Fund Research

The Independent Investment Trust

Last update 12 July 2018

Max Ward, who had previously managed Scottish Mortgage while a partner at Baillie Gifford, launched the Trust in 2000. Over both short and long-term periods, the trust has delivered significant NAV returns –albeit with very high levels of volatility as a result of Max’s highly unique approach.

Max does not follow a predetermined investment process or specific investment style – as he believes both concepts are overly constrictive and detrimental to long-term shareholder returns. Instead, this is a pure, best ideas stock picking portfolio with Max assembling the portfolio without reference to any benchmark or index whatsoever.

The portfolio is highly concentrated, and currently only has 34 holdings. Max also likes to run his winners, leading to an extremely low turnover. The performance of the trust is therefore entirely predicated on Max’s skill as a fund manager, and it has certainly paid-off for long-term investors. But, it has also led to some very painful periods over the years – as we note in the performance section.

Though the Independent Investment Trust sits in the AIC Global sector, this is effectively a UK equity portfolio that has the flexibility to invest overseas when Max sees opportunities. According to JPMorgan Cazenove statistics, around 8% of the portfolio is invested in overseas listed companies.

This heavy UK exposure (particularly to the domestic stocks such as house builders, travel and leisure and technology) has had a major influence on the trust’s relative and absolute returns recently, having been the worst performer in the AIC Global sector in 2016 when Brexit-induced uncertainty had a detrimental effect on sentiment. However, the uncertainty surrounding the UK has not affected the performance of the trust over the past year, and the trust has offered handsome returns, especially over 2017.

Shares in the trust are very tightly held, and despite both the board and the manager himself reducing their holdings in the trust (which previously collectively stood at c.35%), the trust’s premium continues to increase. As of the 4 July 2018, the trust trades on a c.20% premium.

As it is self-managed, shareholders are not charged an annual management fee (Max draws a salary only from the trust’s ongoing costs). This leads to one of the lowest ongoing charges figures (OCF of 0.24%) of any actively managed equity fund (both closed and open-ended) available to UK investors.

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