Page 13 - DIY Investor Magazine | Issue 31

‘THIS HAS MEANT A RETURN OF ALMOST 50 TIMES YOUR MONEY OVER THE PAST 30 YEARS’ LG: How key are dividends? SM: What is very important are the reinvested dividends. Hopefully, all the shareholders remember to reinvest dividends if they don’t need the regular income. This has meant a return of almost 50 times your money over the past 30 years. I looked at this five years ago to coincide with the 25th anniversary of the trust. The reinvestment of dividends meant a return of almost 25 times your money at that point. Since then we have doubled investors’ returns. That really shows both the power of stockpicking and of compounding. One of the great advantages of investment trusts that sometimes gets overlooked is their ability to gear. Certainly, the gearing level has varied over 30-year periods, depending on our confidence in the stocks. The combination of that compounding stockpicking and gearing has meant that if you’re invested in the fund, net of fees you’ve made almost more than three times the amount of money than if you’d invested in the index over the same period. This is quite staggering and ticks the box for active management, which, as active managers, we’re always very pleased about. LG: How has Europe performed compared with some of the other major investment markets? SM: It is perhaps a bit counterintuitive to look at the indices for the major stock markets. Europe has pretty much matched the world stock market return despite the fact that many people tend to read gloomy headlines about how it’s rather sclerotic, but actually European companies have done pretty well. I think what really drives the performance of an index is the performance of the companies and their real dividend growth. Fidelity’s Peter Lynch had a lovely saying: ‘Nobody can predict interest rates, the future direction of the economy or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.’ I think this is very much a testament to our focus on stockpicking. The general view is that Europe hasn’t done as well as the world in the past 10 years or so, and that’s largely because of the big US tech names. LG: When the trust first launched, innovation in the tech sector in Europe was one of its drivers. Is this still an attractive area or should investors look to the US? SM: Technology has become an important part of the benchmark in Europe. It’s now a much larger component. Our weighting in tech is around 15% and we’re probably about 3% overweight compared with the index. The tech companies in the US have done phenomenally, but that may change in the next 10 years. We have one or two companies in the portfolio we think look of value relative to their US peers, German software firm SAP would be a case in point. 13 Diy Investor Magazine · Nov 2021