Page 20 - DIY Investor Magazine | Issue 40

These trusts pay a fixed percentage of capital out as a dividend
rather than relying on the income from investments to fund it.
The drawback of this approach is that if the value of the portfolio
falls, the dividend will too.
April 2024 20 However, both these trusts have delivered strong annualised
dividend growth over the past five years, illustrating the power
of the approach over the long run. JCGI will need to see good
capital returns this year to maintain this strong dividend-growth
record, given the falls in the Chinese market over 2023.
DIY Investor Magazine · 2024 ALTERNATIVE INCOME RATED FUNDS
CONCLUSIONS
What is alternative income all about? Many of the funds do offer
If you want cynicism about active management then there is some diversification benefits, but ultimately, we think they are
plenty on offer these days, but to mangle a quote by a former there to offer a high immediate yield to investors who are less
prime minister on a slightly different topic, we think passive concerned about capital growth.
investing is a philosophy of failure.
This is a relatively young space, with many new asset classes appearing over the years, and historically there haven’t been many funds with the track record.
Additionally, this kind of strategy can often end up seeing capital depleted. For this rating, we look across the sectors to reward those that have managed to maintain or grow both their dividend and their NAV over five years.
In our view, this rating rewards those that have ‘proof of concept’ and could be a starting point for investigation.
‘OFFER A HIGH IMMEDIATE YIELD TO INVESTORS WHO ARE LESS CONCERNED ABOUT CAPITAL GROWTH’
It’s interesting to see the first energy storage fund appear on the list this year—Gresham House Energy Storage (GRID)— reflecting the growing maturity of that asset class. As many as 14 funds made the cut this year, up from 11 in 2023.
The investment trust space is full of talented managers with interesting and idiosyncratic strategies that have delivered excellent returns to investors over the long run, and our ratings hope to highlight some of the best.
It goes without saying, that past performance patterns cannot be guaranteed to repeat, but we think there is a variety
of strategies winning a rating this year with the potential
to outperform in multiple environments. It is the portfolio construction task to put these together in such a way as to balance risks and opportunities, and we can’t help our readers with that. But we think these lists could be a starting point for research.
DISCLAIMER
This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary