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A wider universe of investment trusts for retirement income in 2019

Picture of The Greybear who is exploring an income strategy in retirement based around investment trusts.

Long time readers may remember that as I’ve written on Monevator many times, a few years ago I began repositioning my main SIPP towards income-centric investment trusts.

Mostly, this meant selling various passives and some funds, and replacing them with investment trusts.

This isn’t the place to reprise the merits or otherwise of that strategy.

Previous articles by me have:

For me it boils down to a combination of in-built diversification, (mostly) reasonable charges, and a proven investment model that in many cases goes back over a hundred years.

To which I might add that in some cases, investment trusts also offer access to asset classes that would otherwise be problematic for ordinary investors.

These days, for instance, my own portfolio features large-scale industrial and warehouse properties in the form of Tritax Big Box, and solar and wind farms in the form of Bluefield Solar Income and Greencoat UK Wind.

Terra incognita

Whatever their merits, investment trusts have historically faced an uphill struggle for mindshare among investors.

The financial press, for instance, has traditionally fêted open-ended funds, for reasons not unconnected to the amount of advertising that such funds undertake.

When soliciting interviews with active managers, the same logic applies.

Investment advisors, too, were slow to tout the attractions of investment trusts. The arrival of RDR back in 2014 and the demise of a number of cosy commission-based arrangements has changed that a little, but more needs to be done.

And – it has to be said – the venerable nature of a number of investment trusts hasn’t helped to bring about a nomenclature that appears investor-friendly to modern eyes.

The Scottish Mortgage investment trust, for instance, is nothing to do with mortgages, and the last time I looked it had no investments in Scotland. To be blunt, the name does little to hint at index-beating major investments in Facebook, Google-owner Alphabet, Tesla, Amazon, Alibaba, Tencent, and other digital illuminati.

Put another way, investment trusts can be something of an unknown for many ordinary investors, with relatively few sources of worthwhile information.

New, better, bigger

Hence, back in 2015, I created a Monevator-published table of income-centric investments trusts, which became something of a popular resource.

Further updated in 2016, it was actually in the process of receiving a 2017 refresh when, as they say, real life got in the way.1

And somehow, here we are in 2019.

The 2019 table, updated at long last, contains a small number of improvements. Three, to be precise.

  • It includes many more investment trusts – roughly twice as many.
  • I’ve included a number of ‘specialist’ trusts, as well as property-centric trusts, not least because these asset classes now figure fairly prominently in my own investments.
  • Following reader suggestions, trusts are categorised and grouped together: UK-centric, global and international, specialist trusts, and property-centric trusts.

Click through to view the cloud-hosted investment trust table in a new window.

(Click through to see Greybeard’s table of trusts.)

The small print

There are four observations to make on the 2019 bunch of trusts.

The first is that among those trusts that featured in the 2016 list, costs are down: 18 trusts had a lower reported ongoing charge; four were the same; and two appeared to have slightly increased it.

Second, of the trusts listed, 24 feature among my own investments, with two more earmarked for purchase soon.

Third, to be included in the table trusts had to be a member of trade body the Association of Investment Companies, which means that a number of REITS that would otherwise make this list have been excluded. Among my own investments, for instance, are Primary Health Properties, Empiric Student Property, and Tritax Eurobox. These do not feature in the table.

Fourthly and finally, the SIPP in question which holds these trusts is now significantly larger, after two other pension investments have been rolled-up into it in order to cut costs and improve performance.

There’s still a fairly hefty five-figure sum in funds, but for me at least, the strategy of moving into income-centric investment trusts is delivering the goods.

Naturally this information is only provided as a starting point for Monevator readers doing their own research: If you invest in any of them, on your head be it!

Of course I hope it’s useful, and look forward to any comments. It’d be especially interesting to see an outline of the portfolio of any readers using investment trusts in retirement, if you’d care to share?

See all The Greybeard’s previous articles.

  1. My friend is now fully recovered from his heart attack and subsequent coronary bypass, and now regularly trounces me at our weekly exercise class. []
{ 14 comments… add one }
  • 1 diy investor (uk) August 15, 2019, 10:12 am

    I would find it really useful if you could consider the addition of a further column for annualised return over say a 5 yr period to compare which trusts are merely generating higher income at the expense of capital.

  • 2 The Investor August 15, 2019, 11:01 am

    Morning all! If anyone knows how to remove the cursor box from an Excel cloud table like this, please drop us a note below! (We’ve hidden it in the bottom right of the table as a workaround, but it’s not ideal as it introduces a pointless vertical scrollbar.)

  • 3 Factor August 15, 2019, 4:05 pm

    @TGB “….. an outline of the portfolio of any readers …..

    Sixteen years into retirement, my rounded annual income consists of, £10k net occupational pension (taxed at source and after 50% sharing on divorce), £8k state pension, and £4k dividends from fully ISA’d ITs viz: Henderson Diversified (HDIV); Henderson High Income (HHI); Murray International (MYI); and Standard Life Investment Property Income (SLI).

    My thinking when buying into these particular trusts was that they were income yielding, and that they gave me diversification but without an unwanted complexity of holdings – KISMIE (keep it simple make it effective) being my way of doing things generally in life :).

    Based on their current total value and their most recent total annual dividends, the ITs are yielding a tax-free 5.14%. I love them!!

  • 4 DP August 15, 2019, 4:54 pm

    Some extra things would also be useful, please:

    Details of dividend cover and revenue reserves
    Details of annualised dividend growth over the last, say, 7 years.

    Many thanks!

  • 5 MJCROSS August 15, 2019, 7:00 pm

    Fab – thanks, very useful.
    Thanks to some good advice I received early on I hold my emergency “cash” buffer in the form of IVTs, within ISAs alongside my SIPP. The resulting tax free dividend income makes a real difference to the plan 🙂

  • 6 BillD August 16, 2019, 12:13 am

    The AIC has a useful facility called Income Finder on their website which is useful for modelling the income from a portfolio if ITs. You need to register and once a portfolio is entered it will show the dividend income for the past 12 months or previous years. It also shows a dividend calendar for upcoming and prior dividends. Several portfolios can be set up to track real portfolios or possible future additions. It is nicely done and I found it useful – here: https://www.theaic.co.uk/income-finder/

  • 7 Mark Meldon August 16, 2019, 10:41 am

    Many of my client SIPP portfolios consist entirely of investments trusts, bought for covered income, and they have been very worthwhile investments for some years. However, one disadvantage of closed-end funds can be a lack of liquidity in ‘specialist’ (as opposed to the very large ‘generalist’ trusts) trusts in volatile markets, with dealing spreads widening quite sharply. Discounts to NAV have also widened in recent weeks.

    This is all OK as long as the money you have in such investments is ‘free money’, i.e. you can stomach the volatility and you have sufficient other assets to provide the income you need to cover your consumption needs.

    All of my clients using flexi-access drawdown have a decent ‘cash bucket’ in their SIPP, from where income is withdrawn, tax paid, and dividends are credited – a kind of ‘breathing space’, if you like. This can help ease worries in volatile markets.

    Nevertheless, I have seen increased interest in ‘real annuities’ this summer, much to my surprise and delight. Surprise as these RPI-linked income streams are (wrongly) perceived as expensive and thus make up a tiny fraction of the retirement income market, and delight as I know that a client arranging such an annuity has bought two vital things. Firstly, longevity insurance and, secondly, priceless peace of mind. This pair of benefits must not be underestimated!

  • 8 Scott August 16, 2019, 10:46 am

    @TGB – why do you hold so many ITs? (around 30?). This seems like a lot of complexity (to someone more used to all-world trackers.) Is this the sort of the number one requires to get diversification?

  • 9 Whettam August 16, 2019, 3:09 pm

    Re @The Investors comment to say whether you are a fan of this table, I certainly am thank you @Greybeard for the update. I was not reading Monevator when this was published first time, but this was one of the articles I came across a couple of years ago, when I properly discovered Monevator and started to read archives.

    I did my own research 😉 but the article was probably responsible for me adding my first IT’s to my portfolio. There have been several more since including several of the newer recommendations, as I decided to commit 10% of my portfolio to Income Alternatives (Renewables, Infrastructure, Private Equity, Debt, Mining, etc) about 6 months ago. I’m not yet retired, but hoping to retire “early” in about four years and currently just re-investing dividends.

    Surprised that Scottish American is not listed in the global trusts, yield is not the highest, but I still think warrants consideration.

  • 10 Andrew Smale August 18, 2019, 10:17 am

    Firstly, my heartfelt thanks for so many informative articles over the last few years.

    I retired nearly 2 years ago in my 50s. Similarly to the author, I orientated my SIPP and the ISAs of both my other half and me towards income-centric investment trusts. This was after, during the last few years at work, spending time reading up on and beefing up my investment knowledge, since I wanted to do it myself rather than rely on (and pay) other people to do it. Read some books on the subject of course but also took a lot of info from this site, John Baron, Lemon Fool, Moneyforum at Citywire, Mr Money Moustache etc.

    14% of funds invested is in the debt/loan/bond sector – NCYF, IPE, CMHY, HDIV. The author does not mention this sector and I would be interested to have a penny for his thoughts here.
    28% is in the UK sector – MRCH, CTY, HHI, DIG and also some high yield FTSE shares (from pre- retirement) that I am gradually converting to investment trusts.
    12% in overseas – EAT, HFEL, MYI
    20% in special or themes – HICL, JLEN, SQN, GCP, TRIG
    23% in property – RGL, AEWU, PHP, BBOX, NRR
    3% in cash.

    Total net yield at cost is 6.19%. The capital value has fluctuated within a band of of about 10% since set up and I imagine will go a bit further south until the current panic is over…

    The whole thing is on HL since their costs for both SIPPs and ISAs are reasonable if you steer clear of open-ended funds of course. (Fingers crossed they do not change it). Also their service seems to be very good and they actually do answer the phone if needed!

    I keep about two-and-a-half years of spending in cash, although, as it is difficult to earn more than 2/5 of diddly squat on the folding stuff, I do wonder about this and the opportunity cost of letting further potential income slip away which could be invested for the future.

    I read a lot about passive investing here and elsewhere of course and also the views of the total return orientated investors. I should in the next few years have some future sums to invest from overseas and may look at a different strategy for any further investment, but would most likely stick with the investment trust route, as there are good choices in that domain as well. I also think I should look at another investment platform in case of any risk with the HL / all eggs in one basket approach, although I am loathe to increase investment costs or maybe just a bit lazy at researching it all again!

    Finally I have not spent all of the yield over the last two years and was thinking of increasing the exposure to overseas orientated trusts. However, being mindful of the “be greedy when others are fearful” mantra I would probably buy more of the good old UK PLC trusts since yields are high already and people in the country will still go on eating, travelling, raising kids etc even if we do eventually leave the EU. Sorry, I know that is not a popular view on here and also apologies for the long post.

    Thanks once again for a most informative and helpful website.

  • 11 SemiPassive August 19, 2019, 5:48 pm

    Hi Greybeard, I currently own 5 of the trusts you list as part of the natural income biased portfolio I am building:
    City Of London, Merchants Trust, Murray International, Blackrock Energy & Resources Income, and Standard Life Investment Property.

    In addition I hold three investment trusts not on your list:
    BMO Real Estate Investments (BREI) yields 5.8%
    John Laing Environmental Asset Group (JLEN) yields 5.5% with about a 50/50 split between wind and solar infrastructure
    European Assets Trust (now London listed) yields 4.5%

    Investment Trusts make up about 40% of my SIPP portfolio. Most of the remainder is in decently yielding ETFs, covering both equity and bonds (VHYL plus various State Street Dividend Aristocrat and iShares ETFs).
    Currently holding 17 ITs and ETFs in total. I have a self imposed limit of 20 holdings absolute max.
    Mostly equal weighted, but I do make sure overall asset allocation stays within my plans by grouping them into UK equity, international equity (developed and EM), property, infrastructure and bonds.
    I’m still in the accumulation phase. To minimise trading costs I place cash in from dividends only a few times a year, either into new or existing holdings.

  • 12 The Rhino November 19, 2019, 10:36 am

    A relevant article from Merryn on the attraction of ITs for retirement income:


  • 13 hyperhypo July 7, 2020, 5:36 pm

    Would love to hear again from Greybeard with an update on his Investment Trusts table, as am in process of transition from acc to inc, well rather stuck on the strategy at present & contemplating a move to new platform and a mix of ITs and ETFs / cash to do the job.

  • 14 pim43 November 27, 2020, 6:17 pm

    Your insights into money management should be part of the national curriculum. I came across your compelling blogs three years ago and what they’ve taught me would have made me a wealthy citizen had I been 30 years younger than my (now) 76 years. No matter, it’s never too late to ‘learn and do’ and I’m managing my investment trust portfolio – that first two I dipped into in 1991 – much better now thanks to your whimsical yet clear, prodding. Thanks so much

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