŐĂƐƚƌĂŶƐŵŝƐƐŝŽŶ
ŶĂƟŽŶĂůĐŚĂŵƉŝŽŶ͘
/ƚŚĂƐŵŝƐƐĞĚŝƚƐĚŝǀŝĚĞŶĚ
ŐƌŽǁƚŚƚĂƌŐĞƚũƵƐƚŽŶĐĞŝŶƚŚĞ
ƉĂƐƚϭϬLJĞĂƌƐ;ϮϬϭϮͿ͕ǁŚĞŶ
ZW/ǁĂƐĐŽŵŝŶŐĚŽǁŶĨƌŽŵ
ĂƐƉĞůůƌƵŶŶŝŶŐĂƚϱйͲƉůƵƐ͘
dŚŝƐLJĞĂƌ͛ƐĨƵůůLJĞĂƌĨŽƌĞĐĂƐƚ
ƉĂLJŽƵƚŽĨϰϳ͘ϰϱƉŝŵƉůŝĞƐĂϱ͘ϱй
ŝŶĐŽŵĞLJŝĞůĚ͘
dŚŝƐƐŽƌƚŽĨŝŶŇĂƟŽŶͲďĞĂƟŶŐ
ƚƌĂĐŬƌĞĐŽƌĚŝƐŵĂƚĐŚĞĚďLJŽƚŚĞƌ
ƵƟůŝƚLJƐƚŽĐŬƐ;ĞůĞĐƚƌŝĐŝƚLJ͕ŐĂƐ͕
ǁĂƚĞƌƐƵƉƉůŝĞƌƐ͕ĨŽƌĞdžĂŵƉůĞͿ
ďƵƚEĂƟŽŶĂů'ƌŝĚŝƐƚŚĞh<
ŽƉĞƌĂƚŽƌůĞĂƐƚƚŚƌĞĂƚĞŶĞĚ
ďLJƚĂƌŝīƉƌŝĐĞĐĂƉƐďĞŝŶŐ
ŝŶƚƌŽĚƵĐĞĚĂĐƌŽƐƐƚŚĞŝŶĚƵƐƚƌLJ͘
dŚŝƐŝƐŶŽƚƚŽƐĂLJƚŚĂƚƚŚĞ
ŐƌŽƵƉŝƐŝŵŵƵŶĞĨƌŽŵŝƚƐŽǁŶ
ĐŚĂůůĞŶŐĞƐ͕ŶŽƚůĞĂƐƚĂŚĂǁŬŝƐŚ
ƌĞŐƵůĂƚŽƌLJĞŶǀŝƌŽŶŵĞŶƚďŽƚŚ
ƐŝĚĞƐŽĨƚŚĞƚůĂŶƟĐ͕ƐƚƌŝŬĞ
ĂĐƟŽŶĂŶĚŽŶĞͲŽīĐŽƐƚƐĂƐŝƚ
ůŽŽŬƐƚŽƌĞĂůŝŐŶŝƚƐŽƉĞƌĂƟŶŐ
ĞdžƉĞŶƐĞƐĨŽƌƚŚĞĨƵƚƵƌĞ͘
ƵƚǁĞďĞůŝĞǀĞEĂƟŽŶĂů
'ƌŝĚŝƐƉƵůůŝŶŐƚŚĞƌŝŐŚƚůĞǀĞƌƐ
ĂƐŝƚďĂůĂŶĐĞƐƚŚĞĚĞŵĂŶĚƐ
ŽĨƐŚĂƌĞŚŽůĚĞƌƐ͕ǁŽƌŬĞƌƐ͕
ƌĞŐƵůĂƚŽƌƐĂŶĚĐƵƐƚŽŵĞƌƐ͘
ƐĐŚĞŵĞƚŽĐƵƚƐƚĂīŶƵŵďĞƌƐ
ƚŚƌŽƵŐŚĂƉƌŽŐƌĂŵŵĞŽĨ
ǀŽůƵŶƚĂƌLJƌĞĚƵŶĚĂŶĐŝĞƐ
ĂŶŶŽƵŶĐĞĚĂůŽŶŐƐŝĚĞƌĞĐĞŶƚ
ŚĂůĨLJĞĂƌƌĞƐƵůƚƐŝƐĂŐŽŽĚ
ĞdžĂŵƉůĞ͕ĞǀĞŶŝĨƚŚĂƚǁŝůů
ŵĞĂŶƐŽŵĞƐŚŽƌƚͲƚĞƌŵŽŶĞͲ
ŽīĐŽƐƚƐ͘;^&Ϳ
900 NATIONAL GRID
880
860
840
820
800
780
760
740
720
N D J F M A M J J A S O N
 Never heard of our
investment trusts?

That’s because those

who have, keep it to
themselves.
With more than 70 years of industry
experience, we might be one of the
investment world’s best kept secrets.

Get in the know.

Visit schroders.co.uk/trusts

Please remember that the value of

investments and the income from
them may go down as well as up
and you may not get back the
amount originally invested.

Marketing material. Issued by Schroder Unit Trusts Limited, 31 Gresham Street, London EC2V 7QA. Registration No 4191730 England.
Authorised and regulated by the Financial Conduct Authority. UK12828
 GREAT IDEAS UPDATES

EXPERIAN ON THE BEACH

(EXPN) £19.06
Gain to date: 2%
Original entry point:
Buy at £18.69,  August 2018
WE FLAGGED Experian (EXPN) as a Great Idea in
ƵŐƵƐƚĂƚάϭϴ͘ϲϵŽŶĂĐŽŵďŝŶĂƟŽŶŽĨĞĂƌŶŝŶŐƐ
ŐƌŽǁƚŚĂŶĚĂŶĂƉƉĞĂůŝŶŐǀĂůƵĂƟŽŶ͘
ůƚŚŽƵŐŚƚŚĞƐŚĂƌĞƐƐŽůĚŽīǁŝƚŚŽƚŚĞƌŐƌŽǁƚŚ
stocks last quarter they quickly rebounded and
ƚŚĂŶŬƐƚŽĂƌĞĐĞŶƚƚƌĂĚŝŶŐƵƉĚĂƚĞ;ϭϯEŽǀͿƚŚĞLJ
ĂƌĞďĂĐŬĂďŽǀĞŽƵƌŝŶŝƟĂůĞŶƚƌLJƉŽŝŶƚ͘
ĞŵĂŶĚĨŽƌŝƚƐƉƌŽĚƵĐƚƐĂŶĚƐĞƌǀŝĐĞƐĐŽŶƟŶƵĞƐ
ƚŽŐƌŽǁǁŝƚŚůŝŬĞͲĨŽƌͲůŝŬĞƐĂůĞƐŝŶĐƌĞĂƐŝŶŐϴйŝŶƚŚĞ
ĮƌƐƚŚĂůĨůĞĂĚŝŶŐƚŚĞĐŽŵƉĂŶLJƚŽƌĂŝƐĞŝƚƐŐƵŝĚĂŶĐĞ
ĨŽƌĨƵůůͲLJĞĂƌƐĂůĞƐĂŶĚĞĂƌŶŝŶŐƐďĞĨŽƌĞŝŶƚĞƌĞƐƚĂŶĚ
ƚĂdž;/dͿ͘
^ĂůĞƐƚŽĐůŝĞŶƚƐŝŶEŽƌƚŚŵĞƌŝĐĂĂƌĞƉĂƌƟĐƵůĂƌůLJ
ƐƚƌŽŶŐƚŚĂŶŬƐƚŽĚĞŵĂŶĚĨŽƌŝƚƐŵŽƌƚŐĂŐĞĚĂƚĂ͘
ůƐŽŝƚƐƐĐĞŶĚ͚ďŝŐĚĂƚĂ͛ƉƌŽĚƵĐƚŚĂƐďĞĞŶ
ĂĚŽƉƚĞĚďLJĂůůƚŚĞŝƌďŝŐh^ĐůŝĞŶƚƐĂŶĚĂǀĞƌƐŝŽŶŝƐ
ďĞŝŶŐƌŽůůĞĚŽƵƚƚŽŵŝĚͲŵĂƌŬĞƚĐůŝĞŶƚƐ͘
DͬƐŝĂͲWĂĐŝĮĐƐĂůĞƐĂƌĞĂůƐŽƐƚƌŽŶŐƚŚĂŶŬƐ
ƚŽŶĞǁďƵƐŝŶĞƐƐǁŝŶƐŝŶƚŚĞĐŽŶƐƵŵĞƌͲůĞŶĚŝŶŐ
market.
(OTB) 446.5p
Loss to date: 11.6%
Original entry point:
Buy at 505p, 30 August 2018
ONLINE BEACH holidays retailer On The Beach
(OTB) has been hit by troubles in the sector as the
shares have reversed more than 11% to 446.5p
ƐŝŶĐĞǁĞŇĂŐŐĞĚŝƚĂƐĂĐŽŵƉĞůůŝŶŐŽƉƉŽƌƚƵŶŝƚLJ͘
Shares in tour operators Thomas Cook (TCG)
and TUI (TUI) are also in a downward spiral with
ƚŚĞĨŽƌŵĞƌƐĞƌǀŝŶŐƵƉĂďŝŐƉƌŽĮƚǁĂƌŶŝŶŐ͘
/ƚĂƉƉĞĂƌƐƚŚĞƐĞĐƚŽƌĐĂŶŶŽƚƐŚĂŬĞŽīĐŽŶĐĞƌŶƐ
ŽǀĞƌƚƌĂĚŝŶŐĂŌĞƌƚŚĞďůŝƐƚĞƌŝŶŐƐƵŵŵĞƌǁĞĂƚŚĞƌ
ĚĞƚĞƌƌĞĚƉĞŽƉůĞĨƌŽŵŬŝŶŐĂŶŽǀĞƌƐĞĂƐ
holiday.
WĞĞů,ƵŶƚĂŶĂůLJƐƚ/ǀŽƌ:ŽŶĞƐĂƌŐƵĞƐƚŚĞĂďƐĞŶĐĞ
ŽĨĂŶKĐƚŽďĞƌƚƌĂĚŝŶŐƐƚĂƚĞŵĞŶƚĚĞƐƉŝƚĞƚŚĞ
ƵŶƵƐƵĂůƐƵŵŵĞƌŝŵƉůŝĞƐƚƌĂĚŝŶŐŝƐŽŶƚƌĂĐŬ͘
͚/ĨƚŚĞƌĞŝƐƚŽďĞĚŝƐƌƵƉƟŽŶƚŽƚŚĞƚƌĂǀĞůŵĂƌŬĞƚ
[from Brexit] we do not expect On The Beach to
ďĞŝŵŵƵŶĞ͕ďƵƚĚŽĞdžƉĞĐƚŝƚƚŽĨĂƌĞďĞƩĞƌƚŚĂŶ
ĐŽŵƉĞƟƚŽƌƐǁŝƚŚŚŝŐŚĮdžĞĚĐŽƐƚƐĂŶĚĞŵĞƌŐĞ
with an enhanced market share,’ comments
Jones.
KŶdŚĞĞĂĐŚ͛ƐƌĞĐĞŶƚĂĐƋƵŝƐŝƟŽŶŽĨůĂƐƐŝĐ
ŽůůĞĐƟŽŶ͕ĂďƵƐŝŶĞƐƐͲƚŽͲďƵƐŝŶĞƐƐĚŝƐƚƌŝďƵƟŽŶ
network, which sells premium holidays, should
ŽīĞƌĂŶĞǁŐƌŽǁƚŚŽƉƉŽƌƚƵŶŝƚLJ͘

700 ON THE BEA

ACH
CH GR
GROUP
ROUP
U
20000
00 650
EXPERIAN
1950
19 50 600
1900
000
18
1
1850
850
5 550
1800
00 500
50 0
1750
17 500
1700 450
1650 400
1600
350
1550 N D J F M A M J J A S O N
1500
N D J F M A M J J A S O N

SHARES SAYS: È
SHARES SAYS: È We think the fall in the share price is due to
We anticipate sales and earnings upgrades following negative sentiment in the sector rather than a poor
these results and we stick with our positive view. (IC) operational performance. (LMJ)

14 | SHARES | 15 November 2018

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 TALKING POINT Our views on topical issues

Could logistics firms

benefit from stockpiling
ahead of Brexit?
We discuss the impact on the food and drug supply chain

ood and beverage

F companies seem to be
following in the footsteps
ŽĨƚŚĞĚƌƵŐĮƌŵƐŝŶŵĂŬŝŶŐ
ƉƌĞƉĂƌĂƟŽŶƐĨŽƌĂ͚ŶŽͲĚĞĂůƌĞdžŝƚ͛͘
,ĞŝŶĞŬĞŶƌĞĐĞŶƚůLJĂŶŶŽƵŶĐĞĚ
ƉůĂŶƐƚŽĚĞĂůǁŝƚŚƐƵƉƉůLJ
ĐŚĂŝŶŝƐƐƵĞƐĂŶĚďĂĐŬŝŶ
:ƵůLJƉŚĂƌŵĂĐĞƵƟĐĂůŐŝĂŶƚ
AstraZeneca (AZN) caused quite
ƚŚĞƐƟƌǁŚĞŶŝƚĂŶŶŽƵŶĐĞĚ
ƚŚĂƚŝƚǁŽƵůĚďĞŐŝŶƐƚŽĐŬƉŝůŝŶŐ
ŵĞĚŝĐŝŶĞƐŝŶƉƌĞƉĂƌĂƟŽŶĨŽƌĂŶŽͲ
ĚĞĂůŽƵƚĐŽŵĞ͘
dŚĞĐŽŵƉĂŶLJƐĂŝĚŝƚǁŽƵůĚ
increase the amount of
ĮŶŝƐŚĞĚŵĞĚŝĐŝŶĞƐĂǀĂŝůĂďůĞƚŽ hŶĚĞƌĂ͚ŶŽͲĚĞĂůƌĞdžŝƚ͛ƚŚĂƚ are concerned that food will be
ƉŚĂƌŵĂĐŝĞƐĂŶĚŚŽƐƉŝƚĂůƐďLJ ǁŽƵůĚŶŽůŽŶŐĞƌďĞƚŚĞĐĂƐĞ͕ ŚĞůĚƵƉĂƚƉŽƌƚƐ͚ǁŝƚŚŽƌǁŝƚŚŽƵƚ
ĂƌŽƵŶĚϮϬй͚ĂƐĂƐĂĨĞƚLJŶĞƚ͛͘ ƉŽƚĞŶƟĂůůLJĐĂƵƐŝŶŐŵĂũŽƌĚĞůĂLJƐ ĂĚĞĂů͛͘
Less than a month later rival ŝŶƚŚĞh<ŐĞƫŶŐĚƌƵŐƐĨƌŽŵ >ĂƐƚǁĞĞŬ,ĞŝŶĞŬĞŶ͕ƚŚĞ
^ĂŶŽĮĂŶŶŽƵŶĐĞĚƚŚĂƚŝƚǁŽƵůĚ ƵƌŽƉĞĂŶĚǀŝĐĞǀĞƌƐĂ͘ ǁŽƌůĚ͛ƐƐĞĐŽŶĚͲůĂƌŐĞƐƚďƌĞǁĞƌ͕
ĂůƐŽƐƚŽĐŬƉŝůĞŵĞĚŝĐŝŶĞƐŝŶ Now it seems food companies ĂĚŵŝƩĞĚƚŚĂƚŝƚŚĂĚďĞŐƵŶ
ƚŚĞh<͘ ĂƌĞĨŽůůŽǁŝŶŐƐƵŝƚ͘ŽůĚƐƚŽƌĂŐĞ adding warehouse space in the
^ĂŶŽĮŝƐŽŶĞŽĨƚŚĞǁŽƌůĚ͛Ɛ ĮƌŵtŝůĚtĂƚĞƌƐĂLJƐŝƚŝƐƌƵŶŶŝŶŐ h<ƚŽŐŝǀĞŝƚ͚ŐƌĞĂƚĞƌŇĞdžŝďŝůŝƚLJƚŽ
leading producers of insulin out of room because food ŵĞĞƚĐƵƐƚŽŵĞƌĚĞŵĂŶĚƐ͛͘
and vaccines and imports its
ŵĞĚŝĐŝŶĞƐŝŶƚŽƚŚĞh<͘

ZK^^ͳ,EE>dZ
“
ƉƌŽĚƵĐĞƌƐĂŶĚƐƵƉĞƌŵĂƌŬĞƚƐ /ƚƐĐŽŵŵĞŶƚƐĐĂŵĞĂŌĞƌ
ƚŚĞĐŚŝĞĨĞdžĞĐƵƟǀĞŽĸĐĞƌŽĨ
h<ůŽŐŝƐƟĐƐĮƌŵWincanton
(WIN)͕ĚƌŝĂŶŽůŵĂŶ͕ĚĞƐĐƌŝďĞĚ

Z/^<^/EZ^/E'
ǀĞƌLJŵŽŶƚŚƐŽŵĞϯϳŵƉĂĐŬƐŽĨ
medicine come into the UK from
Europe and 45m travel the other
ǁĂLJ͕ĂĐĐŽƌĚŝŶŐƚŽĂƌĞƉŽƌƚ͘
ůůĚƌƵŐƐĂƌĞůŝĐĞŶƐĞĚ͕ƚĞƐƚĞĚ
ĂŶĚĐĞƌƟĮĞĚĂĐĐŽƌĚŝŶŐƚŽƐƚƌŝĐƚ
ŶĂƟŽŶĂůƌĞŐƵůĂƟŽŶƐ͕ĂŶĚĨŽƌŶŽǁ
tests in the UK and Europe are
ƚƌĞĂƚĞĚĞƋƵĂůůLJ͘
“
UK firms will stockpile
close to £40bn of
goods ahead off Brexit
ƚŚĞƵƚĐŚĮƌŵĂƐƐƚŽĐŬƉŝůŝŶŐ
͚ƚŚŽƵƐĂŶĚƐŽĨƉĂůůĞƚƐǁŽƌƚŚ
ŽĨŐŽŽĚƐ͛ĂŚĞĂĚŽĨƚŚĞDĂƌĐŚ
ĚĞĂĚůŝŶĞ͘
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ΈE^dZΉ&KZ
>K'/^d/^&/ZD^
dŚĞĞŶƚƌĞĨŽƌĐŽŶŽŵŝĐƐĂŶĚ
ƵƐŝŶĞƐƐZĞƐĞĂƌĐŚĞƐƟŵĂƚĞƐƚŚĂƚ

16 | SHARES | 15 November 2018

 TALKING POINT
h<ĮƌŵƐǁŝůůƐƚŽĐŬƉŝůĞĐůŽƐĞƚŽ
άϰϬďŶŽĨŐŽŽĚƐĂŚĞĂĚŽĨƌĞdžŝƚ͘
Among the goods being stored
ďLJtŝůĚtĂƚĞƌĂƌĞϭ͘ϳϱŵƚƵƌŬĞLJ
ĐƌŽǁŶƐ͕ϳ͕ϬϬϬƉĂůůĞƚƐŽĨĐĂŬĞƐ͕
ϰ͕ϬϬϬƉĂůůĞƚƐŽĨƐƵƉĞƌŵĂƌŬĞƚ
ĚĞƐĞƌƚƐĂŶĚϭ͕ϬϬϬƉĂůůĞƚƐŽĨ
ŵŽnjnjĂƌĞůůĂƐƟĐŬƐŽĨĂůůƚŚŝŶŐƐ͘
tŝůĚtĂƚĞƌ͛ƐĐŚŝĞĨĞdžĞĐƵƟǀĞ
<ĞŶZĂƩĞŶďƵƌLJĚĞƐĐƌŝďĞĚƚŚĞ
ƐƵƌŐĞŝŶĚĞŵĂŶĚĂƐ͚ĐŽŵƉůĞƚĞůLJ
ŽƵƚŽĨƐLJŶĐ͛ǁŝƚŚŶŽƌŵĂůƚƌĂĚŝŶŐ
ĂŶĚƐĂLJƐŝƚŝƐŚĂǀŝŶŐƚŽƚƵƌŶ
ĐƵƐƚŽŵĞƌƐĂǁĂLJŽŶĂĚĂŝůLJďĂƐŝƐ͘
ƐǁĞůůĂƐĮŶŝƐŚĞĚƉƌŽĚƵĐƚƐ͕
customers are worried about
ŬĞĞƉŝŶŐĂĐĐĞƐƐƚŽƐƵƉƉůŝĞƐŽĨ months ahead of normal in KƚŚĞƌh<ƐƚŽĐŬƐǁŚŝĐŚŵĂLJďĞ
ƌĂǁŝŶŐƌĞĚŝĞŶƚƐƉŽƐƚͲƌĞdžŝƚ ŽƌĚĞƌƚŽĞŶƐƵƌĞŝƚĐĂŶƐƵƉƉůLJ ůŝŶŬĞĚƚŽƐƚŽĐŬƉŝůŝŶŐŝŶĐŽŵŝŶŐ
ŝŶĐůƵĚŝŶŐƐƵĐŚďĂƐŝĐƐĂƐŇŽƵƌĂŶĚ ŝƚƐĐƵƐƚŽŵĞƌƐ͘ ŵŽŶƚŚƐŝŶĐůƵĚĞƚƌĂŶƐƉŽƌƚĮƌŵƐ
ĨƌƵŝƚũƵŝĐĞƐ͘ EĞdžƚLJĞĂƌĂƐƚĞƌĨĂůůƐŝŶůĂƚĞͲ ĚĚŝĞ^ƚŽďĂƌƚ>ŽŐŝƐƟĐƐ;^>Ϳ
ĞƐŝĚĞƐďƌĞǁĞƌƐƐƚŽĐŬƉŝůŝŶŐ ƉƌŝůƐŽƚŚĞƌĞŝƐůŝŬĞůLJƚŽďĞĂ and yƉĞĚŝĂƚŽƌ;yW͗/DͿ and
ďĞĞƌ͕tŝŶĐĂŶƚŽŶŚĂƐƐĞĞŶ ďŝŐƌƵƐŚĨŽƌĂůůŬŝŶĚƐŽĨƐĞĂƐŽŶĂů ǁĂƌĞŚŽƵƐĞůĂŶĚůŽƌĚƐůŝŬĞ^ĞŐƌŽ
ĐŚŽĐŽůĂƚĞͲŵĂŬĞƌƐƉƌŽĚƵĐŝŶŐ ƉƌŽĚƵĐƚƐďĞĨŽƌĞƚŚĞDĂƌĐŚϯϭ ;^'ZKͿ and tĂƌĞŚŽƵƐĞZ/d
ĂŶĚƐƚŽĐŬƉŝůŝŶŐĂƐƚĞƌĞŐŐƐ ƌĞdžŝƚĚĞĂĚůŝŶĞ͘ ;t,Z͗/DͿ͘;/Ϳ

Navigating your investment through

challenging market conditions

VT RM ALTERNATIVE INCOME FUND

Fund objective: Income generation and capital protection

5% target income per annum

paid quarterly

www.rm-funds.co.uk/RMAI • 0131 603 7050

Past performance is not a guide to future returns and there is a risk of loss of capital. Full details of fund-specific risks are available on the fund 15 November
website 2018 | SHARES | 17
at www.rm-funds.co.uk/RMAI
TURN PATIENCE
INTO PROFIT
C
ompounding is a is in the last few years, which
fundamental force, a
How reinvested ŵĞĂŶƐŵŽƐƚŽĨƚŚĞďĞŶĞĮƚ
bit like gravity. In fact dividends unlock ĐŽŵĞƐĨƌŽŵƐƟĐŬŝŶŐǁŝƚŚŝƚ͘
Einstein is said to have
called it the most powerful force the benefits of a buy THE POWER OF DIVIDEND
in the universe. and hold approach REINVESTMENT
While gravity pulls a snowball If as well as going up 10% a year
downhill, it’s compounding that your shares pay you an annual
makes it grow bigger. If the shares go up 10% the ĚŝǀŝĚĞŶĚŽĨάϱϬ͕ƌĞͲŝŶǀĞƐƟŶŐƚŚĞƐĞ
As it rolls downhill the next year you’ll have £1,210 ĚŝǀŝĚĞŶĚƐƌĂƚŚĞƌƚŚĂŶŐĞƫŶŐĂ
snowball collects more snow: the as you’ve generated a gain not cheque every three or six months
further it rolls the more snow it just on your original investment ĐŽƵůĚƐƵďƐƚĂŶƟĂůůLJŝŵƉƌŽǀĞLJŽƵƌ
collects. of £1,000 but also on the £100 returns ͷ (see chart B).
gains you made last year. In this case, at the end of the
UNDERSTANDING THE If the shares keep going up 10% ĮƌƐƚLJĞĂƌLJŽƵŚĂǀĞάϭ͕ϭϱϬʹ
COMPOUNDING EFFECT a year for 10 years, you’ll end up your original £1,000 plus £100
In the same way, the longer you with £2,588 as you keep making of capital gains plus £50 of
hold an investment the greater gains on your previous year’s dividends.
the power of compounding. So gains. You actually double your /ĨLJŽƵŬĞĞƉƌĞŝŶǀĞƐƟŶŐƚŚĞ
how does it work? ŵŽŶĞLJĂŌĞƌũƵƐƚŽǀĞƌƐĞǀĞŶLJĞĂƌƐ͘ dividends then instead of
Say you invest £1,000 in a If you keep the same shares doubling your £1,000 in just over
stock and the shares go up 10% and they go up 10% a year for seven years, it doubles in less
in a year. At the end of that year another 10 years you’ll end up than six years. In 10 years it turns
you’ll have £1,100, your original with £6,714 or more than six into £3,390 rather than £2,588,
£1,000 plus £100 of gains ͷ (see ƟŵĞƐLJŽƵƌŵŽŶĞLJ͘ almost a third more.
chart A). EŽƟĐĞŚŽǁƐƚĞĞƉƚŚĞŝŶĐƌĞĂƐĞ /ĨLJŽƵƐƟĐŬǁŝƚŚŝƚĨŽƌƚŚĞ
whole 20 years, rather than
Simple compounding effect (CHART A) £6,714 you end up with £9,591
8000 or over 40% more than the
7000 ƌĞƚƵƌŶĨƌŽŵŶŽƚƌĞͲŝŶǀĞƐƟŶŐƚŚĞ
dividends.
6000
Again, as the chart shows, your
5000 returns accelerate towards the
£
4000 end.
DŽƐƚŝŶǀĞƐƚŵĞŶƚƉůĂƞŽƌŵƐ͕
3000
including AJ Bell Youinvest, allow
2000 you to opt for dividends to be
1000 ƌĞŝŶǀĞƐƚĞĚĂƵƚŽŵĂƟĐĂůůLJ͘
&ŽƌƚŚŽƐĞǁĂŶƟŶŐƚŽůĞƚ
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 someone else re-invest dividends
Years for them, many investment trust

18 | SHARES | 15 November 2018

 Compounding plus dividends reinvested (CHART B)
12000

10000

8000
£
6000

4000

2000

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Years

ĂŶĚĨƵŶĚƐŚĂǀĞ͚ĂĐĐƵŵƵůĂƟŽŶ͛ a year you will have £7,021 or a

ƵŶŝƚƐǁŚŝĐŚǁŝůůĂƵƚŽŵĂƟĐĂůůLJ
do this without your having to
tell them.
BANKING THE DIVIDEND
On the other hand you could
have just banked the £50 of
dividends every year instead of
ƌĞͲŝŶǀĞƐƟŶŐŝƚ͕ŝŶǁŚŝĐŚĐĂƐĞLJŽƵ
ǁŽƵůĚŚĂǀĞάϳ͕ϳϭϰĐŽŶƐŝƐƟŶŐ
of £6,714 from your original
investment plus £1,000 in
dividend cheques.
third more.
ŌĞƌƐĞǀĞŶLJĞĂƌƐĂŶĚĂŶ
investment of £7,350, you amass
άϭϬ͕ϭϬϲ͕ĂŶĚĂŌĞƌϭϬLJĞĂƌƐĂŶĚ
an investment of £10,500 you
end up with a whopping £18,328
or almost 75% more than you’ve
invested.
If you keep this exercise going
and invest £1,000 of capital plus
400 Big Macs at £2.50

Or you could have spent the

£50 in which case over 20 years
you could have bought 400 Big
Macs at £2.50 each or 200 pints
of strong lager at £5.00 each. 200 pints at £5.00
Now imagine that as well as
ƌĞͲŝŶǀĞƐƟŶŐLJŽƵƌĚŝǀŝĚĞŶĚƐLJŽƵ
invest another £1,000 at the
start of the year, so you start the
second year with £2,150 instead
of £1,100 ͷ (see chart c).
ŌĞƌĮǀĞLJĞĂƌƐLJŽƵ͛ǀĞŝŶǀĞƐƚĞĚ
άϱ͕ϮϱϬʹĮǀĞůŽƚƐŽĨάϭ͕ϬϬϬĂŶĚ
ĮǀĞĚŝǀŝĚĞŶĚƉĂLJŵĞŶƚƐŽĨάϱϬʹ
and with the same 10% increase

15 November 2018 | SHARES | 19

 the £50 of dividends each year
for another 10 years, you’ll have
turned £21,000 into £65,866
ŽƌŵŽƌĞƚŚĂŶƚŚƌĞĞƟŵĞƐLJŽƵƌ
money, assuming a constant
10% annual return.

THE IMPORTANCE OF
STAYING THE COURSE
Again note how sharply the
curve rises in the last few years.
In fact your returns double in the
last six years which is why it’s so
important to stay the course.
As well as staying the course to
allow the power of compounding
to work, another crucial rule is to
start early.
The chart, shows the
ĚŝīĞƌĞŶĐĞƚŚĂƚŝŶǀĞƐƟŶŐĞĂƌůLJ
Compounding plus dividends plus annual investing (CHART C)
70000

60000

50000
£
40000

30000

20000

10000

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Years
ĐĂŶŵĂŬĞƚŽLJŽƵƌƌĞƟƌĞŵĞŶƚƉŽƚ͘ $450.000
/ĨƚǁŽƉĞŽƉůĞǁĂŶƚƚŽƌĞƟƌĞ
$400.000
Ăƚϲϱ͕ǁŝƚŚŽŶĞŝŶǀĞƐƟŶŐ 25 vs 35 Chart
regularly from age 25 and $350.000
ƚŚĞŽƚŚĞƌŝŶǀĞƐƟŶŐƚŚĞƐĂŵĞ
regular amount from age 35, $300.000
ƚŚĞĚŝīĞƌĞŶĐĞƚŚŽƐĞĞĂƌůLJLJĞĂƌƐ
SAVINGS

$250.000
make is staggering.
The early saver (blue line) $200.000
invests a third more than
the later saver (red line) but $150.000
ƚŚĞŝƌƌĞƟƌĞŵĞŶƚƉŽƚŝƐĂůŵŽƐƚ
$100.000
double as the scale of the gains
ĂĐĐĞůĞƌĂƚĞƐŝŶƚŚĞůĂƩĞƌƐƚĂŐĞƐ͘ $50.000

STARTING EARLY $0
/ŶĨĂĐƚŝĨLJŽƵƐƚĂƌƚƉƵƫŶŐŵŽŶĞLJ
60
40
30

50

65
45
25

35

55

aside early enough and let it Early Saver Later Saver AGE Source: Business Insider

20 | SHARES | 15 November 2018

 Compounding in action:
JPMorgan Chase
US investment bank
:WDŽƌŐĂŶŚĂƐĞŚĂƐĂ
tool on its website which
allows you to calculate your
80000
The power of compounding -
JP Morgan Chase
Source: JP Morgan Chase, assumes an initial
70000 investment in 100 shares with dividends reinvested

return on an investment in
its shares from 1972 to the
present day.
dŽĐƌĞĂƚĞĂŵŽƌĞƌĞĂůŝƐƟĐ 60000
ƟŵĞĨƌĂŵĞ͕ůĞƚ͛ƐƚĂŬĞĂ
shorter 30-year period
which means looking at
data from November 1988. 50000
If you’d bought 100 shares
30 years ago at $32.87, your $
ŝŶŝƟĂůŝŶǀĞƐƚŵĞŶƚǁŽƵůĚ
have been worth $3,287.
40000
The share price traded
below this entry level during
several periods including
the early 1990s and again
ĂƌŽƵŶĚƚŚĞĮŶĂŶĐŝĂůĐƌŝƐŝƐ 30000
in 2008.
But by staying invested
ƚŚƌŽƵŐŚƚŚĞĞŶƟƌĞƚLJŽĨƚŚŝƐ
ƉĞƌŝŽĚLJŽƵƌŝŶŝƟĂůΨϯ͕Ϯϴϳ 20000
investment would be worth
$33,387 today.
And if you’d reinvested
dividends your investment 10000
would be worth $68,681.74.
The chart shows that a
ƐŝŐŶŝĮĐĂŶƚĐŚƵŶŬŽĨƚŚŝƐ
value has been achieved in 0
recent years, underscoring
88 93 98 03 08 13 18
ƚŚĞŝŵƉŽƌƚĂŶĐĞŽĨƉĂƟĞŶĐĞ
ŝŶLJŽƵƌŝŶǀĞƐƟŶŐ͘(TS) Years

compound you could stop paying ZĞŵĂƌŬĂďůLJƚŚĞĮƌƐƚƐĂǀĞƌ

in at some point and just let the
funds compound themselves.
ZĞƐĞĂƌĐŚĮƌŵ>^ůŽŽŬĞĚĂƚ
savers who each invested £2,500
a year in a pension growing at 7%
per year.
One started at 21 and stopped
at 30, while the other started
ĂƚϯϭĂŶĚĚŝĚŶ͛ƚƐƚŽƉƵŶƟůƚŚĞLJ
hit 70.
ended up with the bigger pension
pot by age 70 — £533,000 against
£534,000 — even though they
ŵĂĚĞŶŽĐŽŶƚƌŝďƵƟŽŶƐĨŽƌ
40 years.
The early saver pays in £25,000
but the power of compounding
means returns are greater than
the later saver who pays in
£100,000. (IC)

15 November 2018 | SHARES | 21

 MONEY MATTERS Helping you with personal finance issues

How to save money

when you’re investing
We reveal ways to keep your costs down and help bolster your returns

W
hether it’s a buy one
ŐĞƚŽŶĞĨƌĞĞŽīĞƌ
in the supermarket
ŽƌŐĞƫŶŐĂŶĞĂƌůLJĚĞĂůŽŶĂ
ŐĞƚĂǁĂLJ͕ŵŽƐƚƉĞŽƉůĞůŽǀĞ
bagging a bargain.
Ƶƚŝƚ͛ƐĂďŝƚŵŽƌĞĚŝĸĐƵůƚ
ǁŚĞŶŝƚĐŽŵĞƐƚŽŝŶǀĞƐƟŶŐʹ
ƐŚĂƌĞƐĚŽŶ͛ƚŚĂǀĞƚŚƌĞĞĨŽƌƚǁŽ
ŽīĞƌƐ͕ĂŶĚƚŚĞŽŶůLJǁĂLJƚŽďƵLJ
ĂƚĂĚŝƐĐŽƵŶƚŝƐŝĨLJŽƵĚŽƐŽǁŚĞŶ
ĂƐƚŽĐŬŝƐŽƵƚŽĨĨĂǀŽƵƌ͘
ƵƚƐĂǀǀLJŝŶǀĞƐƚŽƌƐĐĂŶƐƟůů
ŬĞĞƉĐŽƐƚƐĚŽǁŶƚŚƌŽƵŐŚĂĨĞǁ
ƐŝŵƉůĞƚƌŝĐŬƐ͗

REGULAR INVESTING
^ĞƫŶŐƵƉĂƌĞŐƵůĂƌŝŶǀĞƐƚŵĞŶƚ
ĂĐĐŽƵŶƚǁŝƚŚLJŽƵƌĨƵŶĚ
supermarket has a number of
ďĞŶĞĮƚƐ͘&ŝƌƐƚĂŶĚĨŽƌĞŵŽƐƚ
ŝƐƚŚĞĨĂĐƚƚŚĂƚĞdžƉĞƌƚƐƐĂLJ
ĚƌŝƉͲĨĞĞĚŝŶŐŝƐŽŌĞŶƚŚĞŵŽƐƚ ĮŶĂŶĐŝĂůƉůĂŶŶĞƌĂƚŚĂƐĞĚĞ
ĞīĞĐƟǀĞǁĂLJƚŽŝŶǀĞƐƚLJŽƵƌ sĞƌĞ͕ƐĂLJƐ͚͗/ƚ͛ƐŝŶĐƌĞĚŝďůLJĚŝĸĐƵůƚ
ŵŽŶĞLJ͘WƵƫŶŐĂƐĞƚŵŽŶƚŚůLJ ƚŽĐĂůůŵĂƌŬĞƚƐ͕ƐŽŝŶǀĞƐƚŽƌƐ
ĂŵŽƵŶƚŝŶƚŽLJŽƵƌŚŽůĚŝŶŐƐ ŶĞĞĚƚŽĚĞĐŝĚĞǁŚĞƚŚĞƌƚŚĞLJ
ĞĂĐŚŵŽŶƚŚŵĞĂŶƐLJŽƵĂƌĞ are happy to take that risk

ŶŽƚƚĞŵƉƚĞĚƚŽƚƌLJĂŶĚƟŵĞ
ƚŚĞŵĂƌŬĞƚǁŝƚŚĂůƵŵƉͲƐƵŵ
ŝŶǀĞƐƚŵĞŶƚ͕ƌƵŶŶŝŶŐƚŚĞƌŝƐŬŽĨ
ŝƚĨĂůůŝŶŐŝŵŵĞĚŝĂƚĞůLJĂŌĞƌLJŽƵƌ
ŚĂǀĞŝŶǀĞƐƚĞĚ͘
/ŶƐƚĞĂĚ͕ƌĞŐƵůĂƌŝŶǀĞƐƚŽƌƐ
ďĞŶĞĮƚĨƌŽŵƐŽͲĐĂůůĞĚƉŽƵŶĚͲ
ĐŽƐƚĂǀĞƌĂŐŝŶŐǁŚĞƌĞďLJ͕ŽǀĞƌ
ƟŵĞ͕LJŽƵŐĞƚĂďĞƩĞƌĚĞĂů
ďĞĐĂƵƐĞLJŽƵĂƌĞďƵLJŝŶŐĨĞǁĞƌ
ƐŚĂƌĞƐŽƌƵŶŝƚƐŝŶĂĨƵŶĚǁŚĞŶ
ƚŚĞLJĂƌĞĞdžƉĞŶƐŝǀĞĂŶĚŵŽƌĞ
ǁŚĞŶƚŚĞLJĂƌĞĐŚĞĂƉĞƌ͘
WĂƚŽŶŶŽůůLJ͕ĐŚĂƌƚĞƌĞĚ
“
“
You shouldn’t choose
a platform just on the
basis of free trades,
as it will likely end
up costing you in the
long-term
erm
ĂŶĚŝŶǀĞƐƚĂůƵŵƉƐƵŵ͕ǁŚŝĐŚ
ĐĂŶƉŽƚĞŶƟĂůůLJŐĞŶĞƌĂƚĞ
ŚŝŐŚĞƌƌĞƚƵƌŶƐ͕ŽƌƌĞĚƵĐĞƌŝƐŬ
ďLJŝŶǀĞƐƟŶŐƚŚƌŽƵŐŚƌĞŐƵůĂƌ
ƉĂLJŵĞŶƚƐ͘/ƚŝƐŽŌĞŶƚŚĞďĞƐƚ
ǁĂLJĨŽƌŶŽǀŝĐĞŽƌĐĂƵƟŽƵƐ
ŝŶǀĞƐƚŽƌƐĂŶĚƐŚŽƵůĚĂůůŽǁƚŚĞŵ
ƚŽƐůĞĞƉĞĂƐŝĞƌĂƚŶŝŐŚƚ͛͘
ECONOMIES OF SCALE
ZĞŐƵůĂƌŝŶǀĞƐƟŶŐŚĂƐĂŶŽƚŚĞƌ
ŵĂũŽƌďĞŶĞĮƚƚŽŽŝŶƚŚĂƚŵŽƐƚ
ƉůĂƞŽƌŵƐǁŝůůĂůůŽǁLJŽƵƚŽƚƌĂĚĞ
ĂƚĂůŽǁĞƌĐŽƐƚŝĨLJŽƵŚĂǀĞĂŶ

22 | SHARES | 15 November 2018

 Helping you with personal finance issues MONEY MATTERS
ŝŶǀĞƐƚŵĞŶƚƉůĂŶƐĞƚƵƉ͘
tŝƚŚ:ĞůůzŽƵŝŶǀĞƐƚ͕ĨŽƌ
ĞdžĂŵƉůĞ͕ƚŚĞƐƚĂŶĚĂƌĚĚĞĂůŝŶŐ
ĨĞĞŝƐάϵ͘ϵϱĞĂĐŚƟŵĞLJŽƵďƵLJ
ŽƌƐĞůůƐŚĂƌĞƐ͕ďƵƚƚŚŝƐĨĂůůƐƚŽũƵƐƚ
άϭ͘ϱϬĨŽƌƚŚŽƐĞƵƐŝŶŐƚŚĞƌĞŐƵůĂƌ
ŝŶǀĞƐƚŵĞŶƚƐĞƌǀŝĐĞ͘
,ĂƌŐƌĞĂǀĞƐ>ĂŶƐĚŽǁŶĐŚĂƌŐĞƐ
άϭϭ͘ϵϱĂƐĂƐƚĂŶĚĂƌĚĚĞĂůŝŶŐ
ĨĞĞďƵƚĂůƐŽĐŚĂƌŐĞƐάϭ͘ϱϬĨŽƌ
ƌĞŐƵůĂƌŝŶǀĞƐƚŵĞŶƚ͘
dŚĞƌĞĂƐŽŶĨŽƌƚŚĞůŽǁĞƌ
ƌĞŐƵůĂƌŝŶǀĞƐƚŵĞŶƚĐŚĂƌŐĞŝƐƚŚĂƚ
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15 November 2018 | SHARES | 23

VinaCapital Vietnam Opportunity Fund
ADVERTORIAL

Vietnam is thriving.
W hile other frontier and emerging markets have had a tough go in
2018, Vietnam continues to grow. In 2018, its GDP is expected to
rise 7%, coming off 6.8% growth in 2017. Foreign direct investment
continues to reach new highs, mostly from companies looking to establish
or expand manufacturing operations – Vietnam has quickly become the
manufacturing hub of Southeast Asia. These companies are driving export
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reach US$179 billion, much of that consisting of high-tech items such as
mobile phones and microchips going to the EU and UK, the US, and China.
Vietnam’s aggressive efforts to integrate into the global economy via free
trade pacts, including the recently signed CPTPP and the EU-Vietnam Free
Trade Agreement, are reaping dividends.
Investment is also creating more and better paying jobs for Vietnam’s
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are moving from rural areas to cities – Vietnam boasts Asia’s highest
urbanisation rate – to seek better incomes and opportunities for themselves
and their families. This in turn has created solid demand for new homes, VOF believes that the most compelling investment opportunities are
EHWWHU HGXFDWLRQ KHDOWKFDUH DQG ˉQDQFLDO VHUYLFHV DQG GLVFUHWLRQDU\ in companies participating in Vietnam’s domestic consumption growth
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SHRSOHE\ORRNVWRVSHQGLQFUHDVHGGLVSRVDEOHLQFRPH construction and materials, and infrastructure. Examples of some of
our key investments include Vinamilk, the country’s largest food and
Spurred on by strong international investor interest, private sector IPOs
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and a newly aggressive push by the Vietnamese government to privatise
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state-owned enterprises, Vietnam’s stock markets have expanded
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healthcare network that is expanding to meet the growing medical needs
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of Vietnamese people.
making the frontier market much larger than some emerging markets such
DV3DNLVWDQ86ELOOLRQ)76(5XVVHOOLQFOXGHG9LHWQDPRQLWVZDWFKOLVW With extensive investment experience in Vietnam and internationally,
for upgrade to emerging market status in September. VOF’s senior leaders have developed an expansive network that gives the
fund exposure to opportunities not available to others, contributing to
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the fund’s strong results. VOF’s one-year net asset value/share increased
government committed to further reforming the economy for continued
18%. VOF is also the only Vietnam-focused fund to pay dividends. VOF
sustainable growth and it is easy to see why Vietnam is far better
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positioned to weather global uncertainty than many other frontier and
the strength of our model and the tremendous opportunities available in
emerging markets, and why growing numbers of international investors
Vietnam today.
have been attracted to Vietnam.

How to invest in Vietnam? The VinaCapital Vietnam

Opportunity Fund
/DXQFKHGLQWKH9LQD&apital Vietnam Opportunity Fund (VOF) is one Andy Ho
of the largest and most successful investment vehicles focused on Vietnam. VinaCapital
VOF is unique from other funds in that it can invest across asset classes, Vietnam Opportunity Fund
such as listed equities, private equity, and government privatisations,
enabling it to participate in all segments of Vietnam’s vibrant economy.

IMPORTANT INFORMATION: VinaCapital Vietnam Opportunity Fund Limited (the “Company”) is a Guernsey domiciled closed-ended investment
company listed on the London Stock Exchange and is a member of the Association of Investment Companies. Past performance is not a guide to future
performance. The value of investments and the income from them may fall as well as rise and is not guaranteed. An investor may not get back the original
amount invested. There can be no assurance that the Company’s investment objective will be achieved and investment results may vary substantially over
me. This document is for information purposes only and does not constitute an offer or invitation to purchase shares in the Company and has not been
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There may be a divergence between the prices at which you may purchase (“the offer price”) or sell (“the bid price”) a share on the stock market which is
known as “bid-offer” or “dealing “spread”. This is set by the market makers and varies from share to share. This spread typically averages 1-2% each way
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Any opinions on individual stocks are those of the Company’s Portfolio Manager and no reliance should be given on any such views. Any research in this
document has been procured and may have been acted upon by VinaCapital Investment Management Ltd for its own purposes. The results are being made
available to you only incidentally. The views expressed herein do not constitute investment or any other advice and are subject to change. They do not
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Capital LLP on behalf of VinaCapital Investment Management Ltd, the investment manager of VinaCapital Vietnam Opportunity Fund Limited. Frostrow
Capital LLP is authorised and regulated by the Financial Conduct Authority (“FCA”). Before investing in an investment trust referred to in this advertorial,
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‘How does pension
tax relief work?’
AJ Bell expert Tom Selby helps explain the money you get on pension contributions
Alan from Wimbledon
Can you explain exactly how
pension tax relief works? I’ve
seen some stories saying people
in ‘net pay’ schemes might not
get anything, but others say you
get it at your marginal rate –
but I’m not really sure what this
means! Any help appreciated!
Tom Selby,
AJ Bell senior
analyst, replies:
Firstly, don’t worry – you’re
ŶŽƚĂůŽŶĞŝŶŐĞƫŶŐŝŶĂďŝƚŽĨ
a tangle about the mechanics
of pension tax relief. But once
you get your head round it the
system is actually fairly simple
for most people.
Receiving tax relief at your
‘marginal rate’ just means
ŐĞƫŶŐďĂĐŬǁŚĂƚĞǀĞƌŝŶĐŽŵĞ
tax you paid.
It’s probably easiest to
illustrate this with an example.
Let’s imagine someone has total
taxable earnings of £46,400 in
2018/19. The basic-rate tax band
is currently £46,350, meaning
this person is only just a higher-
rate taxpayer (with £50 of their
earnings taxed at 40%).
If they make a £40
ĐŽŶƚƌŝďƵƟŽŶŝŶƚŽĂ^/WW͕ƚŚĂƚ
ĐŽŶƚƌŝďƵƟŽŶǁŝůůĂƵƚŽŵĂƟĐĂůůLJ
be increased to £50 when basic-
rate tax relief (20%) is added
ĂƵƚŽŵĂƟĐĂůůLJďLJƚŚĞŝƌƉƌŽǀŝĚĞƌ͘
Note here it’s 20% of the
Your retirement questions answered ASK TOM
On your second point, you are
right that there is an issue for
some members of so-called ‘net
pay’ pension schemes. These
ǁŽƌŬĚŝīĞƌĞŶƚůLJƚŽ
‘relief at source’ pensions (such
as the SIPP example described
ĂďŽǀĞͿďĞĐĂƵƐĞĐŽŶƚƌŝďƵƟŽŶƐ
total amount that goes into the ĂƌĞƚĂŬĞŶĂƵƚŽŵĂƟĐĂůůLJĨƌŽŵ
ƉĞŶƐŝŽŶŽƌ͚ŐƌŽƐƐ͛ĐŽŶƚƌŝďƵƟŽŶ͕ salary, meaning you don’t
rather than 20% of the amount have to claim anything back
ƚŚĞLJƉƵƚŝŶŝŶŝƟĂůůLJ͘dŚĞLJ from HMRC.
can also claim back an extra The issue you highlight
20% (£10) through their tax ŵĂŝŶůLJĂīĞĐƚƐƉĞŽƉůĞǁŚŽĂƌĞ
return, meaning the £50 SIPP ĂƵƚŽŵĂƟĐĂůůLJĞŶƌŽůůĞĚŝŶƚŽŶĞƚ
ĐŽŶƚƌŝďƵƟŽŶŚĂƐŽŶůLJĐŽƐƚ pay schemes. Under government
them £30. rules anyone earning £10,000 or
If they had paid £100 gross more should be auto-enrolled
into their SIPP rather than £50, into a pension scheme by their
ŽŶůLJŚĂůĨŽĨƚŚĂƚĐŽŶƚƌŝďƵƟŽŶ employer.
would have received higher-rate However, because the basic-
tax relief, with the other half ƌĂƚĞƚĂdžďĂŶĚĚŽĞƐŶ͛ƚƐƚĂƌƚƵŶƟů
ŐĞƫŶŐďĂƐŝĐͲƌĂƚĞƌĞůŝĞĨ͘ you earn over £11,850 anyone
/ŶƉƌĂĐƟĐĂůƚĞƌŵƐ͕ƚŚĂƚŵĞĂŶƐ in a net pay scheme earning
ƚŚĞάϭϬϬĐŽŶƚƌŝďƵƟŽŶǁŽƵůĚ between £10,000 and £11,850
have cost them £70 in total. won’t get tax relief added
/ĨƚŚĞĞŶƟƌĞĐŽŶƚƌŝďƵƟŽŶŚĂĚ ƚŽƚŚĞŝƌĨƵŶĚĂƵƚŽŵĂƟĐĂůůLJ
been granted tax relief at the (although they can make a claim
higher rate, they’d have been to HMRC).
able to claim back an extra £10 This is not the case in relief at
– meaning it would have cost source schemes, where tax relief
them just £60. ŝƐĂĚĚĞĚĂƵƚŽŵĂƟĐĂůůLJ͘
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Please note, we only provide guidance and we do not provide
ĮŶĂŶĐŝĂůĂĚǀŝĐĞ͘/ĨLJŽƵ͛ƌĞƵŶƐƵƌĞƉůĞĂƐĞĐŽŶƐƵůƚĂƐƵŝƚĂďůLJ
ƋƵĂůŝĮĞĚĮŶĂŶĐŝĂůĂĚǀŝƐĞƌ͘tĞĐĂŶŶŽƚĐŽŵŵĞŶƚŽŶŝŶĚŝǀŝĚƵĂů
investment ƉŽƌƞŽůŝŽƐ͘
15 November 2018 | SHARES | 25
 ADVERTORIAL FEATURE

THE IMPORTANCE
OF INCOME
One advantage of contrarian investing is that the out-of-favour
stocks we look for often offer higher-than-average dividend yields.
But we never consider a high yield an attraction in its own right.

All that glitters is not gold – and an enticing dividend is worth

little if it can’t be sustained. That’s why we look for companies
with a yield that is both attractive and sustainable over the long-
term. As part of a ‘belt and braces’ approach we often look for
a reliable dividend to provide us with a return while we wait
for our investment thesis to play out. As we typically invest in
companies where major change is planned or already afoot, this
can be crucial. Executing an effective turnaround can require time
and patience and we want to be sure that the company has the
wherewithal to maintain shareholder payouts through potentially
turbulent times.

Being paid for our patience Drip, drip

If our research shows that the dividend is sustainable, then we can Finally, it is always worth emphasising the potential impact of
afford to be patient – secure in the knowledge that we are being paid to reinvesting dividends. Dividends form a large part of total returns and this
wait. That’s an ideal situation for us: a strong dividend yield that gives us is especially true when the income is reinvested. Certificated shareholders
a consistent and attractive level of income while we await the return of can take advantage of our Dividend Reinvestment Programme (DRIP),
health to the business – and hence its share price. allowing them to harness the power of compounding and potentially
We value dividends not only because they boost portfolio returns, enhance returns significantly over the long-term. As at the end of July
but also because we understand the importance of regular income to 2018, an investment in The Scottish Investment Trust would have returned
our investors. 3 times its value over the last 20 years. With dividends reinvested, this
Making income more predictable would have increased to 3.7 times the original investment – an uplift of
We announced a step-change increase in our dividend in December 25%. This underscores the importance of income – and shows how a
2017. This boosted the regular dividend by 48%, the total dividend steady drip of dividends can swell to a sizeable flow. ■
increased by 11%. As our investment style tends to generate an above-
average dividend income, compared with global equities, we have
rewarded our shareholders with a higher and more predictable income
stream than previously. Also, we have moved from semi-annual to
quarterly dividend payments. This provides a more regular income to our
shareholders. Of course, it should be remembered that dividend income
is not guaranteed and can go down as well as up.
Thirty-four not out
Another key objective is to achieve dividend growth ahead of UK
inflation. We have increased our net dividend in each of the last 34 years
High conviction, global contrarian investors
and the net dividend has been increased or maintained since at least
the Second World War. Just as with our portfolio of investments, the For more information visit
sustainability of our own dividend is important to us and this is helped www.thescottish.co.uk
by revenue reserves of more than three times the regular dividend. This or follow
provides a strong foundation, so were the portfolio to experience a  @ScotInvTrust
temporary shortfall in income the company would still be able to maintain   The Scottish Investment Trust PLC
its dividend policy.

RISK WARNING
Please remember that past performance may not be repeated and is not a guide for future performance. The value of shares and the income from them
can go down as well as up as a result of market and currency fluctuations. You may not get back the amount you invest. The Scottish Investment Trust PLC has a
long-term policy of borrowing money to invest in equities in the expectation that this will improve returns for shareholders. However, should markets fall these
borrowings would magnify any losses on these investments. This may mean you get back nothing at all. Investment trusts are listed on the London Stock
Exchange and are not authorised or regulated by the Financial Conduct Authority. Please note that SIT Savings Ltd is not authorised to provide advice to
individual investors and nothing in this article should be considered to be or relied upon as constituting investment advice. If you are unsure about the suitability
of an investment, you should contact your financial advisor. Issued and approved by SIT Savings Ltd, registered in Scotland No: SC91859, registered office:
6 Albyn Place, Edinburgh, EH2 4NL. Authorised and regulated by the Financial Conduct Authority.
Telephone: 0131 225 7781 | Email: info@thescottish.co.uk | Website: www.thescottish.co.uk
 FUNDS

Blue Whale goes straight

to the top end of the
fund chart
We reveal how a hugely successful new fund approaches stock picking and
differentiates itself from the crowd

T he team behind LF Blue

Whale Growth Fund
(BD6PG78) have set the
bar very high with their debut
performance. The product
ĨƵŶĚŵĂŶĂŐĞƌƐ͕ƚŚƌĞĞĂŶĂůLJƐƚƐͿ
ǁŚŽĂƌĞŶŽƚŽŶůLJďĂƩůŝŶŐĂ
ĚŝĸĐƵůƚŵĂƌŬĞƚďĂĐŬĚƌŽƉĂƚ
ƉƌĞƐĞŶƚ͕ďƵƚĂůƐŽƚƌLJŝŶŐƚŽůŝǀĞ
ƵƉƚŽŝŶǀĞƐƚŽƌƐ͛ŚĞŝŐŚƚĞŶĞĚ
ƉŽƌƞŽůŝŽ͚͘tĞĂƌĞƚƌƵůLJĂĐƟǀĞ͕
ŶŽƚďƵLJĂŶĚŚŽůĚ͕͛ĞdžƉůĂŝŶƐzŝƵ͘
He says the investment
ƉƌŽĐĞƐƐŝƐǀĞƌLJĚŝīĞƌĞŶƚƚŽŵĂŶLJ
other global funds because his
launched in September 2017 ĞdžƉĞĐƚĂƟŽŶƐ͘ team do their own research and
and went to the top end of the do not speak to brokers or read
funds chart. d,/Es^dDEdWZK^^ third party analyst notes.
/ŶŝƚƐĮƌƐƚLJĞĂƌ͕ƚŚĞĨƵŶĚ dŚĞĨƵŶĚ͛ƐŐŽĂůŝƐƚŽĚĞůŝǀĞƌ zŝƵĂůƐŽĐůĂŝŵƐŚŝƐƚĞĂŵƐƉĞŶĚ
outperformed the MSCI World outperformance of least 5% ŵŽƌĞƟŵĞƉĞƌĐŽŵƉĂŶLJƚŚĂŶ
index by 13.1% and the FTSE per year versus the MSCI World ŵĂŶLJŽƚŚĞƌĨƵŶĚƐ͕ĞdžĐůƵĚŝŶŐ
ϭϬϬŝŶĚĞdžďLJϮϮ͘ϯй͕ŵĞĂŶŝŶŐŝƚ index. Fund manager Stephen ones run by very large asset
ranked in the top 1% in the IA zŝƵƐĂLJƐƚŚĂƚŝƐŽŶůLJƉŽƐƐŝďůĞŝĨ managers like Schroders who
Global Sector. LJŽƵƌƵŶĂĐŽŶĐĞŶƚƌĂƚĞĚƉŽƌƞŽůŝŽ͕ have considerable resources.
Delivering such impressive ŶĂŵĞůLJLJŽƵ͛ǀĞŐŽƚƚŽƚĂŬĞďŝŐ ͚dŚĞƌĞĂƌĞĮǀĞŽĨƵƐŝŶƚŚĞ
results means that some ďĞƚƐŽŶƐƉĞĐŝĮĐƐƚŽĐŬƐƌĂƚŚĞƌ ƚĞĂŵ͘tĞǁŽƌŬϭϬŚŽƵƌƐĂĚĂLJ͕
investors may expect superior than spread yourself too thinly ƐŽϮϱϬŚŽƵƌƐĂǁĞĞŬĐŽŵďŝŶĞĚ͕
returns going forward. That puts with countless holdings. Žƌϭ͕ϬϬϬŚŽƵƌƐĂŵŽŶƚŚ͘&ŽƌĂ
ĂůŽƚŽĨƉƌĞƐƐƵƌĞŽŶƚŚĞĮǀĞͲ dŚĞůƵĞtŚĂůĞĨƵŶĚĂŝŵƐ ϮϱͲƐƚŽĐŬƉŽƌƞŽůŝŽƚŚĂƚŵĞĂŶƐ
strong investment team (two to hold 25 to 35 stocks in its we spend 40 hours on research
per stock per month. We think
ŽƵƌĐŽŵƉĞƟƚŽƌƐŽŶůLJƐƉĞŶĚĮǀĞ
ŚŽƵƌƐƉĞƌŵŽŶƚŚƉĞƌƐƚŽĐŬ͛͘

>KE'ͳdZD'ZKtd,
&KZ^d/E'
zŝƵďĞůŝĞǀĞƐůƵĞtŚĂůĞŚĂƐĂŶ
ĞĚŐĞƚŚƌŽƵŐŚŝƚƐŽǁŶŵŽĚĞůůŝŶŐ͕
ŝŶƉĂƌƟĐƵůĂƌƚĂŬŝŶŐĂƐƚƌŽŶŐǀŝĞǁ
ŽŶůŽŶŐͲƚĞƌŵĞĂƌŶŝŶŐƐƉŽƚĞŶƟĂů͘
He says the market is very
ŝŶĞĸĐŝĞŶƚǁŝƚŚĨŽƌĞĐĂƐƟŶŐ
earnings beyond 18 months to
three years. He believes analysts
ĂƌĞŵĞƌĞůLJĨŽůůŽǁŝŶŐƚŚĞƉĂƩĞƌŶ
ŽĨďĞůŝĞǀŝŶŐǁŚĂƚĂĐŽŵƉĂŶLJ͛Ɛ
ŵĂŶĂŐĞŵĞŶƚƉƌĞĚŝĐƚŶĞĂƌͲƚĞƌŵ
and then assuming that earnings
Many people think of Amazon solely as a retailer but its AWS web server business is growing at 50% a year
ŐƌŽǁƚŚǁŝůůƐůŽǁĚŽǁŶŽǀĞƌƟŵĞ͘

15 November 2018 | SHARES | 27

 FUNDS
͚dŚĞŵĂƌŬĞƚƵŶĚĞƌĂƉƉƌĞĐŝĂƚĞƐ
ůŽŶŐͲƚĞƌŵŐƌŽǁƚŚƉŽƚĞŶƟĂůĂŶĚ
ůŽŶŐĞǀŝƚLJŽĨŐƌŽǁƚŚ͕͛ƐĂLJƐƚŚĞ
ĨƵŶĚŵĂŶĂŐĞƌ͘ƐƐĞŶƟĂůůLJŚĞ
is saying that while a company
may look expensive on current
ǀĂůƵĂƟŽŶŵĞƚƌŝĐƐ͕ŝƚĐŽƵůĚůŽŽŬ
ĨĂƌŵŽƌĞĂƩƌĂĐƟǀĞŝĨLJŽƵůŽŽŬ
further out.
He gives the example of
ŵĂnjŽŶ͚͘ĞĨŽƌĞƚŚĞŵĂƌŬĞƚ
ƐĞůůͲŽīŝƚǁĂƐƚƌĂĚŝŶŐŽŶϱϬƟŵĞƐ
ĞĂƌŶŝŶŐƐǁŝƚŚĂϳйŽƉĞƌĂƟŶŐ
ŵĂƌŐŝŶĨŽƌĞĐĂƐƚŝŶƚǁŽLJĞĂƌƐ͛
ƟŵĞ͘dŚĂƚ͛ƐƚŚĞŵĂƌŐŝŶƚŚĞ
business said 20 years ago it
ǁŽƵůĚĂĐŚŝĞǀĞŽǀĞƌƚŚĞůŽŶŐͲ
ƚĞƌŵ͘ƵƚƚŚĞďƵƐŝŶĞƐƐŚĂƐ
since evolved.
͚/ƚƐt^ǁĞďƐĞƌǀĞƌďƵƐŝŶĞƐƐŝƐ
growing at 50% a year with 30%
ŽƉĞƌĂƟŶŐŵĂƌŐŝŶ͘dŚĞĂĚǀĞƌƟƐŝŶŐ
side of its business is growing at
over 50% a year with 60% to 65%
ŽƉĞƌĂƟŶŐŵĂƌŐŝŶ͘
Many analysts are
lazy and just put
down numbers
between 1% above
and below those
guided by company
management in their
“ ŝŶŶŽǀĂƟŶŐ͘
earnings models
͚/ĨLJŽƵƉƵƚĞǀĞƌLJƚŚŝŶŐƚŽŐĞƚŚĞƌ
ŽƵƌůŽŶŐͲƚĞƌŵŽƉĞƌĂƟŶŐŵĂƌŐŝŶ
for Amazon is up to 20%. The
ƟŵŝŶŐŽĨŚŝƫŶŐƚŚŽƐĞŶƵŵďĞƌƐ
ĚĞƉĞŶĚƐŽŶŝƚƐĞdžƉĂŶƐŝŽŶƉůĂŶƐ͛͘
zŝƵƐĂLJƐƚŚĂƚŵĂnjŽŶ͛ƐƐŚĂƌĞƐ
ĂƌĞĐŚĞĂƉĞǀĞŶŽŶĂϱϬͲƟŵĞƐ
ƉƌŝĐĞͲƚŽͲĞĂƌŶŝŶŐƐŵƵůƟƉůĞ͘
28 | SHARES | 15 November 2018
>ht,>'ZKtd,&hEWZ&KZDE
Blue Whale ZĂŶŬ;/
D^/tŽƌůĚ &d^ϭϬϬ
fund 'ůŽďĂů^ĞĐƚŽƌͿ
ϮϬϭϴΎ +15.5% +3.7% Ͳϯ͘ϲй #3 of 294
^ŝŶĐĞ
+18.8% +7.8% +0.7% #5 of 287
ůĂƵŶĐŚΎΎ
Source: Blue Whale. *1 Jan to 8 Nov 2018. **Launched 11 Sep 2017
͚zŽƵ͛ǀĞŶĞǀĞƌŚĂĚĂďƵƐŝŶĞƐƐůŝŬĞ believes they are less impacted
Amazon where anything it does is by macroeconomic factors.
ŵĂƌŐŝŶĂĐĐƌĞƟǀĞ͖ƚŚĂƚ͛ƐďĞĐĂƵƐĞ ƵƌƌĞŶƚŶĂŵĞƐŝŶƚŚĞƉŽƌƞŽůŝŽƐ
ŝƚƐƚĂƌƚĞĚĨƌŽŵƐƵĐŚĂůŽǁďĂƐĞ͛͘ ŝŶĐůƵĚĞƉĂLJŵĞŶƚƐŐƌŽƵƉWĂLJWĂů͕
dŚĞůƵĞtŚĂůĞ&ƵŶĚŚĂƐ ĐŽŵƉƵƚĞƌƐŽŌǁĂƌĞďƵƐŝŶĞƐƐ
ĂŐůŽďĂůƌĞŵŝƚ͖ǁŚŝůĞϲϬйŽĨ ĚŽďĞĂŶĚŚĞĂůƚŚĐĂƌĞͲĨŽĐƵƐĞĚ
its holdings are listed in the ĐůŽƵĚĐŽŵƉƵƟŶŐĮƌŵsĞĞǀĂ͘
h^͕ŵĂŶLJŽĨƚŚĞƐĞďƵƐŝŶĞƐƐĞƐ A key ingredient behind the
are global in nature. Some of ƚĞĂŵ͛ƐƐƵĐĐĞƐƐ͕ĂůŽŶŐǁŝƚŚ
the names are stable holdings ƚĂŬŝŶŐĂůŽŶŐĞƌͲƚĞƌŵǀŝĞǁ
in other global funds like the ǁŝƚŚĞĂƌŶŝŶŐƐƉŽƚĞŶƟĂů͕ŝƐŝƚƐ
ĂĨŽƌĞŵĞŶƟŽŶĞĚŵĂnjŽŶĂŶĚ awareness of issues that could
'ŽŽŐůĞͲŽǁŶĞƌůƉŚĂďĞƚ͘KƚŚĞƌ ĂīĞĐƚĂĐŽŵƉĂŶLJĂŶĚŬŶŽǁŝŶŐ
popular names with global funds companies inside out.
ĂƌĞŶŽƟĐĞĂďůLJĂďƐĞŶƚĨƌŽŵůƵĞ ͚DĂŶLJĂŶĂůLJƐƚƐĂƌĞůĂnjLJ
Whale such as Apple which and just put down numbers
zŝƵĐƌŝƟĐŝƐĞƐĨŽƌŶŽƚŐƌŽǁŝŶŐŽƌ between 1% above and below
͚tĞĚŽŶ͛ƚĚŽĂŶLJƚŚŝŶŐ
special in terms of investment
ƉŚŝůŽƐŽƉŚLJ͕͛ƐĂLJƐƚŚĞĨƵŶĚ
ŵĂŶĂŐĞƌ͕ƐŽŵĞwhat candidly.
͚dŚĞƌĞŝƐŶŽŵĂŐŝĐĨŽƌŵƵůĂ͛͘dŚŝƐ
modesty clearly understates the
ĞdžƉĞƌƟƐĞŽĨƚŚĞƚĞĂŵ͘
those guided by company
management in their
earnings models.
͚ƐĨƵŶĚŵĂŶĂŐĞƌƐǁĞƚƌLJĂŶĚ
understand how the last three
LJĞĂƌƐ͛ĞĂƌŶŝŶŐƐĨŽƌĂĐŽŵƉĂŶLJ
were delivered and whether
ƐŽŵĞƚŚŝŶŐŚĂƐĐŚĂŶŐĞĚ͕ƉůƵƐ
ŚŽǁŵĂĐƌŽĨĂĐƚŽƌƐĐŽƵůĚŝŵƉĂĐƚ͕͛
WKZd&K>/KWK^/d/KE/E' ƐĂLJƐzŝƵ͚͘tĞůŽŽŬĂƚǁŚĂƚ͛Ɛ
ůƵĞtŚĂůĞƐĞĞƐƚŚĞďŝŐŐĞƐƚ already known in the market and
ƐŚŽƌƚͲƚĞƌŵƌŝƐŬƚŽŵĂƌŬĞƚƐĂƐ recognise how these issues are
the US Federal Reserve raising ƌĞůĞǀĂŶƚƚŽǀĂƌŝŽƵƐĐŽŵƉĂŶŝĞƐ͛͘
interest rates too quickly. He says many fund managers
dŚĞĨƵŶĚƐĂLJƐŝƚǁŽƵůĚŶ͛ƚ in the near future will blame
typically invest in companies with ĚŝƐĂƉƉŽŝŶƟŶŐƉĞƌĨŽƌŵĂŶĐĞŽŶ
high levels of direct exposure ĂƌĞĂƐƐƵĐŚĂƐƚĂƌŝīƐ͕ƌĞdžŝƚĂŶĚ
ƚŽŝŶƚĞƌĞƐƚƌĂƚĞƐ͕ĐŽŵŵŽĚŝƚLJ currencies. His view is that they
ƉƌŝĐĞƐŽƌŝŶĚƵƐƚƌŝĂůĐLJĐůĞƐ͕ǁŚŝĐŚ should have already factored
ĞdžƉůĂŝŶƐǁŚLJƚŚĞƉŽƌƞŽůŝŽŵĂŝŶůLJ this issues into their research
ĨĞĂƚƵƌĞƐƚĞĐŚŶŽůŽŐLJ͕ĐŽŶƐƵŵĞƌ ĂŶĚƐƚŽĐŬƉŝĐŬŝŶŐ͕ĂƐƚŚĂƚ͛Ɛ
and healthcare stocks as it ƚŚĞŝƌũŽď͘;Ϳ
 INVESTMENT TRUSTS

Can retail investors bag a

unicorn?
How you can use investment trusts to invest in private growth companies

Uber is an example of a privately held company not listed on a stock exchange

I ŶǀĞƐƚŽƌƐŽŌĞŶŚĞĂƌĂďŽƵƚŚŝŐŚ
growth private companies,
but can’t access a piece of the
investment. So-called Unicorns,
start-up companies that have
of honour, many companies
choose to stay private for a
variety of reasons. Many of
these companies can be quite
ůĂƌŐĞǁŝƚŚĂŶŽƟŽŶĂůŵĂƌŬĞƚ
approaches.
One issue with these trusts
is that they typically trade at a
constant discount – meaning
you can buy each share for less
ƌĞĂĐŚĞĚĂǀĂůƵĂƟŽŶŽĨΨϭďŶ ĐĂƉŝƚĂůŝƐĂƟŽŶŽĨŚƵŶĚƌĞĚƐŽĨ than the value of the underlying
or more, have become more millions of pounds.’ assets. Some investors see this
commonplace in recent years. ,ĞƌĞǁĞůŽŽŬĂƚƚŚĞĚŝīĞƌĞŶƚ as a buying opportunity, but
Big names such as taxi-app ŽƉƟŽŶƐ͘ not if the discount remains and
hďĞƌ͕ĂĐĐŽŵŵŽĚĂƟŽŶǁĞďƐŝƚĞ doesn’t narrow.
Airbnb and delivery company PRIVATE EQUITY TRUSTS For example, Standard Life
ĞůŝǀĞƌŽŽĂƌĞƐƟůůŚĞůĚƉƌŝǀĂƚĞůLJ There is a grouping of investment Private Equity (SLPE) currently
and aren’t listed on the ƚƌƵƐƚƐƚŚĂƚŝŶǀĞƐƚƐŽůĞůLJŝŶ͚ƉƌŝǀĂƚĞ trades at a 17.3% discount,
stock exchange. equity’ – so companies not listed ahead of its 14% 12-month
tŚŝůĞŵĂŶLJůĂƌŐĞŝŶƐƟƚƵƟŽŶĂů on the stock exchange. These average, while Apax Global
investors, such as pension funds trusts look to invest in early- Alpha (APAX) is on a 20%
and insurance companies, can stage, high growth companies, discount, compared to its
invest in private companies, ǁŚŝĐŚĂƌĞŽŌĞŶƌŝƐŬŝĞƌ 12-month average of 14%.
individual investors struggle to than most. However, this is far lower than
buy them directly. However, they Some trusts invest directly in ŝŶƚŚĞĮŶĂŶĐŝĂůĐƌŝƐŝƐ͕ǁŚĞŶƚŚĞ
ĐĂŶĂĐĐĞƐƐĂƐůŝĐĞŽĨƚŚĞĂĐƟŽŶ these start-up companies, while sector averaged discounts of 60%
through certain funds. ŽƚŚĞƌƐŚĂǀĞĂ͚ĨƵŶĚŽĨĨƵŶĚ͛ or more at some points.
ZLJĂŶ,ƵŐŚĞƐ͕ŚĞĂĚŽĨĂĐƟǀĞ structure and invest in other ƵƚƚŚĞƌĞŝƐĂƉŽƚĞŶƟĂůĚŽƵďůĞͲ
ƉŽƌƞŽůŝŽƐĂƚ:Ğůů͕ƐĂŝĚ͚͗tŚŝůĞ funds and trusts that are focused ĚŝƐĐŽƵŶƚŽŶŽīĞƌ͘ƵĞƚŽƚŚĞ
ŐĂŝŶŝŶŐĂƐƚŽĐŬŵĂƌŬĞƚůŝƐƟŶŐŚĂƐ on private equity. Some split unlisted nature of these trusts’
always been seen as a badge their money between the two holdings, they are not valued

15 November 2018 | SHARES | 29

 INVESTMENT TRUSTS
daily like those with shares on
the stock market. This means
ƚŚĞŶĞƚĂƐƐĞƚǀĂůƵĞĮŐƵƌĞƐŽĨ
the trust can be out of date,
and the actual discount will be
much larger.
Adding to this list recently is
Old Mutual Global Investors,
now rebranded as Merian
Global Investors, which has just
launched a new investment trust
focused on unquoted companies
called Merian Chrysalis (MERI).
The trust raised £100m at launch,
and originally aimed to invest in
between seven and 15 unquoted
ĐŽŵƉĂŶŝĞƐ͘dŚĞƚĞĂŵ͛ƐĞdžŝƐƟŶŐ
unlisted holdings in other funds
they run include The Hut Group,
TransferWise and Secret Escapes,
which will likely make it into the
new trust.
,ƵŐŚĞƐĂĚĚƐ͚͗DĞƌŝĂŶ͛ƐŶĞǁ
investment trust launch is
ŝŶƚĞƌĞƐƟŶŐĂƐŝƚŐŝǀĞƐƉƌŝǀĂƚĞ
investors a method of gaining
exposure to a dedicated
investment focused on this
area. The small cap team at
Merian is one of the strongest
in the market and therefore
ƚŚĞŝƌĞdžƉĞƌƟƐĞŝŶƚŚŝƐĂƌĞĂ
is important.’
OTHER FUND OPTIONS
ŶŽƚŚĞƌŽƉƟŽŶŝƐƚŽŝŶǀĞƐƚŝŶ
funds that have a slice of their
money in private companies, but
ƐƟůůŚĂǀĞĂůĂƌŐĞƉŽƌƟŽŶŝŶƚŚĞ
public markets. Investment trusts
are an ideal vehicle for these kind
of investments – because they
are closed-ended they are not
going to be forced sellers of the
private companies as a result of
investor withdrawals.
,ƵŐŚĞƐĐŽŵŵĞŶƚƐ͚͗ĐĐĞƐƐŝŶŐ
private companies for retail
investors is typically very
ĚŝĸĐƵůƚďƵƚƐŽŵĞĨƵŶĚƐĚŽ
have exposure to this area.
30 | SHARES | 15 November 2018
tŚŝůĞŝŶǀĞƐƟŶŐŝŶƚŚŝƐĂƌĞĂŝƐŶ͛ƚ
ǁŝƚŚŽƵƚƌŝƐŬ͕ǁŝƚŚƉŽƚĞŶƟĂů
for liquidity issues, investment
trusts in this area may be a
ƵƐĞĨƵůĚŝǀĞƌƐŝĮĞƌƚŽĂƉŽƌƞŽůŝŽŽĨ
ĞdžŝƐƟŶŐh<ĞƋƵŝƟĞƐ͛͘
The £8bn ^ĐŽƫƐŚDŽƌƚŐĂŐĞ
(SMT) investment trust has
recently expanded its private
ĂůůŽĐĂƟŽŶʹŝŶϮϬϭϲŝƚŝŶĐƌĞĂƐĞĚ
the amount it could have in
unquoted companies from
15% to 25%. It currently has
37 unlisted companies, which
accounts for 15% of the
ƉŽƌƞŽůŝŽ͘ĂƌůŝĞƌƚŚŝƐLJĞĂƌ͕ŝƚƐ
unlisted holdings included music
ƐƚƌĞĂŵŝŶŐǁĞďƐŝƚĞ^ƉŽƟĨLJ͕
Airbnb and ride-sharing app (and
hďĞƌƌŝǀĂůͿ>LJŌ͘
Another globally-focused
SELECTED TRUSTS WITH UNQUOTED ALLOCATIONS
Trust
RIT Capital
Woodford
Lindsell Train
Caledonia
^ĐŽƫƐŚDŽƌƚŐĂŐĞ
Artemis Alpha
Miton Global
Fidelity China
ĚŝŶďƵƌŐŚtŽƌůĚǁŝĚĞ
Source: AIC
example is the £2bn Caledonia
Investment Trust (CLDN), which
ŚĂƐĂϯϲйĂůůŽĐĂƟŽŶƚŽƵŶůŝƐƚĞĚ
companies but also invests in
private equity funds, giving it
further exposure to private
businesses.
/ŶǀĞƐƚŽƌƐǁŚŽĨĞĞůƉĂƌƟĐƵůĂƌůLJ
ĞŶƚŚƵƐŝĂƐƟĐĂďŽƵƚƚŚĞŐƌŽǁƚŚŽĨ
ƐƚĂƌƚͲƵƉƐŝŶƉĂƌƟĐƵůĂƌĐŽƵŶƚƌŝĞƐ
ŽƌƌĞŐŝŽŶƐĂůƐŽŚĂǀĞŽƉƟŽŶƐ͘
For example, the Asia-focused
&ŝĚĞůŝƚLJŚŝŶĂ^ƉĞĐŝĂů^ŝƚƵĂƟŽŶƐ
(FCSS) has 5% in unlisted
investments at the moment,
including ride sharing app
ŝĚŝŚƵdžŝŶŐĂŶĚŚŝŶĞƐĞĂƉƉ
ĚĞǀĞůŽƉĞƌ:ŝŐƵĂŶŐ͘
>ĂƵƌĂ^ƵƚĞƌ͕ƉĞƌƐŽŶĂůĮŶĂŶĐĞ
analyst, AJ Bell
hŶƋƵŽƚĞĚĂůůŽĐĂƟŽŶ
220.0%
69.0%
44.8%
36.0%
15.0%
12.0%
12.0%
5.0%
2.8%
LISTEN TO OUR NEW PODCAST

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ĮŶĂŶĐŝĂůŝƐƐƵĞƐʹĨƌŽŵƉĞŶƐŝŽŶƐƚŽƉŽĐŬĞƚŵŽŶĞLJ͕ĨƌŽŵ
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dŚĞƉŽĚĐĂƐƚŝƐƉƌĞƐĞŶƚĞĚďLJShares’ editor Daniel
ŽĂƚƐǁŽƌƚŚĂŶĚ:Ğůů͛ƐƉĞƌƐŽŶĂůĮŶĂŶĐĞĂŶĂůLJƐƚ
>ĂƵƌĂ^ƵƚĞƌ͘dŚĞLJĂƌĞũŽŝŶĞĚĞĂĐŚǁĞĞŬďLJƐƉĞĐŝĂů
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investment experts.
How to listen
zŽƵĐĂŶĚŽǁŶůŽĂĚĂŶĚƐƵďƐĐƌŝďĞƚŽ͚:ĞůůDŽŶĞLJΘ
DĂƌŬĞƚƐ͛ďLJǀŝƐŝƟŶŐƚŚĞƉƉůĞŝdƵŶĞƐWŽĚĐĂƐƚ^ƚŽƌĞ͕
'ŽŽŐůĞWŽĚĐĂƐƚŽƌ^ƉŽƟĨLJĂŶĚƐĞĂƌĐŚŝŶŐĨŽƌ͚:Ğůů͛͘
dŚĞƉŽĚĐĂƐƚŝƐĂůƐŽĂǀĂŝůĂďůĞŽŶWŽĚďĞĂŶ͘
KƌLJŽƵĐĂŶůŝƐƚĞŶƚŽĞĂĐŚĞƉŝƐŽĚĞŽŶŽƵƌǁĞďƐŝƚĞďLJ
clicking here.
 INVESTMENT TRUSTS

Do capital preservation
funds perform as planned?
These funds aim to protect investors’ capital come rain or shine

V ŽůĂƟůŝƚLJƌĞƚƵƌŶĞĚƚŽĞƋƵŝƚLJ
ŵĂƌŬĞƚƐĚƵƌŝŶŐKĐƚŽďĞƌ
ĂŶĚƚŚŝƐƌĞĐĞŶƚŵĂƌŬĞƚ
ƐĞƚďĂĐŬƉƌŽǀŝĚĞƐĂŶŽƉƉŽƌƚƵŶŝƚLJ
ƚŽƌĞĂƉƉƌĂŝƐĞƚŚĞŵĞƌŝƚƐŽĨƚƌƵƐƚƐ
ƚŚĂƚƉƌŝŽƌŝƟƐĞƚŚĞĂǀŽŝĚĂŶĐĞŽĨ
ĐĂƉŝƚĂůůŽƐƐ͘
ĂƉŝƚĂůƉƌĞƐĞƌǀĂƟŽŶĨƵŶĚƐĂƌĞ
ĐŽůůĞĐƟǀĞƐǁŝƚŚĂƐƚƌŽŶŐƚƌĂĐŬ
ƌĞĐŽƌĚŽĨŚĞůƉŝŶŐŝŶǀĞƐƚŽƌƐĂǀŽŝĚ
ůĂƌŐĞůŽƐƐĞƐǁŚŝůƐƚŐƌŽǁŝŶŐƚŚĞŝƌ
ǁĞĂůƚŚƚŽŽ͕ĂůďĞŝƚŵŽƌĞƐůŽǁůLJ
ƚŚĂŶĂĚǀĞŶƚƵƌŽƵƐ͕ŵŽƌĞƌŝƐŬͲ
ƚŽůĞƌĂŶƚĐŽůůĞĐƟǀĞƐ͘
dŚĞƐĞƚƌƵƐƚƐĐĂŶƐƵīĞƌůŽƐƐĞƐ
ĚƵƌŝŶŐǁŝĚĞƐƉƌĞĂĚƐĞůůŽīƐĂŶĚ
ƚŚĞƌĞŝƐŶŽŐƵĂƌĂŶƚĞĞƚŚĞLJǁŝůů /ƚŝƐŝŵƉŽƌƚĂŶƚLJŽƵƵŶĚĞƌƐƚĂŶĚ ^ƉĞĐŝĮĐĂůůLJ͕ZƵīĞƌĂŝŵƐƚŽ
ĂůǁĂLJƐŵĂŬĞLJŽƵŵŽŶĞLJ͕LJĞƚ ƚŚĂƚǁŚĞŶĞƋƵŝƚLJŵĂƌŬĞƚƐƌŝƉͲ ĂĐŚŝĞǀĞĂƉŽƐŝƟǀĞƚŽƚĂůĂŶŶƵĂů
ƚŚĞŝƌǁŚŽůĞĞƚŚŽƐŝƐƚŽĨĂůůďLJ ƌŽĂƌĂŚĞĂĚ͕ƚŚĞLJĂƌĞƵŶůŝŬĞůLJƚŽ ƌĞƚƵƌŶ͕ĂŌĞƌĂůůĞdžƉĞŶƐĞƐ͕ŽĨĂƚ
ůĞƐƐƚŚĂŶƚŚĞŵĂƌŬĞƚĚƵƌŝŶŐĂ ŬĞĞƉƉĂĐĞ͕ĂƐƚŚĞLJƚĞŶĚƚŽŚĂǀĞĂ ůĞĂƐƚƚǁŝĐĞƚŚĞĂŶŬŽĨŶŐůĂŶĚ
ĚŽǁŶƚƵƌŶ͕ůŝŵŝƟŶŐLJŽƵƌůŽƐƐĞƐ ůŽǁĞƌĞdžƉŽƐƵƌĞƚŽƐŚĂƌĞƐƚŚĂŶĂ ďĂŶŬƌĂƚĞ͕ďLJĂůůŽĐĂƟŶŐĂƐƐĞƚƐ
ĂŶĚƉƌŽƚĞĐƟŶŐLJŽƵƌŚĂƌĚͲ ƐƚĂŶĚĂƌĚŝŶĐŽŵĞŽƌŐƌŽǁƚŚĨƵŶĚ͘ ƚŽǁĂƌĚƐďŽŶĚƐ͕ĐĂƐŚ͕ŐŽůĚ
ĞĂƌŶĞĚĐĂƉŝƚĂů͘ ĂŶĚĞƋƵŝƟĞƐ͘
DĂŶLJĐŽŶƐŝĚĞƌĐĂƉŝƚĂů AIMING TO DELIVER ĐĐŽƌĚŝŶŐƚŽƚŚĞƐƐŽĐŝĂƟŽŶ
ƉƌĞƐĞƌǀĂƟŽŶĨƵŶĚƐƚŽďĞƐŝŵƉůLJ POSITIVE RETURNS, COME ŽĨ/ŶǀĞƐƚŵĞŶƚŽŵƉĂŶŝĞƐ;/ͿΘ
ĚĞĨĞŶƐŝǀĞƉŽƌƞŽůŝŽƐ͕ďƵƚĂƚůĞĂƐƚ RAIN OR SHINE DŽƌŶŝŶŐƐƚĂƌ͕ZƵīĞƌŚĂƐĚĞůŝǀĞƌĞĚ
ƐŽŵĞŽĨƚŚĞƐĞĐŽůůĞĐƟǀĞƐŚĂǀĞ dŚŝƐĂƌƟĐůĞǁŝůůŚĞůƉŝŶǀĞƐƚŽƌƐ ƌŽďƵƐƚϭϬLJĞĂƌƐŚĂƌĞƉƌŝĐĞĐĂƉŝƚĂů
ŐŽŽĚƚƌĂĐŬƌĞĐŽƌĚƐŽĨĚĞůŝǀĞƌŝŶŐ ĨĂŵŝůŝĂƌŝƐĞƚŚĞŵƐĞůǀĞƐǁŝƚŚ ƌĞƚƵƌŶƐĂŶĚEsĐĂƉŝƚĂůƌĞƚƵƌŶƐ
ĚĞĐĞŶƚĂŶŶƵĂůƌĞƚƵƌŶƐ͘
“ ĐĂƉŝƚĂůƉƌĞƐĞƌǀĂƟŽŶƚƌƵƐƚƐĂŶĚ
ƚŚĞŝƌƉĞƌĨŽƌŵĂŶĐĞ͘dŚĞLJŝŶĐůƵĚĞ
RIT Capital Partners (RCP)͕
ŽĨϳϱ͘ϳйĂŶĚϲϱ͘ϵйƌĞƐƉĞĐƟǀĞůLJ͘
ůďĞŝƚŐĞŶĞƌĂƚĞĚĚƵƌŝŶŐĂďƵůů
ŵĂƌŬĞƚ͕DŽƌŶŝŶŐƐƚĂƌĚĂƚĂƐŚŽǁƐ
ǁŚŝĐŚŚĂƐĂƐƚƌĂƚĞŐLJƚŽƉƌĞƐĞƌǀĞ ĂŶŶƵĂůƌĞƚƵƌŶƐŽŶĂŶEsďĂƐŝƐ

“
Ruffer’s principal
objective is to protect
its investors’ capital
ƐŚĂƌĞŚŽůĚĞƌƐ͛ĐĂƉŝƚĂůĂŶĚĚĞůŝǀĞƌ ƌŝƐŝŶŐŝŶŶŝŶĞŽĨƚŚĞůĂƐƚϭϬLJĞĂƌƐ͕
ůŽŶŐͲƚĞƌŵĐĂƉŝƚĂůŐƌŽǁƚŚƚŚƌŽƵŐŚ ƐĂǀĞĨŽƌϮϬϭϱ͘
ĂŵƵůƟͲĂƐƐĞƚĂƉƉƌŽĂĐŚ͘ ZƵīĞƌƐĞĞŬƐƚŽďĞŐĞŶƵŝŶĞůLJ
KŶĞŽĨŝƚƐƉĞĞƌƐŝƐZƵīĞƌ ƵŶĐŽƌƌĞůĂƚĞĚǁŝƚŚĞƋƵŝƚLJŵĂƌŬĞƚƐ
Investment Company (RICA)͕ ĂŶĚƚŚĞƚƌƵƐƚǁŽƵůĚƐŝƚƌĂƚŚĞƌ
ǁŚŽƐĞ͚ŶĞĂƌŽďƐĞƐƐŝǀĞƉƌŝŶĐŝƉĂů ƐŶƵŐůLJĂůŽŶŐƐŝĚĞĂŶĞƋƵŝƚLJͲ
ŽďũĞĐƟǀĞŝƐƚŽƉƌŽƚĞĐƚŽƵƌ ĨŽĐƵƐĞĚƉŽƌƞŽůŝŽ͕ǁŚĞƌĞŝƚĐŽƵůĚ
ŝŶǀĞƐƚŽƌƐ͛ĐĂƉŝƚĂů͕͛ĂĐĐŽƌĚŝŶŐ ďĞĐĂůůĞĚƵƉŽŶǁŚĞŶŽƚŚĞƌ
ƚŽŝŶǀĞƐƚŵĞŶƚĚŝƌĞĐƚŽƌ ĂƐƐĞƚƐĨĂůůŝŶǀĂůƵĞ͘
,ĂŵŝƐŚĂŝůůŝĞ͘ ůƐĞǁŚĞƌĞ͕Capital Gearing’s

32 | SHARES | 15 November 2018


(CGT)ĚƵĂůŽďũĞĐƟǀĞƐĂƌĞƚŽ
ƉƌĞƐĞƌǀĞƐŚĂƌĞŚŽůĚĞƌƐ͛ƌĞĂů
ǁĞĂůƚŚĂŶĚĂĐŚŝĞǀĞĂďƐŽůƵƚĞ
ƚŽƚĂůƌĞƚƵƌŶŽǀĞƌƚŚĞŵĞĚŝƵŵƚŽ
ůŽŶŐĞƌƚĞƌŵ͘
ƵƌŝŶŐƉĞƌŝŽĚƐŽĨŵĂƌŬĞƚ
ĞdžƵďĞƌĂŶĐĞƚŚŝƐŵĞĂŶƐƐĂĐƌŝĮĐŝŶŐ
ƐŚŽƌƚƚĞƌŵƌĞƚƵƌŶƐĨŽƌƚŚĞƐĂŬĞ
ŽĨƉƌŽƚĞĐƟŶŐĐĂƉŝƚĂů͕ďƵƚŽǀĞƌ
ƚŚĞůŽŶŐĞƌƚĞƌŵ͕ƚŚĞĐƵŵƵůĂƟǀĞ
ĞīĞĐƚŽĨƉŽƐŝƟǀĞĐŽŵƉŽƵŶĚ
ƌĞƚƵƌŶƐĚƌŝǀĞƐŽƵƚƉĞƌĨŽƌŵĂŶĐĞ͘
DŽƌŶŝŶŐƐƚĂƌĚĂƚĂƐŚŽǁ
ƉŽƐŝƟǀĞĂŶŶƵĂůƉƌŝĐĞĂŶĚĂŶŶƵĂů
EsƌĞƚƵƌŶƐĚĂƟŶŐďĂĐŬƚŽϮϬϬϴ͕
ĞdžĐĞƉƚĨŽƌĂŶϴ͘ϵϵйƉƌŝĐĞĚĞĐůŝŶĞ
ŝŶϮϬϭϯ͘/ŶƚŚĞLJĞĂƌĞŶĚĞĚϱ
ƉƌŝůϮϬϭϰ͕ĐŽǀĞƌŝŶŐƚŚĞďƵůŬŽĨ
ƚŚĞƉĞƌŝŽĚ͕ĂƉŝƚĂů'ĞĂƌŝŶŐ͛ƐŶĞƚ
ĂƐƐĞƚǀĂůƵĞƉĞƌƐŚĂƌĞĨĞůůϮ͘ϱй
ƚŽάϯϭ͘ϮϬĂŶĚƚŚĞƚƌƵƐƚĨĂŝůĞĚƚŽ
ŵĞĞƚŝƚƐŽďũĞĐƟǀĞŽĨĂĐŚŝĞǀŝŶŐ
ŐƌŽǁƚŚŝŶĂďƐŽůƵƚĞƚĞƌŵƐĨŽƌƚŚĞ
ĮƌƐƚƟŵĞŝŶŽǀĞƌƚŚŝƌƚLJLJĞĂƌƐ͘
dŚŝƐĚŝƐĂƉƉŽŝŶƚŵĞŶƚǁĂƐĚƵĞ
ƚŽĂƌĞůĂƟǀĞůLJŚŝŐŚĞdžƉŽƐƵƌĞ
ƚŽƵŶĚĞƌƉĞƌĨŽƌŵŝŶŐĚĞĨĞŶƐŝǀĞ
ĂƐƐĞƚĐůĂƐƐĞƐĂŶĚƵŶĨĂǀŽƵƌĂďůĞ
ĐƵƌƌĞŶĐLJŵŽǀĞŵĞŶƚƐ͘
STALLIONS OUT OF THE
TROY STABLE
tŚĞŶŝƚĐŽŵĞƐƚŽĐĂƉŝƚĂů
ƉƌĞƐĞƌǀĂƟŽŶƐƚƌĂƚĞŐŝĞƐ͕
ŝŶǀĞƐƚŽƌƐĐĂŶŶŽƚŝŐŶŽƌĞdƌŽLJ
ƐƐĞƚDĂŶĂŐĞŵĞŶƚ͕ĨŽƵŶĚĞĚ
ďLJƚŚĞůĂƚĞ>ŽƌĚtĞŝŶƐƚŽĐŬĂŶĚ
^ĞďĂƐƟĂŶ>LJŽŶŝŶϮϬϬϬ͕ǁŚŽƐĞ
ŝŶǀĞƐƚŵĞŶƚĂƉƉƌŽĂĐŚĂŝŵƐƚŽ
ĂǀŽŝĚƉĞƌŵĂŶĞŶƚĐĂƉŝƚĂůůŽƐƐ͘/ƚƐ
ŵĂŶĂŐĞƌƐƉƵƚŵŽŶĞLJƚŽǁŽƌŬŝŶ
ƐƵƐƚĂŝŶĂďůĞďƵƐŝŶĞƐƐĨƌĂŶĐŚŝƐĞƐ
ĂŶĚƌƵŶĐŽŶĐĞŶƚƌĂƚĞĚ͕ůŽǁ
ƚƵƌŶŽǀĞƌƉŽƌƞŽůŝŽƐ͘
dƌŽLJŵĂŶĂŐĞƐPersonal Assets
Trust (PNL)͕ŽīĞƌŝŶŐĂŶĞdžƉŽƐƵƌĞ
ƚŽĂĚĞĨĞŶƐŝǀĞĐŽŵďŝŶĂƟŽŶŽĨ
ŚŝŐŚƋƵĂůŝƚLJĞƋƵŝƟĞƐĂƐǁĞůůĂƐ
ŐŽǀĞƌŶŵĞŶƚďŽŶĚƐ͕ŐŽůĚĂŶĚ
ĐĂƐŚ͘
ůƐŽŝŶƚŚĞdƌŽLJƐƚĂďůĞŝƐTroy
Income & Growth Trust (TIGT)͘
ŽͲŵĂŶĂŐĞƌ,ƵŐŽhƌĞƐĞĞŬƐ
ŽƵƚƐƚĂŶĚŝŶŐĨƌĂŶĐŚŝƐĞƐ͕ƋƵĂůŝƚLJ
ĐŽŵƉĂŶŝĞƐƚŚĂƚŐĞŶĞƌĂƚĞŚŝŐŚ
ůĞǀĞůƐŽĨĨƌĞĞĐĂƐŚŇŽǁ͕ƐƚĞĂĚŝůLJ
ĂŶĚƐƵƐƚĂŝŶĂďůLJŐƌŽǁƚŚĞŝƌ
ĚŝǀŝĚĞŶĚƐĂŶĚĂůƐŽƌĞƚƵƌŶĞdžĐĞƐƐ
ĐĂƉŝƚĂůƚŚƌŽƵŐŚƐƉĞĐŝĂůĚŝǀŝĚĞŶĚƐ
ĂŶĚďƵLJďĂĐŬƐ͘
^ƵĐŚĐŽŵƉĂŶŝĞƐĐŽƵůĚ
ŚĞůƉƐŚŝĞůĚŚŝƐƐŚĂƌĞŚŽůĚĞƌƐ
͚ĨƌŽŵƚŚĞǁŽƌƐƚŽĨĐĂƉŝƚĂů
ĚƌĂǁĚŽǁŶƐĂŶĚŵĂƌŬĞƚƐ͛͘,Ğ
ĂŶĚĐŽůůĞĂŐƵĞ&ƌĂŶĐŝƐƌŽŽŬĞ
ƚĞŶĚƚŽĐƵƚŚŽůĚŝŶŐƐǁŚĞŶ
ǀĂůƵĂƟŽŶƐďĞĐŽŵĞƚŽŽŚŝŐŚĨŽƌ
ƚŚĞŝƌĐŽŵĨŽƌƚ͘
tŚĞŶŝƚĐŽŵĞƐƚŽĂǀŽŝĚŝŶŐ
ƉĞƌŵĂŶĞŶƚĐĂƉŝƚĂůůŽƐƐ͕hƌĞ
ƐĂLJƐ͚ƚŚĞƵŶĚĞƌƉŝŶŶŝŶŐƚŽŽů
ƚŚĂƚǁĞŚĂǀĞƚŽĚŽƚŚĂƚŝƐƚŚĞ
ŝŶǀĞƐƚŵĞŶƚŝŶƐƵƐƚĂŝŶĂďůĞ
ďƵƐŝŶĞƐƐĨƌĂŶĐŚŝƐĞƐ͛ĂŶĚ͚ĂŐƌŽƵƉ
ŽĨĂƐƐĞƚƐƚŚĂƚŚĂǀĞƐƚĞĂĚŝůLJĂŶĚ
ƐƵƐƚĂŝŶĂďůLJŐƌŽǁŶůŽŶŐƚĞƌŵ
ĚŝǀŝĚĞŶĚƐ͛͘
dƌŽLJ/ŶĐŽŵĞΘ'ƌŽǁƚŚŚĂƐ
ĚĞůŝǀĞƌĞĚĂŵŽƌĞƌŽďƵƐƚƌĞƚƵƌŶ
ǁŚĞŶŵĂƌŬĞƚƐŚĂǀĞďĞĞŶ
ƐŽŌĞƌ͕ĂůƚŚŽƵŐŚhƌĞĐŽŶĐĞĚĞƐ
ŝƚƐƚƌƵŐŐůĞƐƚŽŬĞĞƉƵƉǁŚĞŶ
ŵĂƌŬĞƚƐĂƌĞ͚ŵŽƌĞĞďƵůůŝĞŶƚ͛͘
INVESTMENT TRUSTS
dŽƉϭϬŚŽůĚŝŶŐƐĂƐĂƚϯϬ^ĞƉ
ŝŶĐůƵĚĞĚUnilever (ULVR)͕EĞƐƚůĞ͕
ZĞĐŬŝƩĞŶĐŬŝƐĞƌ;Z͘ͿĂŶĚ
Experian (EXPN)͘
KƚŚĞƌƐƚŽĐŬƐŝŶƚŚĞƉŽƌƞŽůŝŽ
ŝŶĐůƵĚĞŚŝŐŚƌĞƚĂŝůĞƌƐNext
(NXT)ĂŶĚWH Smith (SMWH)͕
ǁŚŽƐĞŵĂŶĂŐĞŵĞŶƚƚĞĂŵƐĂƌĞ
ŝŶƚĞƌŶĂůůLJĂůůŽĐĂƟŶŐĐĂƉŝƚĂůƚŽ
ŐƌŽǁŝŶŐďŝƚƐŽĨƚŚĞŝƌďƵƐŝŶĞƐƐĞƐ͕
ĂƐǁĞůůĂƐŽĐĂŽůĂĂŶĚWƌŽĐƚĞƌ
Θ'ĂŵďůĞ͘
^ŝŐŶŝĮĐĂŶƚůLJ͕ƚŚĞƌĞŚĂƐďĞĞŶ
ŶŽŵĞĂŶŝŶŐĨƵůĚŝƐĐŽƵŶƚŽŶƚŚĞ
ƚƌƵƐƚƐŝŶĐĞƚŚĞĚŝƐĐŽƵŶƚĐŽŶƚƌŽů
ŵĞĐŚĂŶŝƐŵ;DͿǁĂƐƉƵƚŝŶ
ƉůĂĐĞŝŶ:ĂŶƵĂƌLJϮϬϭϬ͕ƉƌŽǀŝĚŝŶŐ
ƐŚĂƌĞŚŽůĚĞƌƐǁŝƚŚůŝƋƵŝĚŝƚLJĂŶĚ
ĂǀŽŝĚŝŶŐǁŝůĚƐǁŝŶŐƐďĞƚǁĞĞŶ
ĚŝƐĐŽƵŶƚƐĂŶĚƉƌĞŵŝƵŵƐ͘
͚ZŝŐŚƚĨƌŽŵƚŚĞŽƵƚƐĞƚ͕ǁĞ
ǁĂŶƚĞĚƚŽĂĚĚƌĞƐƐƐŽŵĞŽĨƚŚĞ
ďŝŐŝƐƐƵĞƐƚŚĂƚŝŶǀĞƐƚŵĞŶƚƚƌƵƐƚƐ
ŚĂǀĞ͕ǁŚŝůƐƚŬĞĞƉŝŶŐƐŽŵĞŽĨƚŚĞ
ďĞŶĞĮƚƐ͕͛ĞdžƉůĂŝŶƐhƌĞ͘
͚tĞĨĞůƚǁĞĐŽƵůĚĐƌĞĂƚĞĂ
ǀĞŚŝĐůĞƚŚĂƚƌĞŵŽǀĞĚƐŽŵĞŽĨ
ƚŚĞĚŽǁŶƐŝĚĞƐƚŚĂƚƉĞŽƉůĞŐĞƚ
ĐŽŶĐĞƌŶĞĚĂďŽƵƚ͘dŚĞDǁĞ
ƉƵƚŝŶƉůĂĐĞĞīĞĐƟǀĞůLJĂĚĚƌĞƐƐĞƐ
ƚǁŽďŝŐŝƐƐƵĞƐʹĚŝƐĐŽƵŶƚ
ǀŽůĂƟůŝƚLJĂŶĚůŝƋƵŝĚŝƚLJ͛͘;:Ϳ
15 November 2018 | SHARES | 33
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Find out how ETFs are

getting active
We take a look at this growing space, how to define it and the challenges it faces

ZŽďŽ'ůŽďĂůZŽďŽƟĐƐĂŶĚƵƚŽŵĂƟŽŶ/ŶĚĞdžd&ŝƐĂŶĞdžĂŵƉůĞŽĨĂŶd&ƐǁŝƚŚ͚ĂĐƟǀĞ͛ĐŚĂƌĂĐƚĞƌŝƐƟĐƐ

T he global exchange-
traded fund (ETF) industry
ŝƐĞƐƟŵĂƚĞĚƚŽƐŽĂƌŝŶ
ǀĂůƵĞĨƌŽŵΨϱƚŶƚŽΨϯϬƚŶďLJ
ϮϬϯϬĂĐĐŽƌĚŝŶŐƚŽ:WDŽƌŐĂŶĂƐ
ŵŽƌĞƉĞŽƉůĞƐĞĞŬŽƵƚůŽǁͲĐŽƐƚ
ŝŶǀĞƐƚŵĞŶƚƐ͘
ETFs are used by investors
ƚŽŵĂƚĐŚƚŚĞƉĞƌĨŽƌŵĂŶĐĞŽĨ
an index of assets, usually for
ĂĐŚĞĂƉĞƌƉƌŝĐĞƚŚĂŶĂĐƟǀĞůLJ
ŵĂŶĂŐĞĚĨƵŶĚƐ͘
ƐǁĞůůĂƐŐƌŽǁŝŶŐƌĂƉŝĚůLJ
ƚŚŝƐŝŶĚƵƐƚƌLJŝƐĂůƐŽŝŶŶŽǀĂƟŶŐ
ƐŽǁŚŝůĞŚŝƐƚŽƌŝĐĂůůLJd&ƐŚĂǀĞ
ďĞĞŶĂůŵŽƐƚĞŶƟƌĞůLJƉĂƐƐŝǀĞ
ŝŶǀĞƐƚŵĞŶƚƐ͕ƚŚĞƌĞĂƌĞĂŶ
ŝŶĐƌĞĂƐŝŶŐŶƵŵďĞƌŽĨ͚ĂĐƟǀĞ͛
ƉƌŽĚƵĐƚƐǁŚŝĐŚŚĂǀĞĂĨƵŶĚ
ŵĂŶĂŐĞƌŝŶĐŚĂƌŐĞĂŝŵŝŶŐƚŽ
ďĞĂƚƚŚĞďĞŶĐŚŵĂƌŬ͘
ŝƚǁĂŶƚƐƚŽďĞĂƚĂŶĚĚĞĐŝĚĞƐ
ǁŚĂƚĐŽŵƉĂŶŝĞƐŝƚǁĂŶƚƐƚŽŐŽ
ŽǀĞƌǁĞŝŐŚƚŽƌƵŶĚĞƌǁĞŝŐŚƚŽŶ
using research and future cash
ŇŽǁŝŶƐŝŐŚƚƐĨƌŽŵŝƚƐĂŶĂůLJƐƚƐ͘
dLJƉŝĐĂůůLJ͕LJŽƵǁŽƵůĚĞdžƉĞĐƚ
ƚŽƉĂLJĨŽƌƚŚĞĞdžƚƌĂǁŽƌŬ
ǁŚŝĐŚŐŽĞƐŝŶƚŽďƵŝůĚŝŶŐƐƵĐŚĂ
ƉŽƌƞŽůŝŽƐŽLJŽƵǁŽƵůĚĞdžƉĞĐƚ
ƚƌƵůLJĂĐƟǀĞd&ƐƚŽŚĂǀĞŚŝŐŚĞƌ
ĐŚĂƌŐĞƐƚŚĂŶƚŚĞŝƌƉĂƐƐŝǀĞ
ĐŽƵŶƚĞƌƉĂƌƚƐ͘
KĨƚŚĞƐĞŶĞǁƉƌŽĚƵĐƚƐ͕JPM
Global Research Enhanced
Index Equity (JREG)ĂŝŵƐĨŽƌĂ
ůŽŶŐͲƚĞƌŵƌĞƚƵƌŶŝŶĞdžĐĞƐƐŽĨƚŚĞ
D^/tŽƌůĚ/ŶĚĞdžďLJŝŶǀĞƐƟŶŐŝŶ
ŐůŽďĂůĐŽŵƉĂŶŝĞƐ͘
JPM US Research Enhanced
Index Enhanced Index Equity
(JREU)ƵƐĞƐĂh^ƉŽƌƞŽůŝŽŽĨ
ĐŽŵƉĂŶŝĞƐƚŽƚƌLJĂŶĚďĞĂƚƚŚĞ
^ΘWϱϬϬ͘
ŽƚŚd&ƐŚĂǀĞƚŽƉƉŽƐŝƟŽŶƐ
ŝŶƉƉůĞ͕DŝĐƌŽƐŽŌ͕ŵĂnjŽŶ͕
'ŽŽŐůĞͲŽǁŶĞƌůƉŚĂďĞƚĂŶĚ
:ŽŚŶƐŽŶΘ:ŽŚŶƐŽŶ͘dŚĞƐĞĂƌĞ
ƐŽŵĞŽĨƚŚĞůĂƌŐĞƐƚĐŽŵƉĂŶŝĞƐ
ŝŶƚŚĞǁŽƌůĚĂŶĚĂůƌĞĂĚLJŚĂǀĞ
ĂƐŝŐŶŝĮĐĂŶƚǁĞŝŐŚƟŶŐŝŶh^
and global indices, so there
ŚĂǀĞƚŽďĞƋƵĞƐƟŽŶƐŽŶƚŚĞ
ĞdžƚĞŶƚƚŽǁŚŝĐŚŝŶǀĞƐƚŽƌƐĂƌĞ
ďĞŶĞĮƟŶŐĨƌŽŵƚŚĞĂĐƟǀĞ
ŵĂŶĂŐĞŵĞŶƚĂƉƉƌŽĂĐŚ͘
ŵŽŶŐƚŚĞƚŽƉŚŽůĚŝŶŐƐĨŽƌ
JPM Europe Research Enhanced
Index Equity (JREE)ĂƌĞEŽǀĂƌƟƐ͕
Nestle and Unilever (ULVR)

“
KŶĞŽĨƚŚĞĐŽŵƉĂŶŝĞƐ ŝŶĂďŝĚƚŽďĞĂƚƚŚĞD^/
ŚŽƉŝŶŐƚŽƚĂƉŝŶƚŽƚŚĞŐƌŽǁŝŶŐ ƵƌŽƉĞ/ŶĚĞdž͘
ĂĐƟǀĞd&ƐƉĂĐĞŝƐ:WDŽƌŐĂŶ As well
we as growing dŚŝƐd&ƚƌĂĐŬƐĂŶŝŶĚĞdžŽĨ
ǁŚŝĐŚƚŚƌĞĞŶĞǁ>ŽŶĚŽŶͲůŝƐƚĞĚ rapidly this industry is ϳϭϲƐƚŽĐŬƐ͕ĨĂƌŵŽƌĞƚŚĂŶŵŽƐƚ
ƉƌŽĚƵĐƚƐŝŶKĐƚŽďĞƌϮϬϭϴ͘ also innovating
ting ƚƌĂĚŝƟŽŶĂůĂĐƟǀĞĨƵŶĚƐĂŶĚ
ĐŽŶƐŝĚĞƌĂďůLJŵŽƌĞƚŚĂŶƚŚĞϭϮϮ
AIMING TO BEAT THE INDEX ĂŶĚϮϭϬŚŽůĚŝŶŐƐŝŶƚŚĞƚǁŽ
tŝƚŚƚŚĞƐĞƉƌŽĚƵĐƚƐƚŚĞĨƵŶĚ ŽƚŚĞƌĂĨŽƌĞŵĞŶƟŽŶĞĚ:WDŽƌŐĂŶ
ŵĂŶĂŐĞƌůŽŽŬƐĂƚƚŚĞŝŶĚĞdž d&Ɛ͘zŽƵŚĂǀĞƚŽƋƵĞƐƟŽŶ

15 November 2018 | SHARES | 35

 EXCHANGE-TRADED FUNDS

ǁŚĞƚŚĞƌĂĨƵŶĚŵĂŶĂŐĞƌŝƐƌĞĂůůLJ
ŽŶƚŽƉŽĨĞǀĞƌLJƚŚŝŶŐĂīĞĐƟŶŐ
ϳϭϲĐŽŵƉĂŶŝĞƐ͘ How can ca an investment manager in this
/ŶƚŚĞƐĞƉƌŽĚƵĐƚƐ͛ĨĂǀŽƵƌŝƐ scenario expect to be as effective? It’s the
ƚŚĞŝƌŽŶŐŽŝŶŐĐŚĂƌŐĞŽĨϬ͘Ϯϱй͕ equivalent of starting a hand of poker by
ŚŝŐŚĞƌƚŚĂŶƚŚĞĐŚĞĂƉĞƐƚƉĂƐƐŝǀĞ

”
showing your opponents yourr cards.
d&ƐǁŚŝĐŚƐŽŵĞƟŵĞƐŚĂǀĞ
ĨĞĞƐĂƐůŽǁĂƐĂĨĞǁďĂƐŝƐƉŽŝŶƚƐ
ďƵƚůŽǁĞƌƚŚĂŶŵŽƐƚƚƌĂĚŝƟŽŶĂů
ĂĐƟǀĞĨƵŶĚƐ͘ ĂŶĚƚŚĞƌĞŝƐƐŽŵĞƚŚŝŶŐŽĨĂŐƌĞLJ
ĂƌĞĂŚĞƌĞ͘ THE TRANSPARENCY
WHAT MAKES AN ETF CHALLENGE
ACTIVE? HOW DOES SMART BETA tƌŝƟŶŐŝŶ:ĂŶƵĂƌLJϮϬϭϴZŽďĞƌƚ
dŚĞƌĞŝƐƐŝŐŶŝĮĐĂŶƚĚĞďĂƚĞŽǀĞƌ DIFFER? DĂůŽŶĞ͕ĐůŝĞŶƚŵĂŶĂŐĞŵĞŶƚ͕
ǁŚĂƚŵĂŬĞƐĂŶd&͚ĂĐƟǀĞ͛ŝŶ ^ŵĂƌƚďĞƚĂĨĞĂƚƵƌĞƐĂ͚ƌƵůĞƐͲ ,^^ĞĐƵƌŝƟĞƐ^ĞƌǀŝĐĞƐ͕
ƚĞƌŵƐŽĨŚŽǁƚŚĞŝŶǀĞƐƚŵĞŶƚ ďĂƐĞĚ͛ĂƉƉƌŽĂĐŚƚŽŝŶǀĞƐƟŶŐ͕ ŶŽƚĞĚƚŚĂƚĂĐƟǀĞd&ƐǁĞƌĞ
strategy is decided and ĞīĞĐƟǀĞůLJĂƉƉůLJŝŶŐĂƐĐƌĞĞŶ Ă͚ĐŚĂůůĞŶŐŝŶŐƉƌŽƉŽƐŝƟŽŶ͛͘
ŝŵƉůĞŵĞŶƚĞĚ͘ ƚŽƚŚĞŵĂƌŬĞƚďƵƚŶŽƚŵĂŬŝŶŐ &ŝƌƐƚůLJ͕ŚĞƌĂŝƐĞĚƚŚĞƉŽŝŶƚŽĨ
>ĞŐĂůĂŶĚ'ĞŶĞƌĂů͛Ɛd&ŚĞĂĚ ĂƋƵĂůŝƚĂƟǀĞũƵĚŐĞŵĞŶƚŽŶ ĐŽƐƚƐĂƐd&ŝƐƐƵĞƌƐǁŝůůŚĂǀĞ
,ŽǁŝĞ>ŝĂƌŐƵĞƐĨŽƌĂŶd&ƚŽ ŝŶĚŝǀŝĚƵĂůƐƚŽĐŬƐ͘ ƚŽďĂůĂŶĐĞƚŚĞĞdžƉĞĐƚĂƟŽŶ
ďĞƚƌƵůLJĂĐƟǀĞŝƚƐŚŽƵůĚďĞ /ŶƚŚŝƐƐĞŶƐĞƐŵĂƌƚďĞƚĂd&Ɛ ĨŽƌůŽǁĐŽƐƚƐŽŶĞdžĐŚĂŶŐĞͲ
ůĞĚďLJĂĨƵŶĚŵĂŶĂŐĞƌĂŶĚĂŶ ĂƌĞƐŽŵĞƚŚŝŶŐŽĨĂŚLJďƌŝĚʹ ƚƌĂĚĞĚĨƵŶĚƐ͘
ŝŶǀĞƐƚŵĞŶƚƚĞĂŵǁŚŽƵŶĚĞƌƚĂŬĞ ƵƐŝŶŐĂƐƉĞĐƚƐŽĨďŽƚŚĂĐƟǀĞĂŶĚ /ŶDĂůŽŶĞ͛ƐǁŽƌĚƐ͗
ƌĞƐĞĂƌĐŚƚŽĚĞĐŝĚĞǁŚĂƚƚŽ ŝŶĚĞdžŝŶǀĞƐƟŶŐ͘dŚĞƐĞĨƵŶĚƐ ͚DĂŶĂŐĞƌƐĂƌĞŐŽŝŶŐƚŽŚĂǀĞ
ŝŶǀĞƐƚŝŶ͘ ĨŽĐƵƐŽŶŝŶĐŽƌƉŽƌĂƟŶŐĂƐƐĞƚƐ ƚŽĮŶĚĂƉƌŝĐŝŶŐƉŽŝŶƚǁŚŝĐŚŝƐ
dŚĞďĞŶĞĮƚƐŽĨŚĂǀŝŶŐ ƚŚĂƚŚĂǀĞĐĞƌƚĂŝŶĐŚĂƌĂĐƚĞƌŝƐƟĐƐ ĂƩƌĂĐƟǀĞƚŽd&ŝŶǀĞƐƚŽƌƐďƵƚ
ƐŽŵĞŽŶĞƚĂŬĞĐŽŶƚƌŽůŽĨĂŶ ĂƩƌĂĐƟǀĞƚŽŝŶǀĞƐƚŽƌƐ͕ƐƵĐŚĂƐ ǁŚŝĐŚŬĞĞƉƐƚŚĞůŝŐŚƚƐŽŶ͛͘
d&ŝƐƚŚĂƚƚŚĞLJĐĂŶŬĞĞƉĂŶ ůŽǁǀŽůĂƟůŝƚLJ͕ŐŽŽĚĚŝǀŝĚĞŶĚ His second concern relates
ĞLJĞŽŶƚŚĞŝŶǀĞƐƚŵĞŶƚƵŶŝǀĞƌƐĞ LJŝĞůĚŽƌƐƚƌŽŶŐĐŽŵƉĂŶLJ ƚŽƚƌĂŶƐƉĂƌĞŶĐLJ͘tŚĞƌĞĂƐĂ
ĂŶĚƌĞŵŽǀĞĂŶLJĐŽŵƉĂŶŝĞƐ ƉĞƌĨŽƌŵĂŶĐĞ͘ ƚƌĂĚŝƟŽŶĂůĂĐƟǀĞĨƵŶĚŽŶůLJ
ŝĨ͕ĨŽƌĞdžĂŵƉůĞ͕ƚŚĞLJďĞĐŽŵĞ KƚŚĞƌĞdžĂŵƉůĞƐŽĨd&ƐǁŝƚŚ ƉƵďůŝƐŚĞƐĂĨƵůůůŝƐƚŽĨŝƚƐ
ŽǀĞƌǀĂůƵĞĚ͘ ͚ĂĐƟǀĞ͛ĐŚĂƌĂĐƚĞƌŝƐƟĐƐŝŶĐůƵĚĞ ƉŽƌƞŽůŝŽƉĞƌŝŽĚŝĐĂůůLJ;ŝĨĂƚ
ĂůůͿ͕d&ƐƚƌĂĚŝƟŽŶĂůůLJƉƵďůŝƐŚ
For investors considering an ZŽďŽ'ůŽďĂůZŽďŽƟĐƐĂŶĚ
the full list of underlying
ĂĐƟǀĞd&͕>ŝƐĂLJƐŝƚŝƐĞƐƐĞŶƟĂů ƵƚŽŵĂƟŽŶ/ŶĚĞdžd&;ZKKͿ͘
ŝŶǀĞƐƚŵĞŶƚƐĚĂŝůLJ͘
ƚŚĞLJƵŶĚĞƌƐƚĂŶĚƚŚĞŝŶǀĞƐƚŵĞŶƚ͕ /ƚƚƌĂĐŬƐĂŶŝŶĚĞdžĐƌĞĂƚĞĚďLJ
DĂůŽŶĞĂĚĚƐ͚͗,ŽǁĐĂŶ
ǁŚŽŝƐŝŶǀŽůǀĞĚĂŶĚǁŚĞƚŚĞƌƚŚĞ ZŽďŽ'ůŽďĂůŵĂĚĞƵƉŽĨĮƌŵƐ ĂŶŝŶǀĞƐƚŵĞŶƚŵĂŶĂŐĞƌŝŶ
ƉŽƌƞŽůŝŽŝƐĂĐƚƵĂůůLJƵŶŝƋƵĞĂŶĚŝĨ ǁŝƚŚĂŚŝŐŚƐĂůĞƐĂƐƐŽĐŝĂƟŽŶ ƚŚŝƐƐĐĞŶĂƌŝŽĞdžƉĞĐƚƚŽďĞĂƐ
ŝƚŚĂƐĚĞůŝǀĞƌĞĚƚŽĞdžƉĞĐƚĂƟŽŶƐ ǁŝƚŚƌŽďŽƟĐƐ͕ĂƵƚŽŵĂƟŽŶ ĞīĞĐƟǀĞ͍/ƚ͛ƐƚŚĞĞƋƵŝǀĂůĞŶƚ
ŝŶƚŚĞƉĂƐƚ͘ ĂŶĚ/͘ ŽĨƐƚĂƌƟŶŐĂŚĂŶĚŽĨƉŽŬĞƌ
ĐƟǀĞd&ƐĂƌĞŶŽƚĂůǁĂLJƐ ZŽďŽ'ůŽďĂůDΘ^/ ďLJƐŚŽǁŝŶŐLJŽƵƌŽƉƉŽŶĞŶƚƐ
ĂƐƐƚƌĂŝŐŚƞŽƌǁĂƌĚĂƐĂĨƵŶĚ ĐŚŝĞĨĞdžĞĐƵƟǀĞŽĸĐĞƌZŝĐŚĂƌĚ LJŽƵƌĐĂƌĚƐ͛͘
ŵĂŶĂŐĞƌƉŝĐŬŝŶŐƐƚŽĐŬƐ͘dŚĞ >ŝŐŚƚďŽƵŶĚƐĂLJƐĞdžƉĞƌƚƐĨƌŽŵ /ƚŝƐŶŽƚLJĞƚĐůĞĂƌŝĨƐŽůƵƟŽŶƐ
ĐƌŝƚĞƌŝĂĨŽƌƚŚĞŝŶǀĞƐƚŵĞŶƚ its advisory board, including ƐƵĐŚĂƐŝŶƚƌŽĚƵĐŝŶŐĂƟŵŝŶŐ
ƐƚƌĂƚĞŐLJŵĂLJďĞƐĞƚďLJƚŚĞ ƌŽďŽƟĐƐĂŶĚ/ĂĐĂĚĞŵŝĐƐ͕ ůĂŐƚŽƉƵďůŝĐĂƟŽŶŽĨƚŚĞ
ŵĂŶĂŐĞƌĂŶĚŝŵƉůĞŵĞŶƚĞĚŝŶĂŶ ŚĞůƉŝĚĞŶƟĨLJĐŽŵƉĂŶŝĞƐĨŽƌƚŚĞ ĐŽŵƉŽƐŝƟŽŶŽĨĂƉŽƌƞŽůŝŽǁŝůů
ĂƵƚŽŵĂƚĞĚǁĂLJ͘ ŝŶĚĞdž͘dŚĞLJŚĂǀĞƚŽĚĞŵŽŶƐƚƌĂƚĞ ŵĞĞƚǁŝƚŚƚŚĞƌĞƋƵŝƌĞŵĞŶƚƐ
/ŶǀĞƐƚŽƌƐŵĂLJďĞĐƵƌŝŽƵƐ ŐƌŽǁƚŚŝŶƌŽďŽƟĐƐ͕ĂƵƚŽŵĂƟŽŶ of global regulators, although
ĂďŽƵƚŚŽǁĂĐƟǀĞd&ƐĂƌĞ ĂŶĚ/ǁŝƚŚĂƉŽƚĞŶƟĂů ƚŚĂƚĂƉƉƌŽĂĐŚŝƐďĞŝŶŐĂĚŽƉƚĞĚ
ĚŝīĞƌĞŶƚĨƌŽŵŽƚŚĞƌŝŶǀĞƐƚŵĞŶƚ ƉƌŽĚƵĐƚŽƌƚĞĐŚŶŽůŽŐŝĐĂů ďLJƚŚĞůŝŬĞƐŽĨZŽďŽ'ůŽďĂů͘
ŵĞƚŚŽĚƐƐƵĐŚĂƐƐŵĂƌƚďĞƚĂ ĂĚǀĂŶƚĂŐĞ͘;>D:Ϳ

36 | SHARES | 15 November 2018

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 AEQUITAS Insightful commentary on market issues

Why Warren Buffett

seems to be running
scared of bonds
The conclusions to draw as the legendary investor turns away from
fixed income

T ŚĞĚĞĐŝƐŝŽŶďLJtĂƌƌĞŶƵīĞƩƚŽƐƉĞŶĚ
ƐŽŵĞŽĨŚŝƐĞƌŬƐŚŝƌĞ,ĂƚŚĂǁĂLJŝŶǀĞƐƚŵĞŶƚ
ǀĞŚŝĐůĞ͛ƐĞŶŽƌŵŽƵƐĐĂƐŚƉŝůĞŽŶĂƐŚĂƌĞ
ďƵLJďĂĐŬŝƐŐƌĂďďŝŶŐƚŚĞŚĞĂĚůŝŶĞƐ͕ĂƐŝƚƐƵŐŐĞƐƚƐ
ƚŚĞůĞŐĞŶĚĂƌLJŝŶǀĞƐƚŽƌŝƐƐƚƌƵŐŐůŝŶŐƚŽĮŶĚĂ
ĐŽŵƉĂŶLJƚŚĂƚŚĞǁĂŶƚƐƚŽĂĐƋƵŝƌĞĂƚĂƉƌŝĐĞŚĞ
ǁĂŶƚƐƚŽƉĂLJ͘
ƵƚĂĚĞĞƉĞƌůŽŽŬĂƚŚŽǁĞƌŬƐŚŝƌĞ͛ƐďĂůĂŶĐĞ
ƐŚĞĞƚďƌĞĂŬƐĚŽǁŶďLJĂƐƐĞƚŵŝdž͕ƌĂƚŚĞƌƚŚĂŶŝŶũƵƐƚ
ĂďƐŽůƵƚĞĚŽůůĂƌƐ͕ƐƵŐŐĞƐƚƐƚŚĂƚƚŚĞ^ĂŐĞŽĨKŵĂŚĂ
ŝƐĂůŽƚŵŽƌĞĐŽŶĐĞƌŶĞĚĂďŽƵƚĮdžĞĚŝŶĐŽŵĞƚŚĂŶŚĞ
ŝƐĂďŽƵƚƐƚŽĐŬŵĂƌŬĞƚƐ͘ƚΨϭϴ͘ϳďŶ͕h^'ŽǀĞƌŶŵĞŶƚ
ďŽŶĚƐƌĞƉƌĞƐĞŶƚũƵƐƚϮ͘ϱйŽĨĞƌŬƐŚŝƌĞ͛ƐĂƐƐĞƚƐ͕
ĐŽŶƟŶƵŝŶŐĂĚŽǁŶǁĂƌĚƚƌĞŶĚƚŚĂƚŚĂƐďĞĞŶŝŶ
ĞǀŝĚĞŶĐĞƐŝŶĐĞϮϬϬϯ͘

Z<^,/Z,d,tz͛^&/yͳ/EKD
>>Kd/KE^dE^dDh>d/ͳzZ>Kt^
ƌĞĂƟǀĞŽŵŵŽŶƐ

Source: Company accounts
/ƚŝƐŶŽƚƵīĞƩ͛ƐƐƚLJůĞƚŽŵĂŬĞŵĂĐƌŽĞĐŽŶŽŵŝĐ
ĐĂůůƐ͘,ĞŝŶƐƚĞĂĚƉƌĞĨĞƌƐƚŽĨŽĐƵƐŽŶĐŽŵƉĂŶLJ
ĨƵŶĚĂŵĞŶƚĂůƐĂŶĚƉĂƌƟĐƵůĂƌůLJǀĂůƵĂƟŽŶ͕ƐŽ
ƉĞƌŚĂƉƐƚŚĞŐƌĂĚƵĂůĚĞĐůŝŶĞŝŶƚŚĞĮdžĞĚŝŶĐŽŵĞ
ĂůůŽĐĂƟŽŶƌĞŇĞĐƚƐĂǀŝĞǁƚŚĂƚďŽŶĚƐƌĞƉƌĞƐĞŶƚ
ƌĞůĂƟǀĞůLJƉŽŽƌǀĂůƵĞ͘
h^ǁĂŐĞƐŐƌĞǁϯ͘ϭйŝŶKĐƚŽďĞƌ͕ĂĮŐƵƌĞǁŚŝĐŚ
ƐƵŐŐĞƐƚƐĂƐƵŵŵĞƌĚƌŽƉŝŶƚŚĞŚĞĂĚůŝŶĞŽǀĞƌĂůů
ŝŶŇĂƟŽŶƌĂƚĞƚŽϮ͘ϯйŵĂLJŶŽƚůĂƐƚůŽŶŐ͕ĂƚƌĞŶĚ
ǁŚŝĐŚĐŽƵůĚŵĞĂŶƚŚĂƚĞǀĞŶĂϯ͘ϮйLJŝĞůĚŽŶƚŚĞ
h^ϭϬͲLJĞĂƌdƌĞĂƐƵƌLJ͕ĨŽƌĞdžĂŵƉůĞ͕ŵĂLJŶŽƚŽīĞƌ
ĂƐŵƵĐŚǁĞĂůƚŚƉƌŽƚĞĐƟŽŶĂƐŝŶǀĞƐƚŽƌƐǁŽƵůĚ
ůŝŬĞ͘
/ŶƐƵĐŚĂŶĞŶǀŝƌŽŶŵĞŶƚŝƚŝƐĞĂƐLJƚŽƵŶĚĞƌƐƚĂŶĚ
ǁŚLJƚŚĞh^&ĞĚĞƌĂůZĞƐĞƌǀĞƐĞĞŵƐŝŶƚĞŶƚŽŶ
ƉƵƐŚŝŶŐƚŚƌŽƵŐŚĨƵƌƚŚĞƌŝŶƚĞƌĞƐƚƌĂƚĞŝŶĐƌĞĂƐĞƐ͕
ǁŝƚŚŽŶĞŵŽƌĞƉůĂŶŶĞĚĨŽƌĞĐĞŵďĞƌĂŶĚ
ƉŽƐƐŝďůLJĨŽƌϮϬϭϵ͘/ĨŝƚĞdžĞĐƵƚĞƐƚŚĂƚƉůĂŶ͕ƚŚĞ
ŵĞƌŝĐĂŶĐĞŶƚƌĂůďĂŶŬǁŝůůŚĂǀĞŽǀĞƌƐĞĞŶĂ
ĚŽnjĞŶŝŶƚĞƌĞƐƚƌĂƚĞŚŝŬĞƐŽĨĂƋƵĂƌƚĞƌͲƉŽŝŶƚ
ĂƉŝĞĐĞďLJŶĞdžƚŚƌŝƐƚŵĂƐ͕ƚŽϯ͘Ϯϱй
^ƵĐŚĂƚƌĞŶĚĐŽƵůĚǁĞůůĚƌĂŐh^ϭϬͲLJĞĂƌďŽŶĚ
LJŝĞůĚƐŚŝŐŚĞƌƐƟůůĂŶĚ͕ĂƐǁĞĂůůŬŶŽǁ͕ďŽŶĚƉƌŝĐĞƐ
ŵŽǀĞŝŶǀĞƌƐĞůLJƚŽƚŚĞŝƌLJŝĞůĚ͘

38 | SHARES | 15 November 2018

 Insightful commentary on market issues
^/^D/^,/&d
/ƚĚŽĞƐƐĞĞŵƚŚĂƚDƌƵīĞƩŝƐƚĂŬŝŶŐĞǀĂƐŝǀĞ
ĂĐƟŽŶŽŶƚŚĞĮdžĞĚͲŝŶĐŽŵĞĨƌŽŶƚĂŶĚƚŚŝƐĐŚĂƌƚŽĨ
ƚŚĞh^ϭϬͲLJĞĂƌdƌĞĂƐƵƌLJďŽŶĚLJŝĞůĚƐƵŐŐĞƐƚƐŚĞ
ŵĂLJďĞƌŝŐŚƚ͘/ƚĐĂŶďĞĂƌŐƵĞĚƚŚĂƚĂůŽŶŐďƵůůƌƵŶ
ŝƐĞŶĚŝŶŐ͘
ϯϬͳzZKtEtZdZE/Eh^
dZ^hZzz/>^/^/E'd^d
^ŽƵƌĐĞ͗ZĞĮŶŝƟǀĚĂƚĂ
tŚĞƚŚĞƌƚŚĂƚŝƐĚŽǁŶƚŽƚŚĞĞŶĚŽĨY͕ŚŝŐŚĞƌ
h^ƵĚŐĞƚĚĞĮĐŝƚƐ;ǁŚŝĐŚǁŽƵůĚŵĞĂŶŵĞƌŝĐĂ
ŶĞĞĚƐƚŽŝƐƐƵĞŵŽƌĞďŽŶĚƐƚŽĨƵŶĚŝƚƐĞůĨũƵƐƚĂƐƚŚĞ
&ĞĚƐƚŽƉƐďƵLJŝŶŐͿŽƌŝŶŇĂƟŽŶƌĞŵĂŝŶƐƚŽďĞƐĞĞŶ͘
ƵƚŝĨdƌĞĂƐƵƌLJLJŝĞůĚƐĚŽŐŽŚŝŐŚĞƌƚŚĂƚǁŽƵůĚůĞĂǀĞ
ŝŶǀĞƐƚŽƌƐǁŝƚŚĂŶĞŶǀŝƌŽŶŵĞŶƚǁĞŚĂǀĞŶŽƚƐĞĞŶ
ƐŝŶĐĞƚŚĞϭϵϳϬƐ͕ĞƐƉĞĐŝĂůůLJŝĨŝŶŇĂƟŽŶĚŽĞƐƐƚĂƌƚƚŽ
ŵŽƚŽƌ͘
dŚĞůŽŐŝĐĂůĐŽŶĐůƵƐŝŽŶŽĨƚŚŝƐŝƐƚŚĂƚƚŚĞ
ŝŶǀĞƐƚŵĞŶƚƐƚƌĂƚĞŐŝĞƐƚŚĂƚŚĂǀĞƐĞƌǀĞĚĂĚǀŝƐĞƌƐĂŶĚ
ĐůŝĞŶƚƐǁĞůůƐŝŶĐĞƚŚĞĞĂƌůLJϭϵϴϬƐŵĂLJŶŽƚǁŽƌŬƐŽ
ǁĞůůŐŽŝŶŐĨŽƌǁĂƌĚ͘dŚŝƐĐŽƵůĚďĞŐĂƌĞĂƐƐĞƐƐŵĞŶƚ
ŽĨĮdžĞĚͲŝŶĐŽŵĞĞdžƉŽƐƵƌĞ͕ĞƐƉĞĐŝĂůůLJĂƚƚŚĞ
ǀĞƌLJůŽŶŐĞŶĚǁŚĞƌĞLJŝĞůĚƐĂƌĞƚƌĂĚŝƟŽŶĂůůLJƚŚĞ
ŚŝŐŚĞƐƚĂŶĚĂĐŽůĚůŽŽŬĂƚŐƌŽǁƚŚĂŶĚŵŽŵĞŶƚƵŵ
ƐƚƌĂƚĞŐŝĞƐ͕ĂƐĐĂƐŚŇŽǁǁŽƵůĚďĞĐŽŵĞŵŽƌĞŚŝŐŚůLJ
ǀĂůƵĞĚƚŚĂŶƉƌŽĮƚůĞƐƐƌĞǀĞŶƵĞŐƌŽǁƚŚŽƌĐƵƐƚŽŵĞƌ
ůĂŶĚͲŐƌĂďƐ͘
/ŶƚŚĞϭϵϳϬƐ͕ƚŚĞďĞƐƚƉĞƌĨŽƌŵĞƌƐǁĞƌĞŐŽůĚ
ĂŶĚ͕ĨƌŽŵĂŶĞƋƵŝƚLJƉĞƌƐƉĞĐƟǀĞ͕ĐŽŶƐƵŵĞƌƐƚĂƉůĞƐ
ĮƌŵƐĂŶĚƚŚĞƉƌŽǀŝĚĞƌƐŽĨůŝĨĞĞƐƐĞŶƟĂůƐͲĂŶLJƚŚŝŶŐ
LJŽƵĐŽƵůĚĞĂƚŽƌĂŶĚĚƌŝŶŬŽƌƉŽƵƌĚŽǁŶƚŚĞƐŝŶŬ
ƚŽŬĞĞƉLJŽƵƌŚŽƵƐĞĐůĞĂŶ͘ƌĞƚƵƌŶƚŽŝŶŇĂƟŽŶ
ĐŽƵůĚƚŚĞƌĞĨŽƌĞŵĞĂŶŝƚŵŝŐŚƚďĞƟŵĞƚŽƌĞĂƐƐĞƐƐ
ƉƌĞĐŝŽƵƐŵĞƚĂůƐĂŶĚĂůƐŽƐƚŽĐŬƐǁŝƚŚƉƌŝĐŝŶŐƉŽǁĞƌ͘
&ŝƌŵƐǁŝƚŚŝƚǁŝůůďĞĂďůĞƚŽĚĞĨĞŶĚƚŚĞŝƌŵĂƌŐŝŶƐ͕
ƉƌŽĮƚƐ͕ĐĂƐŚŇŽǁĂŶĚƚŚƵƐĚŝǀŝĚĞŶĚƐ͘dŚŽƐĞ
ǁŝƚŚŽƵƚŝƚǁŝůůďĞƉŽŽƌƐĞůĞĐƟŽŶƐŝŶĚĞĞĚĂŶŝŶ
ŝŶŇĂƟŽŶĂƌLJǁŽƌůĚ͘
AEQUITAS
&>d,WKtZ
WƌŝĐŝŶŐƉŽǁĞƌŝƐĂŬĞLJƌĞƋƵŝƌĞŵĞŶƚĨŽƌƵīĞƩ
ďĞĨŽƌĞŚĞŝŶǀĞƐƚƐŝŶĂŶLJƐƚŽĐŬ͕ǁŚŝĐŚƚĂŬĞƐƵƐďĂĐŬ
ƚŽǁŚĞƌĞǁĞƐƚĂƌƚĞĚ͘,ĞƐĞĞŵƐƚŽďĞƐŚƵŶŶŝŶŐ
ďŽŶĚƐďƵƚŵĂLJĂůƐŽďĞŚĂǀŝŶŐĚŝĸĐƵůƟĞƐŝŶĮŶĚŝŶŐ
ĐŽŵƉĂŶŝĞƐƚŚĂƚŚĞůŝŬĞƐĂƚĂǀĂůƵĂƟŽŶŚĞůŝŬĞƐ͘
ZĞŵĞŵďĞƌƚŚĂƚŚĞƌĂŝůĞĚĂŐĂŝŶƐƚƚŚĞůĂƚĞƐƚǁĂǀĞ
ŽĨŵĞƌŐĞƌĂŶĚĂĐƋƵŝƐŝƟŽŶĂĐƟǀŝƚLJŝŶƚŚŝƐLJĞĂƌ͛Ɛ
>ĞƩĞƌƚŽ^ŚĂƌĞŚŽůĚĞƌƐ;ŶŽƚƚŚĂƚĐŚŝĞĨĞdžĞĐƵƟǀĞƐ
ŚĂǀĞůŝƐƚĞŶĞĚ͕ũƵĚŐŝŶŐďLJƚŚŝƐLJĞĂƌ͛ƐďƵŵƉĞƌ
ƚĂŬĞŽǀĞƌĂĐƟǀŝƚLJĂƌŽƵŶĚƚŚĞŐůŽďĞͿ͘
ĞƌŬƐŚŝƌĞ͛ƐĐĂƐŚƉŝůĞ͕ŝŶĐůƵĚŝŶŐƐŚŽƌƚͲƚĞƌŵ
dƌĞĂƐƵƌLJďŝůůƐ͕ƐƚĂŶĚƐĂƚĂŶĞĂƌͲƌĞĐŽƌĚŚŝŐŚ
ΨϭϬϯ͘ϲďŶ͘dŚĂƚƌĞƉƌĞƐĞŶƚƐϭϰ͘ϭйŽĨĞƌŬƐŚŝƌĞ͛Ɛ
ĂƐƐĞƚƐĂůƚŚŽƵŐŚƚŚĂƚĮŐƵƌĞŝƐǁĂLJĚŽǁŶ͕ĨƌŽŵƚŚĞ
Ϯϰ͘ϱйŚŝŐŚŽĨϮϬϬϱ͕ǁŚĞŶƵīĞƩŚĂĚĐůĞĂƌůLJďĞŐƵŶ
ƚŽĚĞǀĞůŽƉĚŽƵďƚƐĂďŽƵƚƚŚĞďƵůůŵĂƌŬĞƚƚŚĂƚ
ďĞŐĂŶŝŶϮϬϬϯ͕ƌĂŶŽƵƚŽĨƉƵīŝŶϮϬϬϳĂŶĚĐƌĂƚĞƌĞĚ
ŝŶϮϬϬϴͲϬϵ͘
Z<^,/Z͛^^,W/>^dE^d
EZ>>ͳd/D,/',^
^ŽƵƌĐĞ͗ŽŵƉĂŶLJĂĐĐŽƵŶƚƐ͕ZĞĮŶŝƟǀĚĂƚĂ
/ƚŝƐĂůƐŽŶŽƟĐĞĂďůĞŚŽǁĞƋƵŝƟĞƐ͕ŝŶĐůƵĚŝŶŐĂ
Ψϭϳ͘ϱďŶƐƚĂŬĞŝŶ<ƌĂŌͲ,ĞŝŶnj͕ŶŽǁƌĞƉƌĞƐĞŶƚϮϵ͘ϳй
ŽĨĞƌŬƐŚŝƌĞ͛ƐĂƐƐĞƚƐ͕ƵƉƚŽǁĂƌĚƚŚĞůĞǀĞůƐƐĞĞŶĂƚ
ƚŚĞůĂƐƚƚǁŽh^ƐƚŽĐŬŵĂƌŬĞƚƉĞĂŬƐ͘
/ƚǁŝůůƚŚĞƌĞĨŽƌĞďĞŝŶƚĞƌĞƐƟŶŐƚŽƐĞĞŚŽǁƵīĞƩ
ĂŶĚďƵƐŝŶĞƐƐƉĂƌƚŶĞƌŚĂƌůŝĞDƵŶŐĞƌŚƵƐďĂŶĚ
ƚŚĞŝƌĐĂƐŚĨƌŽŵŚĞƌĞ͕ŐŝǀĞŶƚŚĞŝƌƉĂƟĞŶƚ͕ůŽŶŐͲ
ƚĞƌŵĂƉƉƌŽĂĐŚ͘
LJZƵƐƐDŽƵůĚ͕ŝŶǀĞƐƚŵĞŶƚ
ĚŝƌĞĐƚŽƌ͕:Ğůů
15 November 2018 | SHARES | 39
 FEATURE PROFITABLE SMALL CAP PHARMA

Which small cap pharma

firms make a profit?
We explore the profitable companies in this notoriously high risk part of the market

T ypically people invest in

small cap biotechnology
ĂŶĚƉŚĂƌŵĂĐĞƵƟĐĂůƐƚŽĐŬƐ
in the hope they can enjoy
ƌĞƚƵƌŶƐŽĨŵĂŶLJƟŵĞƐƚŚĞŝƌŝŶŝƟĂů
ƌŝƐŬĂƉƉƌŽĂĐŚŵĞĂŶƐƵƌƌĞŶĚĞƌŝŶŐ
the prospect of mega-returns?
We calculate the average total
ƌĞƚƵƌŶĨƌŽŵŝŶǀĞƐƟŶŐŝŶĮǀĞŽĨ
ƚŚĞƐĞǀĞŶƉƌŽĮƚĂďůĞƐŵĂůůĐĂƉ
ƚƌŝĂůĂŌĞƌƚŚĞĮƌƐƚƉĂƟĞŶƚ
ƐƵīĞƌĞĚ͚ƐŝŐŶŝĮĐĂŶƚĂĚǀĞƌƐĞ
events’.
Drug discovery company
Synairgen (SNG:AIM) is also
investment as the share price ƉŚĂƌŵĂĐĞƵƟĐĂůĐŽŵƉĂŶŝĞƐŽǀĞƌ expected to fall into a loss as
reacts to the discovery of the ƚŚĞůĂƐƚĮǀĞLJĞĂƌƐŝƐϮϮϮ͘ϯй͕ ƉƌĞͲƚĂdžƉƌŽĮƚŝƐĂŶƟĐŝƉĂƚĞĚƚŽĨĂůů
next wonder drug. ďƵƚƚŚŝƐŝƐŚĞĂǀŝůLJƐŬĞǁĞĚďLJ from £1.6m to a loss of £5.5m in
,ŽǁĞǀĞƌ͕ƐƚŽƌŝĞƐůŝŬĞƚŚĞƐĞĂƌĞ ƚŚĞĞdžĐĞƉƟŽŶĂůƉĞƌĨŽƌŵĂŶĐĞŽĨ the year to 31 December 2018.
actually few and far between ŝŽǀĞŶƟdž;syW͗/DͿ. Excluding In October, Synairgen’s partner
and lots of companies in this ŝŽǀĞŶƟdž͕ƚŚĞĂǀĞƌĂŐĞƚŽƚĂů AstraZeneca (AZN) abandoned a
space instead burn through return would be 84.6%. Phase IIa asthma clinical trial.
ƚŚĞŝƌĐĂƐŚƋƵŝĐŬůLJĂŶĚĞŶĚƵƉ dǁŽĐƵƌƌĞŶƚůLJƉƌŽĮƚĂďůĞ dŚŝƐůĞĂǀĞƐĮǀĞĐŽŵƉĂŶŝĞƐ
going bust. companies have been excluded ƚŚĂƚĂƌĞĞdžƉĞĐƚĞĚƚŽĐŽŶƟŶƵĞ
WƌŽĮƚĂďůĞďƵƐŝŶĞƐƐĞƐĂƌĞĂ ĂƐƚŚĞƐĞĂƌĞĨŽƌĞĐĂƐƚƚŽƟƉ ďĞŝŶŐƉƌŽĮƚĂďůĞ͗Alliance
rarity in the small cap pharma into a loss. Pharma (APH:AIM), Eco Animal
space. We calculate only ZĞĚdžWŚĂƌŵĂ;Zy͗/DͿ Health (EAH:AIM), ŝŽǀĞŶƟdž
seven out of 60 London-listed ŝƐĞdžƉĞĐƚĞĚƚŽďĞůŽƐƐŵĂŬŝŶŐ (BVXP:AIM), Anpario (ANP:AIM)
ƉŚĂƌŵĂĮƌŵƐǁŝƚŚĂŵĂƌŬĞƚĐĂƉ ŽǀĞƌƚŚĞŶĞdžƚĨĞǁLJĞĂƌƐĂŌĞƌ and Animalcare (ANCR:AIM). All
ŽĨƵƉƚŽάϱϬϬŵĂƌĞƉƌŽĮƚĂďůĞ͕ ĚĞůŝǀĞƌŝŶŐĂάϭ͘ϲŵƉƌĞͲƚĂdžƉƌŽĮƚ of this quintet also pay dividends.
ĂŵŽƵŶƟŶŐƚŽĂůŝƩůĞŽǀĞƌ in the year to 30 September
10% of this investment 2017. BIOVENTIX’S SHARES
universe. Last year, trading was HAVE RALLIED
dŚĞĨĂĐƚƚŚĞLJĂƌĞŵĂŬŝŶŐ ƐƵƐƉĞŶĚĞĚĂƚZĞĚdžĂŌĞƌ ^ŚĂƌĞƐŝŶĂŶƟďŽĚŝĞƐĚĞǀĞůŽƉĞƌ
money provides some comfort ŇŝƌƚĞĚǁŝƚŚĮŶĂŶĐŝĂůĐŽůůĂƉƐĞ ŝŽǀĞŶƟdžŚĂǀĞƐŽĂƌĞĚĨƌŽŵϱϵϱƉ
on the sustainability of their ŽǀĞƌĂŶƵŶƉĂŝĚĚĞďƚĂŶĚĂŌĞƌ ƚŽάϮϵ͘ϮϱŝŶŽŶůLJĮǀĞLJĞĂƌƐ͘
business model, but does a lower temporarily stopping a clinical ŝŽǀĞŶƟdžŵĂŶƵĨĂĐƚƵƌĞƐŚŝŐŚ

WZͳdyWZK&/d&KZ^d^
2018 2019 2020

Alliance Pharma £28.1m £33.3m £36.6m

Animalcare £7m £8.2m N/A
Anpario £4.4m £5m £5.6m
ŝŽǀĞŶƟdžΎ άϲ͘ϵŵ £7.1m άϳ͘ϵŵ
ĐŽŶŝŵĂů,ĞĂůƚŚΎΎ άϭϯ͘ϵŵ £18.5m £20.6m
ZĞƐƵůƚƐĨŽƌLJĞĂƌƚŽϯϭĞĐĞŵďĞƌƵŶůĞƐƐŽƚŚĞƌǁŝƐĞƐƉĞĐŝĮĞĚ͘ΎzĞĂƌĞŶĚŝƐϯϬ:ƵŶĞ͘ΎΎzĞĂƌĞŶĚŝƐϮϭDĂƌĐŚ͘^ŽƵƌĐĞ͗ZĞĮŶŝƟǀ

40 | SHARES | 15 November 2018


ĂĸŶŝƚLJƐŚĞĞƉŵŽŶŽĐůŽŶĂů
ĂŶƟďŽĚŝĞƐĨŽƌƵƐĞŝŶďůŽŽĚ
ƚĞƐƟŶŐŵĂĐŚŝŶĞƐŝŶŚŽƐƉŝƚĂůƐĂŶĚ
laboratories worldwide.
One of its biggest sellers
ŝƐǀŝƚĂŵŝŶĂŶƟďŽĚLJĐĂůůĞĚ
vitD3 .5H10, which is used for
ǀŝƚĂŵŝŶĚĞĮĐŝĞŶĐLJƚĞƐƟŶŐ͘
Over the last few years,
ŝŽǀĞŶƟdžŚĂƐĞŶũŽLJĞĚ
consistently rising sales and
ƉƌŽĮƚƐ͘
In the year to 30 June, earnings
ƉĞƌƐŚĂƌĞďĞĂƚĞdžƉĞĐƚĂƟŽŶƐ
ƚŚĂŶŬƐƚŽŚŝŐŚĞƌƐĂůĞƐĂĐƌŽƐƐ
the majority of its products,
ƉƌŽŵƉƟŶŐďƌŽŬĞƌ&ŝŶŶĂƉƚŽ
upgrade its forecasts.
&ŽƌϮϬϭϵ͕ƐĂůĞƐĂƌĞĞdžƉĞĐƚĞĚ
ƚŽďĞϭϭйŚŝŐŚĞƌĂƚάϵŵĂŶĚ
ĂĚũƵƐƚĞĚŽƉĞƌĂƟŶŐƉƌŽĮƚŝƐ
ĂŶƟĐŝƉĂƚĞĚƚŽƌŝƐĞϭϮйƚŽάϳ͘ϭŵ͘
OUR TOP PICK
ůůŝĂŶĐĞWŚĂƌŵĂŽīĞƌƐĞdžƉŽƐƵƌĞ
to the pharma sector without
ƚĂŬŝŶŐŽŶĚƌƵŐĚĞǀĞůŽƉŵĞŶƚ
ƌŝƐŬƐ͘
Alliance Pharma acquires and
ůŝĐĞŶƐĞƐƉŚĂƌŵĂĐĞƵƟĐĂůĂŶĚ
healthcare products and delivers
ƚŚĞƐĞƚŽƉĂƟĞŶƚƐ͘ƉƉƌŽdžŝŵĂƚĞůLJ
half of all sales are generated in
the UK with the remaining sales
generated equally from Europe
and elsewhere in the world.
ŽŶĐĞƌŶƐŽǀĞƌŽŶĞͲŽīĐŽƐƚƐ
ĨƌŽŵƐƚƌŝĐƚĞƌƌĞŐƵůĂƟŽŶƐĂŶĚ
ƌĞdžŝƚƉƌĞƉĂƌĂƟŽŶƐŚĂǀĞƐĞĞŶ
ƚŚĞƐŚĂƌĞƐŐŝǀĞďĂĐŬƚŚĞƐƚƌŽŶŐ
advance they enjoyed in the
ĮƌƐƚŚĂůĨŽĨƚŚĞLJĞĂƌ͘
While Alliance Pharma’s cash
ŇŽǁŵĂLJďĞŶĞŐĂƟǀĞůLJŝŵƉĂĐƚĞĚ
ďLJƐƚŽĐŬƉŝůŝŶŐƚŽŵŝƟŐĂƚĞƌĞdžŝƚ͕
we consider this a short-term set
ďĂĐŬĂŶĚƐƟůůůŝŬĞƚŚĞďƵƐŝŶĞƐƐ͘
ANIMAL MAGIC
Eco Animal Health develops and
FEATURE PROFITABLE SMALL CAP PHARMA
dKd>ZdhZEKsZ&/szZ^
Company
Alliance Pharma
Animalcare
Anpario
ŝŽǀĞŶƟdž
Eco Animal Health
Average return:
Average return: (without
ŝŽǀĞŶƟdžͿ
^ŽƵƌĐĞ͗^ŚĂƌĞWĂĚ͕ϭϮEŽǀĞŵďĞƌϮϬϭϴ
ŵĂƌŬĞƚƐŵĞĚŝĐŝŶĞƐƚŽĐŽŶƚƌŽů
ĚŝƐĞĂƐĞŝŶůŝǀĞƐƚŽĐŬƐƵĐŚĂƐ
ĐŚŝĐŬĞŶƐĂŶĚƉŝŐƐ͕ĂƐǁĞůůĂƐ
companion animals.
/ƚƐĂŶƟďŝŽƟĐŝǀůŽƐŝŶƚƌĞĂƚƐ
various gut and respiratory
diseases in pigs and poultry.
dŚŝƐŵĂƌŬĞƚŝƐǁŽƌƚŚΨϭ͘ϱďŶ
according to Eco Animal
Health, whose product is
already licensed in Europe
and Asia.
Eco Animal Health wants to
ƚĂŬĞĂĚǀĂŶƚĂŐĞŽĨĐŽŶƐŽůŝĚĂƟŽŶ
in the global animal health
ŝŶĚƵƐƚƌLJďLJůŽŽŬŝŶŐĨŽƌĚƌƵŐƐƚŽ
ĂĐƋƵŝƌĞƚŚĂƚĮƚŝŶƚŽŝƚƐƉŽƌƞŽůŝŽ
ĂŶĚƐƉĞĐŝĂůŝƐĞĚŵĂƌŬĞƚƐ͘
ANIMALCARE IN THE
DOG HOUSE
Rival Animalcare supplies
animal health products such as
bandages, dressings, treatments
and microchipping for various
animals, including cats, dogs,
horses and cows.
It has been a tough year for
ƚŚĞĐŽŵƉĂŶLJĨŽůůŽǁŝŶŐĂƉƌŽĮƚ
warning in April as a changing
ƐĂůĞƐŵŝdžĂŶĚĐŽŵƉĞƟƟǀĞ
pressures hit earnings.
Total return Current market cap
111.0% £353.4m
10.8% £101.2m
85.7% άϵϯ͘ϴŵ
773% £161.5m
131.0% £305.4m
222.3%
84.6%
The company is trying to
create a pan-European animal
health business through the
ĂĐƋƵŝƐŝƟŽŶŽĨĐƵƉŚĂƌ͕ŚĞůƉŝŶŐ
Animalcare expand its direct
ƐĂůĞƐŽƉĞƌĂƟŽŶƐƚŽƐĞǀĞŶ
countries.
POTENTIAL BREXIT
,t/E&KZEWZ/K
Anpario produces high
performance natural feed
ĂĚĚŝƟǀĞƐ͕ǁŚŝĐŚĂƌĞĨŽŽĚ
supplements for farm animals
that cannot get enough nutrients
ĨƌŽŵƚƌĂĚŝƟŽŶĂůŵĞĂůƐ͘
In the year to 31 December
2017, sales climbed 20% to
άϮϵ͘ϮŵĂŶĚƉƌŽĮƚďĞĨŽƌĞŝŶĐŽŵĞ
ƚĂdžũƵŵƉĞĚϮϳйƚŽάϯ͘ϰŵƚŚĂŶŬƐ
to strong trading in South East
ƐŝĂ͕ŚŝŶĂ͕DŝĚĚůĞĂƐƚĂŶĚ
the US.
>ŽŽŬŝŶŐĂŚĞĂĚ͕ŶƉĂƌŝŽ
plans to invest in growth and
ƉŽƚĞŶƟĂůůLJƐĞĞŬĞĂƌŶŝŶŐƐ
ĞŶŚĂŶĐŝŶŐĂĐƋƵŝƐŝƟŽŶƐ͘
WĞĞů,ƵŶƚ͛ƐŚĂƌůĞƐ,Ăůů
ǁĂƌŶƐŽĨĂƉŽƚĞŶƟĂůƌĞdžŝƚͲ
related issue for Anpario as half
of its goods are purchased from
ƵƌŽƉĞ͘;>D:Ϳ
15 November 2018 | SHARES | 41
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 INDEX
KEY Standard Life Private 29 Troy Income & Growth 33
JPM Global Research 35
• Main Market Enhanced Index Equity (SLPE) Trust (TIGT)
• AIM Equity (JREG) Synairgen (SNG:AIM) 40 TUI (TUI) 14
• Investment Trust JPM US Research 35 Tesco (TSCO) 9 Unilever (ULVR) 33,
• Fund Enhanced Index 35
Equity (JREU)
• Exchange-Traded Fund Vodafone (VOD) 7
LF Blue Whale Growth 27
Fund (BD6PG78) Warehouse REIT 17
(WHR:AIM)
Merian Chrysalis 30
Alliance Pharma 40 (MERI) WH Smith (SMWH) 33
(APH:AIM) Thomas Cook (TCG) 14
Morrisons (MRW) 9 Wincanton (WIN) 16
Animalcare 40 Tracsis (TRCS:AIM) 9
(ANCR:AIM) National Grid (NG.) 12 Xpediator (XPD:AIM) 17
Anpario (ANP:AIM) 40
Apax Global Alpha 29 KEY ANNOUNCEMENTS
(APAX)
OVER THE NEXT SEVEN DAYS
AstraZeneca (AZN) 10,
16, Finals
40
19 Nov: Diploma. 20 Nov: Compass, CYBG, EI Group,
Bioventix (BVXP:AIM) 40
EasyJet. 21 Nov: Marston’s, Sage Group.
British American 8 Next (NXT) 33
Tobacco (BATS) On The Beach (OTB) 14 Interims
20 Nov: AO World, Aveva, Big Yellow Group,
Electrocomponents, Halma, Homeserve, Telecom
Plus. 21 Nov: Babcock, Biffa, Johnson Matthey,
TalkTalk, United Utilities. 22 Nov: Mitchells & Butlers,
Assura, CMC Markets, Mitie, Severn Trent, Majestic
Wine.
Caledonia Investment 30 Personal Assets (PNL) 33
Trust (CLDN) Trading Statements
Reckitt Benckiser 33
Capital Gearing (CGT) 32 (RB.) 20 Nov: Coats Group, Spectris. 21 Nov: Kingfisher. 22
Eco Animal Health 40 Redx Pharma 40 Nov: Centrica, Keller Group.
(EAH:AIM) (REDX:AIM)
Eddie Stobart 17 RIT Capital Partners 32 WHO WE ARE
Logistics (ESL) (RCP) EDITOR: DEPUTY NEWS
Daniel EDITOR: EDITOR:
Robo Global Robotics 36 Coatsworth Tom Sieber Steven Frazer
and Automation Index @SharesMagDan @SharesMagTom @SharesMagSteve
ETF (ROBO)
FUNDS AND SENIOR REPORTER CONTRIBUTORS
Ruffer Investment 32 INVESTMENT TRUSTS Ian Conway Holly Black
EDITOR: Russ Mould
Company (RICA) James Crux REPORTER: Tom Selby
@SharesMagJames Lisa-Marie Janes Laura Suter
Sainsbury’s (SBRY) 9 @SharesMagLisaMJ

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Segro (SGRO) 17

15 November 2018 | SHARES | 43