So, how do we look at portfolio construction in the context of a three-course meal? In my view, the starter is sitting down and setting your investment objectives. How much do you have to invest, over how long a time frame, and what outcome do you want from your investments?
Then, the free lunch’s main course: diversification. This is where you ensure you have a wide enough portfolio to hit the best reward for your chosen level of risk, but don’t over-diversify.
Then, we come to the crowning glory of any meal, dessert. For me, the dessert is the ongoing maintenance of a portfolio, most importantly that is re-balancing. It’s something that many newbies eschew, because they’ve been brought up to buy and hold, essentially forever.
That strategy has worked for the past 15 years or so, but it could be time to change tack. Getting into the practice of regularly re-balancing your portfolio has, in my view, not been this important since the turn of the millennium.
Re-balancing is essentially the act of taking profits from your winners and topping up your losers. Say your target weighting was 60% in global equities, 30% in bonds and 10% in property. If the global equity portion became 75% thanks to strong equity market returns, while bonds fell to 20% and property to 5%, a re-balancing would take the profits made from equities to bring them back to 60% and split the profits between bonds and property.
The current, secular bull market in equities has led many to believe that one should let the market determine your portfolio weightings: if equity markets climb, then so be it. However, that could completely alter the risk of your portfolio. This is especially true of periods where stock valuations are at historically high levels, such as in 1999 and 2000, as well as, arguably, now.
Admittedly, I was only 12 years old when the dotcom bubble burst, so my examples of that time (as well as the inspiration for this article) come from the late Yale University CIO David Swensen’s 2005 book Conventional Success.
If you’d managed to invest £10,000 in, say, Allianz Technology Trust (ATT) on 01/01/1998 and made no further purchases or sales, today you’d have c. £640,000. That’s an annualised return of c. 15.5% in a period that includes a two-year bear market where ATT’s share price fell c. 80%.
The problem, of course, as Swensen shows, is that most newcomer investors (and even many seasoned pros) loaded up on stocks through the entirety of the 1990s bull market, declined to re-balance and take profits, then saw their portfolios decimated when the bubble popped, sold out close to the bottom in 2002 and 2003 and stuck what they could salvage into bonds, missing the best gains of the next bull market in the process.
Swensen estimated that the average US mutual fund investor had c. 30% in equities in 1993 and 1994, and that by the 2000 market peak that had doubled to more than 60%, while their bond holdings during that time had shrunk from 30% in 1993 to around 10% by 1999. By 2003, equities were down to 40% and bonds climbed to 19%.
If they’d successfully re-balanced, they’d have consistently locked in profits from their stock holdings and topped up their fixed income portion, setting themselves up well for the bursting of the bubble.
I see similar happening with the VanEck Semiconductor (SMH) and VanEck Space Innovators (JEDG) ETFs, which I see a lot of finfluencers recommending, despite the fact that SMH has returned c. 63% in 2023, 25% in 2024, 40% in 2025 and 79% since the start of 2026, while JEDG has returned c. 45% in 2024, 82% in 2025 and 96% since the start of 2026.
Now, I’m not saying that today’s period is the same as the dotcom bubble. Clearly, there are differences – there always are. However, my personal view is that the mega-IPOs of SpaceX, OpenAI, Anthropic, et al might signal the start of the end of the current tech bull market (which, don’t forget, has gone on for almost two decades now).
That’s certainly not a prediction and I’m prepared to be proven very wrong. The current bull run in stocks could continue for years, so I’m by no means selling all of my equity funds and trusts and trying to time the market.
What I am doing is assessing the performance of my holdings and deciding where I want to take profits. I have a few investment trusts in my portfolio that seem ripe for re-balancing. I’m up c. 120% in the space of around a year on ATT and similar gains have been seen in the emerging market space, most notably through Fidelity Emerging Markets (FEML) and Pacific Horizon (PHI).
Emerging markets are the area I’m particularly considering re-balancing. The initial purchases for the four EM trusts and funds I hold amounted to c. 8% of my portfolio. That’s almost doubled and EM trusts account for c. 14% of my portfolio. At the same time, while I expect EMs to do well moving forward, they’ve certainly become more attuned to the AI bubble. TSMC, Samsung Electronics and SK Hynix account for almost 25% of the MSCI Emerging Markets Index.
A good option for rebalancing my global EM trusts could be India, where the country is still going through a reset of equity market valuations. I’m still down c. 10% on my investment in Ashoka India Equity (AIE) and I remain of the view that this is an attractive point to be buying.
In the UK, too, Temple Bar (TMPL) and Fidelity Special Values (FSV) have gone from an initial investment of 5% to closer to 9%, while my UK small cap allocation has barely moved. Hence, re-allocating profits from TMPL and FSV into the likes of Aberforth Smaller Companies (ASL), as well as private equity names that have fallen recently such as 3i Group (III) and HgCapital (HGT) could be prudent moves.
Finally, Scottish Mortgage (SMT) is in line for a re-balancing, but I’ll likely wait until the blockbuster IPOs have happened and share prices have popped before pulling the trigger and using the proceeds to top up quality growth names such as Rathbone Global Opportunities and Evenlode Global Equity.
Having this week returned from two weeks in Puglia and Emilia-Romagna I’m probably all Tiramisu-d out, so perhaps now my (hypothetical investment) dessert will instead be a portfolio re-balancing.
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]]>Edinburgh Investment Trust’s (EDIN) full year results tell two distinct stories, and it's worth separating them. The trust has two core objectives: to grow the dividend ahead of UK inflation, and to outpace the total return of the FTSE All-Share Index. On the first, it is delivering convincingly.
The full-year dividend of 32p per share, subject to shareholder approval, represents growth of 11.1%, comfortably outpacing UK inflation at 3.3%, with revenue earnings per share growing 6.3% to 26.6p. Whilst this does not fully cover the dividend, with the 5.4p gap funded from capital, the direction of travel is positive. Additionally, EDIN’s dividend is supported from healthy revenue reserves, covering c. 1.1× the last annual dividend, and a larger distributable capital reserve. At a current yield of 4.1%, a premium to both its peer group average and the broader UK market, and with portfolio dividend growth expected to remain in the mid-to-high single digits, the income case is compelling, in our view. In an environment where interest rates remain elevated and the ‘risk off’ appeal of cash may increase, like we saw in 2022/23, which could once again weigh on sentiment for equity income trusts like EDIN. However, it’s worth remembering that cash offers no dividend growth and no capital upside, whereas EDIN does.
On the second objective, however, the trust has fallen short. A NAV total return of 7.2% against the FTSE All-Share's 21.5% represents meaningful underperformance that has now also weighed on three and five-year figures. This stemmed largely from a few specific factors: a quality-growth bias in a year when value, banks and defence dominated, compounded by a sharp sentiment-driven derating of holdings the market labelled AI losers, with Rightmove, AutoTrader and Baltic Classifieds most visibly impacted. Manager Imran Sattar disputes that characterisation, arguing these dominant, cash-generative marketplace businesses have deep economic moats that AI is far more likely to enhance over the long-run, rather than disrupt. That may well prove correct, but for now they have weighed heavily on relative returns, though the trust remains ahead of the index on both a share price and NAV basis since Liontrust's appointment in 2020.
During the reported period, Imran has not stood still, taking advantage of market volatility by adding to de-rated data and analytics names he believes are, in contrast to the market, longer-term AI winners like Softcat, LSEG and RELX. He’s also topped up existing, quality compounders experiencing cyclical weakness including Renishaw and Oxford Instruments whilst also initiating recovery plays in deeply depressed UK construction stocks such as Ibstock. The portfolio is nudging toward better style balance without abandoning its quality-growth roots, something we view as a considered evolution rather than a reactive one, and a reminder of how active management should respond as markets and opportunities shift.
Looking ahead, the backdrop remains challenging. Geopolitical tensions persist, complicating both inflation and interest rate outlooks, with rate cuts that looked likely now firmly off the table. For a trust with a quality-growth bias, higher-for-longer rates are a direct headwind, compressing valuations on longer-duration assets whilst simultaneously supporting the broader financials sector, where EDIN remains underweight. It’s also worth acknowledging that if value and capital-intensive sectors continue to lead, or AI sentiment toward capital-light businesses remains negative, the performance headwinds could persist. That said, at a discount of 8.2%, in line with its five-year average, investors are not being asked to pay a premium for that uncertainty. For those willing to take the longer view, a growing income stream ahead of inflation paired with a repositioned portfolio of high-quality, cash-generative businesses that could pick up quickly if sentiment turns, makes a compelling case.
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]]>Enter private debt. With traditional banks retrenching after the global financial crisis, private lenders have stepped in to fill a void that has since ballooned into a multi-trillion dollar industry.
With geopolitical and economic turbulence showing little sign of abating, debt has come back into focus as a natural counterweight to equity exposure. Investors may gravitate towards the well-trodden safety of bonds, but private debt offers similar defensive ballast with the added benefit of a higher yield, courtesy of the illiquidity premium that comes from lending outside public markets.
But not all private debt is created equal. The label covers everything from asset-backed lending to mezzanine finance, with vastly different risk and reward profiles. Bundling them together makes about as much sense as grouping together NVIDIA, Toyota and Domino's on the basis they're all equities.
Choosing the right kind of private debt can matter just as much as choosing the right asset class - and the difference between general corporate and infrastructure debt can be critical when it comes to building resilience.
The energy transition, digitalisation and the replacement of ageing transport, utility and power infrastructure are driving soaring demand for long-term capital. As the chart below shows, the trillion dollar funding gap is forecast to widen further, making infrastructure debt largely a lender's market. Added to this, infrastructure represents less than 10% of the broader private debt market, and unlike mainstream private debt, has not attracted the US mega funds competing to deploy capital.
Infrastructure’s underlying revenue drivers add a further layer of resilience. Demand is relatively inelastic, providing essential services such as electricity, transport and mobile connectivity that people need regardless of the macro backdrop. Revenue streams are typically contracted and often inflation-linked, while the debt itself is secured against critical hard assets that are expensive and slow to replace.
Demand for corporate debt, by contrast, is driven by the economic cycle rather than the long-term structural forces underpinning infrastructure demand. For corporate borrowers, particularly consumer-facing ones, a slowing economy can also put revenues and debt servicing under pressure. Without the same quality of asset backing, this can result in higher default and lower recovery rates.
Private debt has traditionally been the preserve of institutions, but investment trusts provide a natural wrapper for less liquid assets, with the ability to take a long-term view without the pressure of poorly-timed disposals to meet redemptions.
But not all these vehicles are equal, with returns driven by the expertise of the team sourcing, structuring and managing the loans. Knowing which jurisdictions, sectors and borrowers to back (and which to avoid) requires in-depth experience across the lifecycle of the loan.
Sequoia Economic Infrastructure Income Fund (SEQI) offers such expertise, managed by SIMCo, a dedicated infrastructure debt specialist whose founding partners bring 25-plus years of experience from leading banks and asset managers.
Since launch in 2015, SEQI has delivered a cumulative NAV total return of 92%, compared to 46% for the iShares Global High Yield Corp Bond (GBP-hedged) ETF. This demonstrates both the illiquidity premium available in private markets and the alpha generated through skilled, active management.
SEQI is currently trading on a dividend yield of 9%, with a fully cash-covered dividend. As the chart below illustrates, this yield sits comfortably above forecast returns for both government and investment grade corporate bonds, as well as major equity markets. The trust is also one of the first global infrastructure debt funds to achieve the milestone of paying over $1 billion of dividends since inception.
SEQI's managers focus on the mid-market, where competition is lower and spreads tend to be wider. The portfolio holds around 50 investments across eight sectors - including renewable energy, data centres, healthcare and student housing - with a focus on assets carrying substantial equity cushions and high replacement costs.
The majority of holdings are operational rather than higher-risk construction projects, which reduces loss and default rates. The portfolio is refreshed regularly, with an average loan life of under four years providing the flexibility to pivot towards the most compelling opportunities. A high proportion of floating-rate loans also limits sensitivity to interest rate movements, which could be a useful feature given current uncertainty over the base rate trajectory.
Active management enables the team to tilt the portfolio to both capture opportunity and manage risk. The managers stepped in to acquire some of the secondary loans offloaded by banks post the European sovereign debt crisis, while reducing exposure to transportation projects during the pandemic. Data centres remain a key growth area, but the team has become more selective here as spreads have tightened.
The inhabitants of Animal Farm discovered to their cost that equality can mask a very different reality. Private debt follows a similar script - one label, but beneath it, not all exposures are created equal.
Infrastructure debt is structurally supported, asset backed and built to weather a challenging economic and geopolitical backdrop in a way that general corporate credit struggles to match. For investors seeking resilience without sacrificing yield, SEQI has a decade-plus track record of delivering on both counts.
Data as at 30/04/2026 unless otherwise specified. Returns data sourced from SEQI monthly factsheet.
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]]>These results have delivered some excellent returns for Schroder Oriental Income (SOI), both in absolute and relative terms. Whilst the headline six-month NAV total return of 35.3% speaks for itself, the ability of manager Richard Sennitt to deliver outperformance on top of this, predominantly through stock selection, is a standout in our view. Looking at the longer-term numbers, it is clear this performance is far from an exception, with five-year returns to publication (20/05/2026) of 91.6% versus 50.6% for the benchmark.
On a nearer term view, the trust’s positioning could continue to appeal, due to Richard’s approach of producing a natural and growing income. A number of peers have adopted enhanced dividend strategies, enabling them to invest in non-yielding growth stocks and still pay a relatively high dividend. SOI’s approach means there is a greater bias to yielding stocks, adding more value and core tilts to the portfolio and helping differentiate the trust. Not only has this been supportive to relative performance, as can be seen in the stock selection contribution from the likes of Rio Tinto and Singaporean financial companies, but also to income generation too, aiding the growing dividend over time. The trust is on course to achieve 20 years’ of consecutive dividend growth this year, becoming the first Asia-focussed trust to achieve the AIC’s Dividend Hero status which would be an impressive feat, in our view.
SOI’s current positioning further differentiates the trust due to Richard’s willingness to make sizeable calls on certain sectors or countries. Most notably, the portfolio has a sizeable underweight to China, albeit offset by the overweight to Hong Kong, whilst having a large overweight to Singapore. For investors that share Richard’s scepticism over China but still see the growth potential in the Asian region, this positioning may well appeal. Interestingly, we note small off-benchmark positions in both India and Vietnam. Whilst the latter has often been a source of ideas for active stock pickers, the allocation to India stands out. The market has been popular for its growth characteristics, but high valuations and low yields have meant limited income opportunities We believe that by finding such opportunities, as well as the sector and geographic calls, Richard has shown good flexibility and put in a good foundation for potential future alpha generation.
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]]>However, in this piece, we argue that defaulting to cash at this juncture carries a cost that is easy to underestimate. The dividend growth that can be achieved by investing in equity income means that the extra risk associated with equity markets should be well repaid over the long run. In particular, investment trusts are outstanding options for dividend growth, their ability to use revenue reserves providing their dividends with extra special support through rising and falling markets. Here we examine how this has played out in recent years, the specific trusts that make the case most compellingly today and why the current environment, disruptive as it is, may ultimately prove to have been an opportunity to invest rather than a reason to retreat into cash.
]]>The major story of these results has essentially played out, following the completion of the combination with THRG. We covered the details of this transaction in a previous article, although now the deal is complete, it is worth reaffirming the positives for investors. A combined vehicle now offers investors considerable economies of scale, and therefore better liquidity and lower charges, something aided by a reduction in management fees which should make the trust one of the most cost-competitive in the peer group. In addition, the planned five-for-one share split announced in these results should improve liquidity further, and, in our view, demonstrates the board are still looking at ways to improve the trust’s appeal.
Following the combination, BlackRock Smaller Companies (BRSC) is now the largest growth focussed trust in the UK smaller companies sector and managed with a strategy that has demonstrated good long-term outperformance potential, as is shown by a ten-year NAV total return of 99.9%, ahead of the benchmark’s 86.9%. The management team has also been strengthened with the formal inclusion of Dan, in our view, as he brings his expertise and experience with him and can support the overseas allocation, something that can help diversify the trust as well as offering a wider range of alpha opportunities. We think the trust’s scale, growth focus and impressive dividend track record, means the trust could appeal to a wide pool of investors.
In addition to the trust’s own attractions are those of the asset class. UK small caps remain significantly undervalued versus their history, and therefore offer a compelling opportunity. Furthermore, as shown in these results, there have been several instances of quality companies delivering strong fundamental performance but this not being recognised in share prices movements, which adds considerably to the upside potential of the smaller companies asset class. Whilst the outlook has been impacted by further political issues, the elevated levels of M&A seen in the UK have demonstrated that professional investors are recognising and capitalising on this value. The case for BRSC as a way to access this is further enhanced by the trust’s discount, which has remained largely unchanged over the past year therefore not reflecting the numerous shareholder friendly changes in our view, as well as providing an attractive entry point.
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]]>As Western economies wrestle with sluggish growth, Asia boasts thriving economies, a burgeoning consumer class and a new generation of global market leaders. But the growth story is only half the picture: Asia has quietly become one of the most compelling income regions in the world, with yields beginning to challenge even the most established income markets.
Looking at the litmus test of total return, rather than growth or income in isolation, Asia passes with flying colours. As shown below, UK equities are reliable income generators but at the expense of capital growth. The US tops the table on capital appreciation but sacrifices income, while investors are starting to look elsewhere for growth opportunities given current valuations.
In contrast, Asia has delivered the second-highest total return, offering a similar income contribution to the UK and Europe but with meaningfully higher capital growth. The income component is also growing, with the Pacific (ex China, Hong Kong and Japan) region posting dividend growth of 12% in 2025, second only to Japan and ahead of Europe’s 9%, while UK dividends remained flat, according to Capital Group.
However, headline yield only tells part of the story. For investors relying on a steady income stream, particularly in retirement, resilience is equally important.
Dividend-paying companies have often provided shelter in volatile markets, and the earnings outlook in Asia underpins this resilience. According to Goldman Sachs, earnings growth across the region is forecast to accelerate from around 10% in 2025 to 30% in 2026, providing the scope for further dividend increases.
The strength of balance sheets tells a similar story: around 40% of Asia (ex-Japan) companies are net cash positive, with payout ratios well below the US and Europe. This creates ample headroom for further dividend growth as ongoing corporate governance reforms encourage cash to be returned to shareholders.
The resilience of dividend payouts was put to the test during the pandemic when earnings came under pressure across global markets, yet, notably, Asian dividends held up better than the UK. The investment trust structure adds another layer of protection, allowing trusts to build a ‘rainy day’ reserve to smooth income distributions in leaner times.
Unlike the UK, where a handful of sectors dominate index income, Asian dividends are distributed across a far broader range of countries and companies. Around half of all Asian companies yield 3% or more, with higher-yielding markets such as Indonesia, Malaysia and Singapore sitting alongside faster-growing, lower-yielding markets in Korea, India and Taiwan, which provides a fertile hunting ground for active managers.
Schroder Oriental Income (SOI) proves that an income mandate doesn’t need to come at the expense of growth.
Over the last five years, the trust is not only one of the top performers in the AIC Asia Pacific Equity Income sector with a total return of over 80%, but it has also outperformed many of the growth strategies in the Asia Pacific sector. On the income side, SOI has grown its dividend for 19 consecutive years, putting it on track to become the first Asian fund to achieve AIC Dividend Hero status.
The investment universe in Asia is notoriously complex, with nearly 4,000 listed stocks and research coverage that drops off sharply beyond the largest names, creating significant alpha opportunities for stock-pickers with on-the-ground resources. Manager Richard Sennitt brings over three decades of experience, supported by an extensive team of more than 40 analysts across six regional offices.
Richard follows a bottom-up approach, seeking both a clear income rationale and the potential for long term capital growth, rather than filling the portfolio with the highest-yielding stocks. The focus is on quality businesses with sound balance sheets, underappreciated earnings prospects and attractive dividend outlook. This discipline adds resilience, with the trust achieving positive NAV returns each year from 2021 to 2023, despite falls in the MSCI AC Pacific (ex-Japan) Index.
The dispersion of yields across the region also extends to country-level returns, with the MSCI Korea delivering 86% last year while Indonesia and the Philippines saw meaningful declines. Richard applies a top-down country and sector overlay to capitalise on this divergence and position the portfolio to capture the most compelling structural opportunities across the region.
One such structural theme is the rising demand for semiconductors to support AI and cloud services. The trust’s largest holding is TSMC, the global leader in high-end chip manufacturing and a primary supplier to NVIDIA. The second-largest holding, Samsung Electronics, offers a leading position in semiconductor memory chips, alongside broader exposure to the mobile, display and foundry sectors. MediaTek, a global leader in mobile chipsets, is an asset-light, cash-generative business that has steadily grown its dividend.
The portfolio also combines exposure to higher-yielding, more defensive companies in mature markets such as Singapore, Australia and Hong Kong with structural growth opportunities in markets such as Indonesia, where credit penetration is still limited.
Looking ahead, Asia’s growth story is well established, underpinned by dynamic economies, a booming consumer class and world-class technology firms. But its income story deserves equal billing, having demonstrated its resilience through a global pandemic and geopolitical turbulence.
Investors wanting it all might just find that Asia is well worth a look.
All numbers as at 11/05/2026 unless stated otherwise, returns based on share price total returns.
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]]>The numbers bear this out: the S&P 500 may be the poster child for global growth but the TOPIX delivered almost twice its GBP return in 2025. It was a similar story on the valuation front, with American markets achieving their gains at valuations that leave little room for disappointment while Japanese equities, despite their strong run, continue to trade at a meaningful discount to their US counterparts.
That said, this valuation case doesn't rest on sentiment alone. Double-digit earnings growth is forecast for the MSCI Japan Index in both 2026 and 2027, and structural forces continue to support the broader market.
Where US equities offer growth at a price, Japan offers growth with a credible and rising income story, making it one of the few markets able to make a compelling case on both fronts.
The most significant change to the Japan investment landscape over the past year is political, with the election of Prime Minister Sanae Takaichi. Her ‘Sanaenomics’ agenda is taking shape around two distinct priorities.
The first is an acceleration of earnings growth: fiscal stimulus, rising wages and improving domestic consumption are creating a virtuous cycle that is feeding through to corporate earnings. The current Shunto wage negotiations are targeting increases of 5% or more, and with nominal GDP growth providing a supportive tailwind, this is arguably the most constructive macro backdrop Japan has seen in a generation.
The second is a continued and more focused push on corporate governance reform, with Takaichi reinforcing pressure on companies to deploy excess cash reserves. Together, these two drivers are doing something Abenomics struggled to achieve: combining growth and reform simultaneously, with the advantage of a more receptive corporate sector.
The capital markets are also exerting increasing pressure to improve capital efficiency, with the acceleration of corporate restructuring and delisting through acquisitions such as management buyouts and the conversion of companies into wholly-owned subsidiaries by their parent companies. This has led to 120 companies delisting in 2025 and almost 50 already following suit in 2026.
Beyond the political agenda, AI is emerging as another compelling tailwind. While semiconductors dominated in 2025, the opportunity has broadened into the physical infrastructure of an AI-enabled economy. As the US pushes to bring high-end manufacturing onshore, Japanese industrial and robotics expertise is becoming a strategically important part of this supply chain.
Japan may have been overlooked by yield-focused investors but the income story is arguably as compelling as its growth opportunity. Driven by governance reform and growing pressure on companies to use capital more efficiently, Japan’s income culture has been transformed.
Japanese companies returned £80 billion in dividends and £84 billion in buybacks in 2025, surpassing the FTSE 100, long regarded as one of the leading markets for income-seekers.
With just under 60% of TOPIX companies sitting on net cash, against around 20% for the S&P 500 and STOXX 600, there is plenty of headroom to improve shareholder returns further. Payout ratios are rising but remain below US and European levels, adding both resilience and upside potential to the income story.
The dividend yield on the MSCI Japan and TOPIX indices sits at around 2%, but active management can offer considerably more. Schroder Japan Trust (SJG) has adopted an enhanced dividend policy which pays out 4% of average NAV each year, placing it at the top of the AIC Japan sector with a current yield of 3.1% against a sector average of 1.6%.
Despite its appeal, Japan is not an easy market to navigate without on-the-ground expertise. With nearly 4,000 listed stocks and research coverage that falls away sharply beyond the largest names, more than half of smaller companies carry little or no meaningful analyst coverage.
Recent market dynamics have compounded the challenge, driving concentration into a narrow set of large-cap names. As a result, passive exposure increasingly ends up in the most crowded and expensive segments of the index.
Schroder Japan Trust offers meaningfully different exposure, with around half of the portfolio in small- and mid-cap companies. Valuations relative to large caps are at decade lows, earnings growth prospects are stronger and domestic orientation reduces exposure to tariff risk. With governance reform spreading further down the market cap spectrum and the new administration favouring selective policy over broad stimulus, this provides fertile ground for active stock selection.
The portfolio is managed by Masaki Taketsume, who brings two decades of experience in Japanese equities, supported by a well-resourced, Tokyo-based analyst team. The portfolio holds 60-70 stocks, built from the bottom up with a contrarian value bias, focused on companies whose share prices have yet to reflect their underlying potential.
One such example is fibre optic specialist Fujikura, with the manager identifying that the structural growth potential of AI and electrification was not yet reflected in its valuation. The rapid acceleration in data centre investment has driven strong growth in company profits, alongside a share price increase of over 570% over the past year.
By targeting valuation opportunities before the broader market, the trust has demonstrated its strong long-term record, returning 108% over five years against 60% for the TOPIX index, and once again comfortably outperforming the index with a 53% return over the past year.
Looking ahead, the themes driving the case for Japan may not be entirely new but they are gathering pace. Governance reform, a deepening AI trade and domestic reflation are all gaining momentum, alongside a pro-growth political backdrop. For investors, Japan continues to offer a rare combination of growth, income and resilience.
All numbers as at 11/05/2026 unless stated otherwise, returns based on share price total returns.
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]]>This make-up remains the gold standard for many, but some have started to question its efficacy after bonds failed to play their customary safe-haven role through 2022’s inflationary spike.
There are certainly merits to it: it’s simple and cost-effective to both put together and to understand, yet, in our view, it missed some key asset classes that can help to add both diversification, capital growth and income generation, particularly for SIPP investors looking to draw down a natural income.
For income seekers, we certainly think that there’s a place for real estate investment trusts (REITs) within portfolios – provided the assets owned by your chosen REIT are high quality and biased towards higher-growth sectors. For example, Schroder Real Estate (SREI) has a 65% allocation to multi-let industrial estates and retail warehouses.
Not only do REITs bring tangible, real assets into your portfolio’s fold, the primary attraction for investing in property is the income produced. Today, that income eclipses the yields available in government bonds, and there is a strong case for further growth in that income over time, in contrast to fixed income investments.
In addition, while the capital gains story in real estate is less pronounced than its income, current valuation levels provide scope for a modest re-rating – something that can generally not be said for bonds.
We think that the investment case for UK REITs looks as attractive as it has for a while now. There are a few reasons for this, which we’ll detail below.
I’m sure you’ll know the score when it comes to investing in property, be that commercial or residential: you buy a building, do some renovations and improvements, then rent it out in exchange for regular income for however long the lease runs.
One interesting development we’ve noticed in the commercial property market is the divergence between the valuations of the actual buildings and the rents owners have been able to charge.
The period since interest rates started climbing in 2022 has been a tough backdrop for the sector, and capital values have corrected, as one would expect. Indeed, between June 2022 and around March 2024, the MSCI UK Monthly Property Index fell c. 25%.
Yet rents remained resilient. Since June 2022, for instance, the UK All Industrial rental growth index has risen c. 24% itself. This is in stark contrast to previous periods of falling capital values such as those starting end of 1989 and mid-2007, where rents fell by c. 12% and c. 7% over the same period respectively.
To us, this suggests that the fall in capital values was heavily influenced by rising interest rates during the period. Of course, some areas of the commercial property market have their sector-specific headwinds, but the fact that rents are rising shows that there is demand for (good-quality) assets.
At the same time, construction costs continue to rise, making it ever-more expensive to build new properties and meaning the pipeline of new developments remains thin. In addition, businesses are demanding higher sustainability specifications on their properties, crimping demand for ‘brown’ buildings. Yet, there’s a clear lack of supply of high-quality, high-ESG spec space.
This positive supply-demand dynamic has helped landlords of existing properties to successfully drive through rent increases.
This trend of rising rents has a direct read-across to the ability of real estate investment trusts (REITs) to provide shareholders with an income stream upon which they can rely. It’s those rents that ultimately feed through to the dividend payout, after all.
That provides REITs such as SREI, for instance, with an attractive income profile. The portfolio’s net initial yield is 6.0%, translating into a dividend yield at the current share price (as at 30/03/2026) of c. 7.3%. That’s a 235 basis-point premium to the 10-year gilt yield.
Add in SREI’s 8.3% reversionary yield, a proxy for its underlying yield potential, and a sensible dividend policy and SREI looks attractive for income seekers.
That dividend policy is to only raise the dividend when the board and management think it can be maintained over the long term, and to do so as often as possible. This has translated to growth in the quarterly dividend of 38% since 2019.
Up to now, we’ve mainly dealt with the income story for REITs, as over the long term this is the largest component of total return. However, there’s also a capital growth story unfolding in the sector that can help to underpin the investment thesis.
Since September 2024, we’ve seen some green shoots in terms of a bounce in capital values, however, the MSCI UK Monthly Property Index has only risen modestly (c. 3%) since then, with recent weakness also due to the current Middle East conflict. We’ve therefore got a long way still to go to get to the level of values we saw pre-pandemic.
As we’ve noted before, real estate is one sector where active asset management is crucial: portfolio managers need to be able to ensure properties are of the highest quality to lure and retain the best possible tenants.
SREI is a real leader in this respect. Its ‘brown to green’ investment strategy focuses its asset management on both real estate fundamentals and improving the energy credentials of its portfolio of assets. This allows it to harness the growing evidence we’re seeing of a green premium: the higher rents and stronger valuations commanded by more energy efficient properties.
We can observe that this strategy is paying off: the £1.9m refurbishment of a warehouse unit at SREI’s second largest holding, Millshaw Park Industrial Estate, located just south of Leeds city centre and close to the motorway, enhanced its sustainability credentials, taking the unit from an EPC ‘C’ rating to an ‘A’ rating. A lease was agreed, subject to completion, with Slazenger Padel Club for a 15-year term without breaks at a rent of £9 per square foot – an increase of 86% on the previous passing rent.
SREI also spent £1.5m enhancing two of the units it owns at Churchill Way West, a retail warehouse in Salisbury, with one unit improving from an EPC ‘D’ rating to an ‘A+’ rating. This was let to Lidl on a 25-year lease, with the second let to The Gym Group on a 15-year lease, both with five-yearly inflation-linked rent reviews. The combined rent is £595,000 per year, an increase of 68% compared to the previous passing rent for both units.
Not only that, but SREI has been disposing of assets, in most cases ahead of book value.
All told, SREI offers investors diversification, exposure to the more attractive sectors of real estate such as multi-let industrial and retail warehousing, a high headline yield with an attractive dividend growth profile and a laser focus on controlling costs, with a recent management fee change saving costs and with linkage to market capitalisation, further aligning management with shareholders.
Headlines will undoubtedly be fast-moving, thanks to the Middle East conflict, but we see the backdrop to the current spike in energy prices as being different from the one that followed Russia’s invasion of Ukraine.
Back then, pandemic-related supply chain bottlenecks, heightened demand from flush-with-cash households and strong labour conditions led to inflation sticking around.
Today, the outlook is cloudier, with softer labour conditions and households don’t have anywhere near as much in excess savings. While interest rates may go up slightly, we suspect the ceiling on how high they will go is much lower today.
Notwithstanding this, we see plenty of positive fundamental drivers underlying the UK commercial property market today, as judged by what had been a nascent recovery in REIT share prices. That rally looks to have been postponed, but the earnings growth potential combined with the c. 14.6% fall in SREI’s share price since the middle of January, which now equates to a c. 22.4% discount to NAV, looks to have thrown up an attractive entry point.
This report has been issued by Kepler Partners LLP (“Kepler”). Kepler is a third-party research firm and is remunerated by Schroder Unit Trusts Limited (“Schroders”) for the production and dissemination of investment research on Schroder Real Estate Investment Trust Limited (“SREIT”). On 24 March 2026, SREIT confirmed that it is a member of a consortium, along with LondonMetric Property plc, considering a possible offer for Picton Property Income Limited (“Picton”) under Rule 2.4 of the UK Takeover Code (the “Code”).
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]]>Despite some volatility in markets due to the war in the Middle East, the NAV is up a further 8.7% since the year-end, although the discount was slightly wider at 8.7% as of 10/05/2026.
M&A was a key driver of returns, with five portfolio companies taken out during the period, and this has continued to deliver gains since period-end. However, the largest contributions to performance came from positive approval or trial newsflow for uniQure, Vera Therapeutics and Terns Pharmaceutical. The managers’ trading decisions were particularly impactful in the case of uniQure, helping them lock in large gains before a reversal of the regulatory decision.
During the period, a small initial investment was made in a venture capital fund under the new Schroders Capital partnership which is expected to ramp up over time, subject to the board’s guidance that the trust’s unquoted allocation remains within 5-15% of NAV.
The quoted portfolio remains positioned in late-stage development and recently commercialised companies, where the managers find attractive valuations and the potential for consolidation and acquisition by large caps.
With the shares trading on a discount, the board regularly bought back shares, adding to the NAV total return. In total, c. 5.4% of shares in issue at the start of the period were repurchased.
IBT continues to make dividend payments equivalent to 4% of the trust’s NAV in the last day of the preceding financial year ending 31 August, meaning it offers income investors a way to participate in biotechnology’s growth too.
On 12/02/2026, Schroders plc announced that it had agreed the terms of a recommended cash acquisition by Nuveen LLC. The transaction is not expected to complete until Q4.
Chair of the board, Kate Cornish-Bowden, said: “It has been gratifying to witness a rebound in the biotechnology sector following a significant sell off. The relative outperformance has been sustained by exciting innovation, a higher number of successful Food and Drug Administration (FDA) approvals and increasing evidence of merger and acquisition (M&A) activity.”
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]]>We did, however, enjoy a rare dose of cultural schadenfreude when Kanye West was blocked from entering the UK for the Wireless Festival, provoking equal amounts of outrage and quiet relief, depending on your postcode. It’s a pity our vetting procedures aren’t always quite so discriminating.
After a bruising March, markets restored some order in April. The S&P 500 had the better of it, bouncing 10% to another record high, with the FTSE 100 treading water but keeping its nose above the 10,000 mark.
The Magnificent Seven posted a record quarter, with their aggregative market cap hitting a $22 trillion record high on the back of a 60% rise in combined after-tax profit (with NVIDIA yet to report). But dig underneath the headline numbers and free cash flow is shrinking, buybacks are being wound down and three of the seven are still in the red for 2026.
So, which shares and funds were UK investors slipping into their Easter baskets in April?
These were the most (and least) popular shares with UK retail investors on three of the largest investment platforms last month:
Buying the Magnificent dip
Five of the Magnificent Seven made April's buy list, with Apple and Meta the only absentees. All seven finished March in the red but April proved better business.
Microsoft (MSFT) was arguably the standout opportunity, down more than 20% year-to-date heading into April after markets fretted about AI cannibalising its core software business. Those who bought the dip were richly rewarded with a 10% gain in April after above-expectation Q3 results. That said, its OpenAI tie-up faces stiff competition from the likes of Claude and Gemini, with soaring spending posing a growing headache.
NVIDIA (NVID) played both sides of the trade, with investors seemingly unable to agree on whether the 10% year-to-date share price increase is a bargain or a sign of leaner times to come. It chalked up a 14% rise in April, smashing through the $5 trillion mark in the process, but can it keep up the momentum?
Its 90%-plus share of the GPU market certainly remains an impressively wide moat and its proprietary software ecosystem CUDA makes it genuinely difficult for AI developers to walk away, regardless of the alternatives. On the bear side of the equation, Meta, Microsoft and Alphabet could feasibly flip from customer to competitor if their rival chip development bears fruit.
Elsewhere, shareholders in Tesla (TSLA) are keeping the faith that it’s not just a car manufacturer given the pricing pressure on the EV front. In fairness, there’s fingers in a lot of pies from humanoid robots to robotaxis, not to mention that all-important stake in SpaceX, but the share price has continued to go into reverse (for now at least).
Investors jumped on a late-April dip to add BAE Systems (BA.), with record sales, a healthy order pipeline and a key role in the Australia-UK-US security alliance all supporting the investment case. The question is how much of that is already in the price after a 370%-plus return over the last five years and a valuation that sits towards the upper end of its peer group.
Rolls-Royce (RR.) is in a similar boat after a reassuring April trading update. But the share price has done a lot of the heavy lifting since CEO Tufan Erginbilgic took over and a prolonged conflict could yet weigh on flying hours and civil aerospace revenues. Perhaps not entirely surprising that some investors have decided to come back to earth after its mammoth 1,100% five-year return.
Taylor Wimpey's (TW.) appearance on the buy list looks rather more brave in hindsight. A late April update revealed falling prices, rising input costs and a decision to cut land purchases, with its share price sliding to its lowest since the days of George Osborne as Chancellor. Investors may be effectively paying 70 pence in the pound for assets at current valuations but with moribund demand and rate cuts possibly heading into reverse, today’s bargain can be tomorrow’s value trap.
L&G (LGEN) rounds out the group, offering an eye-catching dividend yield of almost 9%, though its earnings forecasts aren’t exactly setting the world on fire.
The Iran conflict sent oil prices surging and investors duly cashed in, pressing the sell button on BP (BP.) and Shell (SHEL). Good business given their one-year gains of 72% and 39% respectively, with BP the more exposed to a dip in oil prices.
Clean energy plays ITM Power (ITM) and Ceres Power (CWR) have delivered extraordinary gains of 440% and 1,100% respectively over the last year. With neither company yet profitable at scale, investors seem to have decided the easy gains have been made.
Scottish Mortgage (SMT) made it fifteen months at the top - as with Wet Wet Wet's vicelike grip on the charts for an interminable summer, it seems that Love is (Still) All Around for the UK's second-largest investment trust. It also tops the AIC Global Sector on one-year returns, with an impressive 55% return against 33% for the sector as a whole, with all eyes very much on the rumoured IPO of SMT's largest holding, SpaceX.
With Artemis II orbiting the moon and SpaceX chatter reaching fever pitch, it seems we’ve all gone a bit space mad, with investors also pressing the buy button on Seraphim Space (SSIT). It’s been a bumpy ride but the trust has delivered a meteoric 260%-plus return from its portfolio of space tech companies and is riding the wave a little longer by offering a £350 million share issuance.
Templeton Emerging Markets (TEM) has also had a strong run, notching up 74% over the last year. Its quality-focused strategy spans both growth and value, and offers an interesting alternative for investors wanting AI exposure beyond the priced-for-perfection US names.
Otherwise it was business as usual, with Temple Bar (TMPL), JPMorgan Global Growth & Income (JGGI) and City of London (CTY) continuing to find favour with investors.
There's plenty on the cards for May. Nvidia reports first-quarter earnings on the 20th with investors hoping for a perkier reaction than last quarter, when the shares fell almost 10% despite forecast-beating numbers. Export restrictions to China, the Blackwell ramp-up and DeepSeek's challenge in data centre GPUs will certainly give the market plenty to chew on.
Markets may have priced in the Iran conflict as yet another new normal but tightening supplies are continuing to bite. And while the Bank of England may have held rates at its last meeting, the direction of travel may be up rather than down, with inflation potentially rising as high as 6% in 2027.
And for early-bird investors looking to make a dent in this year’s allowances, we’ve produced guides to our pick of the best ISA platforms and best SIPP providers to help you find the right home for your money.
All data as at 06/05/2026 unless stated otherwise, returns based on share price total returns.
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]]>Following on from our trip to Europe earlier this year, Alan and I return once more, armed with a format that has struck a chord with our readers. Less formal and more conversational than our usual style, but an effective way of genuinely getting to grips with a topic. This time round, we are turning our attention to the world of renewables, a sector that has grown rapidly but one that has become increasingly complex and, at times, difficult to navigate for those not immersed on a day-to-day basis. As with our trip to Europe, Alan takes the role of the tour guide, and I play the curious tourist, asking the obvious, the overlooked and, occasionally, the uncomfortable questions.
]]>Whilst Pacific Assets (PAC) has faced its own challenges in the period, wider Asian markets have delivered on their promise in the year under review with a strong rally. The region’s supportive demographics, exciting growth prospects and numerous world leading companies has attracted investor capital, particularly in key sectors such as semiconductors. This is a theme PAC’s manager had identified, as shown by holdings in the likes of TSMC and Samsung Electronics, although limited position sizes in these holdings meant relative returns were impacted. Regardless, the Asian story continues to be well-supported in our view, with many countries offering a blend of good growth characteristics and attractive valuations.
Prior to the broader review, the board had introduced several strategic initiatives in the year to improve the trust’s investment case, including a conditional tender offer and reduction in the management fee, something discussed in the half-year results. With these remaining in place, we believe the discount risk remains reduced. Evidence supporting this is the consistency of the discount since the pause in share buybacks in December to date, having narrowed notably up until this point.
Furthermore, the outcome of the strategic review could lead to a narrowing of the discount. Markets disliking uncertainty is a well-worn adage, therefore regardless of the outcome, it would at least bring certainty. This could be in the form of a management continuation, a switch to a new team, or even a combination with a peer, each of which offers plausible scenarios in which the trust’s rating could narrow. Whatever the outcome, the Asian region still has a vast universe of attractive companies to choose from, which lends itself well to active management. With the board having received numerous proposals, whichever direction the trust’s future goes, the long-term potential for the trust to capture alpha going forward is strong.
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]]>The bill builds on the Mansion House Accord where some of the UK’s largest pension funds agreed to voluntarily increase their weighting to private assets to 10%, half of which will be directed to UK-based projects.
Initially, listed securities, including investment companies, were excluded from the bill; after successful lobbying from the Association of Investment Companies (AIC), with support from Baronesses Altmann and Bowles, investment companies have now been included.
The bill gives the government a so-called reserve power, which would allow ministers to compel funds to meet these targets if they fall short. However, the government agreed that the mandation power would only be used once, must be used before 2032, and apply only to main default pension funds, after pressure from peers in the House of Lords.
The bill has yet to gain Royal Assent, so we’re still in the very early stages, hence details as to exactly which assets will be in scope and, therefore, which investment trusts might benefit are scant. As such, it’s not expected to have a huge immediate impact on the investment trust world.
Still, we agree with AIC CEO Richard Stone when he suggested that it will give pension schemes more confidence to add investment trusts to their investable universe.
Unlocking a potential billion-pound pool of cash sitting and waiting to invest in investment trusts may act as a powerful catalyst for narrowing discounts in related sectors. Sure, those wide discounts may give some trustees pause, but, in our view, they represent some of the most attractive valuation opportunities in UK markets.
Of all the possible outcomes, we suspect that the most obvious beneficiary will be infrastructure projects. The government will be keen to improve swathes of the country’s ailing stock, from roads to hospitals to schools.
This could all play into the hands of a trust like HICL Infrastructure (HICL), which has a 63% weighting to UK assets. These include Affinity Water, which supplies drinking water to 3.8m people in London and around the south-east of England; the A63 motorway, the Home Office building and the Royal School of Military Engineering. Diversification is added through a 23% exposure to Europe, alongside top 10 positions in the US-based power grid business Texas Nevada Transmission and New Zealand mobile towers business Fortysouth.
We’re sure that HICL will strike a tone with pension trustees, given it’s a FTSE 250 trust with a £3.3bn portfolio. Another attraction is HICL’s aim to offer a core, lower-risk infrastructure investor targeting long-term NAV returns of 7-8% through a combination of a high dividend yield – currently 6.6% - and the potential for capital growth. A discount of c. 19% isn’t egregious, but represents attractive value, in our view, particularly when you consider that HICL’s board and manager have undertaken disposals totalling over £730m in the last couple of years, which have all been at or above the most recent valuation prior to sale, indicating that the NAV is robust.
While HICL focuses on taking equity in the projects it owns, GCP Infrastructure Investments (GCP) takes a different tack, financing social and economic infrastructure projects through debt instruments. Again, in contrast to HICL, GCP is fully focused on the UK, making the two a potentially attracting pairing for pensions funds.
Just over half of the portfolio is in senior debt and, again, just over half is also in renewable projects (which we’ll come on to shortly). GCP’s portfolio is mature and fully operational, consisting of 47 investments that are highly diverisified across sub-sectors such as commercial and rooftop solar, biomass plants, supported living and waste disposal.
GCP’s returns come primarily through dividends, with the current yield sitting at an attractive c. 9.4%, more than twice the level of the five-year gilt yield, but there’s certainly some potential for the discount to narrow which, at c. 27%, is essentially analogous to buying a bond yielding in excess of 9% with a par value of 100p for 73p.
Surely, too, with the government’s efforts to decarbonise the UK’s economy, will renewable energy infrastructure projects be on the list of ideal private asset investments. The purest play we could think of here would be Greencoat UK Wind (UKW), which, as the name suggests, invests in onshore and offshore wind farms up and down the UK.
Wind is, in our view, key to both the transition to net zero and to ensuring the UK’s energy self-sufficiency. Indeed, the proliferation of energy from renewable sources played into the fact that Britain’s electricity is the most British in over 20 years, according to the Energy and Climate Intelligence Unit.
UKW is another large and liquid trust, with a c. £4bn portfolio – a big advantage in this context – and remains a leader in the sector. UKW’s share price remains in the doldrums for now, with the ongoing sell-off initially sparked by 2022’s rising interest rate environment and compounded by weak sentiment and some negative government announcements.
Yet, if one looks forward, we see signs of life for UKW. It wouldn’t surprise us if we saw some consolidation in the sector given the current over-supply of trusts in the sector. We’d see this as a positive for UKW as it’s likely to be one of the survivors and would represent an attractive alternative for investors in whichever trusts get taken out.
In addition, UKW’s share price remains, at the time of writing, a shade below its 2013 IPO price, despite the trust having delivered a NAV total return of c. 193% since then. Certainly, a yield of c. 10.4% on a discount of c. 26% and a dividend that is explicitly linked to consumer price inflation strikes us as an attractive proposition.
Private equity and venture capital is a less obvious beneficiary here. While the space is, of course, included in the private assets remit, UK pension funds tend to err on the side of running more cautious portfolios. That said, the increase of defined contribution pensions and auto-enrolment is bringing younger savers into the pension system and these are the exact people that would benefit from their funds looking towards more growth-style investments.
In addition, the private equity space is dominated by the US market. That said, public markets are also skewed towards the other side of the Atlantic and, fortunately, there are some private equity – or growth capital – investment trusts that focus on Europe, with exposure to the UK within that.
On the private equity side of things, CT Private Equity (CTPE) has c. 41% of its portfolio invested in the UK, marking it out as highly differentiated from its listed PE peer group, which typically has less in the UK and significantly more than CTPE’s c. 15% in the US.
While CTPE targets the lower-mid market of the European PE universe, which is typically higher risk, the trust is well diversified across c. 500 underlying companies and management believe that it should be well rewarded over the long term for taking this risk.
CTPE’s two largest individual names are both UK firms, being the casual clothing retailer Weird Fish and the social housing maintenance provider CARDO Group. Management suspects, as do we, that valuations are currently prudent and that experience, over the past 26 years CTPE has been around, suggests that there could be considerable hidden value in the NAV, at which CTPE trades at a c. 30% discount.
Moving into the world of venture capital, Molten Ventures (GROW) is a specialist VC investor owning equity in early-stage, unlisted European businesses both directly and through funds.
The core of the portfolio is a concentrated selection of 16 businesses making up 62% of the NAV and led by the fintech giant Revolut, at 10.6% of the portfolio. Revolut has been a real UK technology success story and has recently been revalued to make it worth more than Barclays, Lloyds or NatWest ahead of an expected 2026 IPO.
GROW has been top-slicing its position in both Revolut as well as the Finnish satellite maker ICEYE, showing management’s success and generating cash. Indeed, GROW generated more than £200m from its portfolio in FY 2025 and through the first six months of 2026, with the fair value of the portfolio being written up by 6% in H1 2026, after a 4% uplift in FY 2025, indicating momentum building after a tough period for VC between 2022 and 2024.
The discount has narrowed significantly from its c. 60% 12 months ago to c. 27% at the time of writing. Still, that’s a fairly meaty discount on a portfolio containing attractive thematic exposures such as space technology, enterprise software, quantum computing and blockchain.
We’ll wait for the finer details to be fleshed out before getting too excited about the potential wall of money that could come into the investment trust sector if pension funds start looking our way. Still, the worst outcome is that it will be net neutral for the sector, with a bullish view that it could really narrow discounts across many sectors that have been hard hit in recent years.
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