WEBVTT - Why Your Portfolio Needs Investment Trusts 0:00:00.280 --> 0:00:04.200 John, Hello man, Hello, Now, John, I've got a question 0:00:04.280 --> 0:00:04.840 for you. 0:00:04.880 --> 0:00:05.400 Go ahead. 0:00:05.680 --> 0:00:07.600 I want you to imagine, and I know you've got 0:00:07.640 --> 0:00:12.039 a good imagination to imagine. They're a hugely successful entrepreneur. 0:00:12.760 --> 0:00:16.400 You had a brilliant idea, maybe eight years ago, maybe 0:00:16.400 --> 0:00:19.400 only five years ago, really good idea. You've worked very hard, 0:00:19.480 --> 0:00:22.639 you've implemented your idea. Well, you've built up a business, 0:00:22.720 --> 0:00:25.640 You've hired a parlor of people, you're making a parlor money. 0:00:26.000 --> 0:00:27.720 And now you're thinking to yourself, do you know what 0:00:27.920 --> 0:00:29.680 getting on a bet? Not you, personally, John, were all 0:00:29.720 --> 0:00:30.600 in the world of imagination. 0:00:30.680 --> 0:00:31.840 Now getting on a bet. 0:00:32.840 --> 0:00:35.000 I think in the next ten years, fifteen years or so, 0:00:35.040 --> 0:00:36.920 i'd like to retire. I'm going to list this company. 0:00:37.200 --> 0:00:39.559 I'm going to let other people share in the growth here. 0:00:39.600 --> 0:00:43.800 I'm going to list. So that's You's like me. It's 0:00:43.840 --> 0:00:45.840 so like you. And then you look around the world 0:00:45.840 --> 0:00:48.160 and you think, ah, where should I list? So here's 0:00:48.200 --> 0:00:50.920 my question. You're going to choose the UK right because 0:00:50.960 --> 0:00:51.560 you live here. 0:00:52.200 --> 0:00:53.160 You like it. 0:00:53.159 --> 0:00:54.760 It's a good place, aren't you. 0:00:55.240 --> 0:00:55.440 Yeah? 0:00:55.480 --> 0:01:01.560 I mean absolutely, of course I'm a Patriot. Although no, 0:01:01.680 --> 0:01:05.600 wait a minute, what's this. I'm hearing the siren song 0:01:05.640 --> 0:01:08.840 from across the Atlantic that says, well, what does it say? 0:01:08.920 --> 0:01:11.880 Maland because this is the point of your excellent column 0:01:11.920 --> 0:01:12.880 this week. 0:01:12.800 --> 0:01:16.039 Ah, excellent, I like that. What it says that siren 0:01:16.160 --> 0:01:19.240 call is it says money, money, Let me give you 0:01:19.319 --> 0:01:22.480 more money. And we know that you're financially incentivized, right 0:01:22.520 --> 0:01:26.120 because you've done this amazing thing already. So what the 0:01:26.160 --> 0:01:28.440 call says is, come to us, Come to us in 0:01:28.520 --> 0:01:31.280 New York, and you can list your company at maybe 0:01:31.360 --> 0:01:33.959 forty percent more, and you could list it at home, 0:01:34.200 --> 0:01:35.720 and you get to keep all that lovely money of 0:01:35.760 --> 0:01:38.080 the percent of the company that you list, and then 0:01:38.400 --> 0:01:41.440 then you can stay on a CEO for as long 0:01:41.480 --> 0:01:44.800 as you like, and we'll pay you double, maybe triple, 0:01:44.840 --> 0:01:47.400 maybe cold druple what you might get if you were 0:01:47.520 --> 0:01:50.080 a CEO in the UK. And you know, if you 0:01:50.080 --> 0:01:53.720 stayed in the UK after nine years or so, all 0:01:53.760 --> 0:01:55.480 the big investors in the UK will be going, oh, 0:01:55.560 --> 0:01:57.440 do you know what, that's kind of our limits. You've 0:01:57.440 --> 0:01:59.920 got to go now, even if you were the dry 0:02:00.040 --> 0:02:02.600 being forced behind the company, even if you've been taking 0:02:02.720 --> 0:02:06.680 brilliant decisions all the way through those institutional investors will 0:02:06.680 --> 0:02:08.320 be going, yeah, we're gonna have to vote against you. 0:02:08.440 --> 0:02:08.919 Sorry. 0:02:09.560 --> 0:02:14.240 See that sounds awful. Why would anyone less than the 0:02:14.360 --> 0:02:18.080 UK let a lot? Also in the small numbers that 0:02:18.120 --> 0:02:20.280 are actually doing it, where is. 0:02:20.280 --> 0:02:21.520 That small number they're not? 0:02:22.320 --> 0:02:23.720 I mean that's the problem. 0:02:23.800 --> 0:02:25.800 We have very few listings in the UK at the 0:02:25.800 --> 0:02:28.080 moment we had any of this year, five six, something 0:02:28.120 --> 0:02:28.440 like that. 0:02:28.840 --> 0:02:29.720 Very few listings. 0:02:29.720 --> 0:02:31.760 There are a lot of listings going on with China 0:02:31.880 --> 0:02:33.240 is the big is a big place for listing to 0:02:33.240 --> 0:02:35.600 them when most companies are listing there, or more companies 0:02:35.600 --> 0:02:37.480 are listing there. There've been I think fifty six or 0:02:37.520 --> 0:02:39.239 something in the US so far this year, and there's 0:02:39.240 --> 0:02:42.160 been a reasonable smattering in Europe. But there is very 0:02:42.200 --> 0:02:45.160 little incentive right now to list in the UK because 0:02:45.160 --> 0:02:49.480 we have spent so much time by trying to make 0:02:49.560 --> 0:02:52.920 ourselves to the gold standard of international governance. You know, 0:02:52.960 --> 0:02:55.200 if you list in the UK, you are going to 0:02:55.200 --> 0:02:58.960 be regulated into the ground. There's literally nothing you can 0:02:59.000 --> 0:03:01.720 do that doesn't mean referring to to a code of 0:03:01.760 --> 0:03:04.160 some kind or a compliance department of some kind. 0:03:04.400 --> 0:03:05.720 And all the big institutions in. 0:03:05.720 --> 0:03:09.520 The UK have huge stewardship and sustainability departments as a result, 0:03:09.639 --> 0:03:10.880 and a lot of your life is going to be 0:03:10.919 --> 0:03:13.280 spent talking to them. And if you talk to a 0:03:13.320 --> 0:03:15.560 fund manager in the UK, they will say, you know 0:03:15.600 --> 0:03:18.120 the guy who the woman who actually manages the money, 0:03:18.280 --> 0:03:20.799 they will they spent they spend half their life listening 0:03:20.880 --> 0:03:23.520 to the sustainability and stewardship company is telling them how 0:03:23.520 --> 0:03:25.240 they have to vote against this, and vote against that 0:03:25.280 --> 0:03:27.959 and vote against this. So it becomes a very kind 0:03:27.960 --> 0:03:31.440 of a tight area to work. And of course everyone 0:03:31.600 --> 0:03:34.440 was on your case about money. You get paid too much. 0:03:34.440 --> 0:03:36.440 You shouldn't get that much, but you should be paid less. 0:03:36.480 --> 0:03:38.560 This isn't right, You should leave, et cetera, et cetera. 0:03:38.400 --> 0:03:38.760 Et cetera. 0:03:39.200 --> 0:03:41.520 You go to the US and all it kind of vanishes. 0:03:42.640 --> 0:03:44.760 So why wouldn't you at all? 0:03:45.280 --> 0:03:48.160 But one one on this is on the compliance said 0:03:48.680 --> 0:03:50.240 and the ESG saide. 0:03:50.680 --> 0:03:51.600 I mean this sort of. 0:03:51.600 --> 0:03:55.680 Stuff is is global, isn't it? How has it got 0:03:56.000 --> 0:03:58.360 so much? Was in the UK? I mean the p 0:03:58.600 --> 0:04:01.680 thing is is clear leave very different and always has been. 0:04:03.680 --> 0:04:03.840 Well. 0:04:03.880 --> 0:04:05.480 I think you know, we love a bit of regulation, 0:04:05.600 --> 0:04:08.440 we love a bit of bureaucracy. We've got endless people 0:04:09.080 --> 0:04:13.120 and endless different organizations creating codes and sets of guidance 0:04:13.240 --> 0:04:15.960 or remember a lot of stuff is guidance. But if 0:04:16.000 --> 0:04:18.680 you're a company and you don't follow the guidance, then 0:04:18.720 --> 0:04:21.400 nonetheless the big institutions will vote against you because they've 0:04:21.400 --> 0:04:23.240 got sort of that stuck in their head as well. 0:04:23.560 --> 0:04:27.400 So you know, there's there's a lot of different organizations, 0:04:27.480 --> 0:04:30.320 different sets of guidance, different regulators or telling you that 0:04:30.360 --> 0:04:31.400 you have to do this, and you have do that, 0:04:31.440 --> 0:04:31.960 and you have to do this. 0:04:32.040 --> 0:04:32.800 And when you you. 0:04:32.720 --> 0:04:34.919 Know, each individual piece, if the likes of you and 0:04:34.960 --> 0:04:36.760 I are ordinary investors look at it, we're like, well 0:04:36.760 --> 0:04:38.880 that that's entirely reasonable. People should have to do that, 0:04:38.960 --> 0:04:40.559 and people should have to do that, and people should 0:04:40.560 --> 0:04:42.800 have to do that. But as it piles up and 0:04:42.880 --> 0:04:44.960 up and up and up and up, it gets the 0:04:44.960 --> 0:04:47.280 point where, you know, what about the actual business, what 0:04:47.320 --> 0:04:49.680 about the innovation, what about the wealth creation, what about 0:04:49.680 --> 0:04:52.080 the value creation, what about the productivity? You know, it 0:04:52.080 --> 0:04:56.360 becomes a sort of a heavy blanket lying over the 0:04:56.400 --> 0:04:59.479 real activity of a company. So then you get this, 0:04:59.480 --> 0:05:03.320 this this feeling from CEOs they're not allowed to do 0:05:03.360 --> 0:05:06.320 what they do best, which is run a business. And worse, 0:05:06.640 --> 0:05:08.440 they're not allowed to do what they do best, and 0:05:08.440 --> 0:05:10.400 they're also not allowed to get paid for doing it, 0:05:10.440 --> 0:05:12.040 maybe not as well as they'd like to do, if 0:05:12.080 --> 0:05:14.160 that makes sense. Whereas you can go somewhere else and 0:05:14.200 --> 0:05:16.440 get all those things out. There's so many problems here. 0:05:16.720 --> 0:05:19.400 You know, good governance is great. We're all very pro 0:05:19.480 --> 0:05:23.440 good governance, but you cannot make investing safe. You shouldn't 0:05:23.480 --> 0:05:26.840 even try and make investing safe because risk is the 0:05:26.880 --> 0:05:27.880 price of growth. 0:05:28.160 --> 0:05:29.080 That's how it works. 0:05:29.600 --> 0:05:33.400 I mean, yeah again doing desicree home, might you this 0:05:33.960 --> 0:05:37.960 is just about the US have insucked all the oxygen 0:05:38.839 --> 0:05:41.800 equity markets in jeninal over the last ten years because 0:05:41.800 --> 0:05:47.359 everyone's been all these party growth stocks let's go. You know, 0:05:47.160 --> 0:05:49.839 you test Etctera, et cetera, and Neil Harton to be 0:05:50.000 --> 0:05:53.200 over there as oppose. They's a specific problem with the UK. 0:05:53.760 --> 0:05:55.600 Yeah, that comes back to something that you and I've 0:05:55.600 --> 0:05:59.440 talked about a lot about this, this idea that evaluation 0:05:59.520 --> 0:06:01.800 gap in the US and the UK is is slightly 0:06:01.839 --> 0:06:03.680 out of control. It's wider than it's ever been with 0:06:03.800 --> 0:06:07.159 running what near forty percent still, but we've also looked 0:06:07.200 --> 0:06:08.719 at you and I had a lot of the research 0:06:08.760 --> 0:06:11.359 and the data that shows that even if you pull 0:06:11.400 --> 0:06:14.280 out the growth, if you are just for that, there's 0:06:14.360 --> 0:06:17.719 still a valuation gap between the US and the UK. 0:06:18.200 --> 0:06:20.240 And so the question is really to ask what is 0:06:20.279 --> 0:06:20.880 that all about? 0:06:21.040 --> 0:06:23.880 Why is it that a companies prefer to list in 0:06:23.880 --> 0:06:26.520 the US but be one of the obvious reasons for 0:06:26.560 --> 0:06:28.600 that is the valuation gap. You know, you spent all 0:06:28.640 --> 0:06:31.159 this time creating a company, building up a company, and 0:06:31.160 --> 0:06:33.640 putting the private equity dynamic to side for one moment 0:06:33.680 --> 0:06:36.840 we're just talking about genuine entrepreneurs. You've done all that, 0:06:37.480 --> 0:06:39.640 Why wouldn't you get the best price for it? Why 0:06:39.640 --> 0:06:41.279 wouldn't you want to get the best price for it? 0:06:41.320 --> 0:06:43.720 So why wouldn't you think about listing in the place 0:06:43.760 --> 0:06:45.280 you can get the best price. So we can't argue 0:06:45.279 --> 0:06:48.000 about whether the evaluations in the US are wrong or 0:06:48.080 --> 0:06:50.279 right and whether they'll mean revert or not mean revert, 0:06:50.560 --> 0:06:53.560 But right now that's where we are. So there's this problem. 0:06:53.640 --> 0:06:56.239 And then the other problem, of course, is the actual 0:06:56.320 --> 0:06:59.640 pay of CEOs. And we like to think, don't we 0:06:59.720 --> 0:07:01.800 all us that you know, once you get above ten 0:07:01.839 --> 0:07:03.720 million or so, it's neither here nor there how much 0:07:03.760 --> 0:07:05.919 you get paid. But if the question is ten million 0:07:06.000 --> 0:07:08.279 or two hundred million, I guess maybe it is here 0:07:08.440 --> 0:07:11.160 or there. And we can also say, and I agree 0:07:11.280 --> 0:07:14.320 with this, that CEOs are paid too much across the 0:07:14.320 --> 0:07:17.120 board in general in the US and in the UK. 0:07:17.800 --> 0:07:22.200 But even if I feel that and you feel that, 0:07:22.200 --> 0:07:26.000 that doesn't mean that we feel that strongly enough that 0:07:26.040 --> 0:07:29.000 we prefer companies listed somewhere else. 0:07:29.960 --> 0:07:33.240 Yeah, I mean, I guess. I mean this is the 0:07:34.920 --> 0:07:37.000 This is the tricky part of all of this, isn't it. 0:07:37.040 --> 0:07:41.400 Because on the one hand, we want this because, as 0:07:41.440 --> 0:07:44.320 you point out in your book, we want to have 0:07:44.400 --> 0:07:48.200 a thriving shareholder democracy and that's really important for the 0:07:48.320 --> 0:07:51.680 creation of capital and having a dynamic economy and all 0:07:51.760 --> 0:07:54.840 the rest of those great things. And on the other hand, 0:07:55.400 --> 0:07:57.240 a lot of the things that we don't like are 0:07:57.280 --> 0:07:59.640 the things that America A lows. So it is things like, 0:08:00.760 --> 0:08:02.480 you know, founders being able to have all of the 0:08:02.560 --> 0:08:05.480 voting shares without actually owning that much of the company. 0:08:06.000 --> 0:08:10.000 Things like founders and more. Actually, I don't mind founders 0:08:10.000 --> 0:08:11.800 so much getting paid in saying amounts of money, but 0:08:11.800 --> 0:08:14.160 I do have a problem were essentially kind of like 0:08:14.200 --> 0:08:17.800 middle management executive equivalents who have become the chief executive 0:08:18.120 --> 0:08:22.040 getting generational, life changing wealth, which is one of the 0:08:22.080 --> 0:08:24.800 objections that people have had to, you know, things like 0:08:24.840 --> 0:08:28.440 the ridiculous the big bonus that the Persimmon guy got. 0:08:29.360 --> 0:08:31.800 Well, here's the big battery, isn't he. There's always those 0:08:31.880 --> 0:08:33.760 outliers for everybody. 0:08:34.080 --> 0:08:38.040 Yeah, helped that. That was government subsidized as well. 0:08:38.080 --> 0:08:42.040 But we're not going to go to help to buy today. No, 0:08:42.040 --> 0:08:45.080 no beginning to get a rage going already. We're not 0:08:45.280 --> 0:08:46.320 doing help to buy. 0:08:48.000 --> 0:08:51.440 But yeah, things like how do we or rather can 0:08:51.520 --> 0:08:54.559 we get the best of both worlds? I mean, I 0:08:54.559 --> 0:08:56.679 suppose one of the things I was thinking in a 0:08:56.760 --> 0:08:59.880 Regier column was does this boil down the act of 0:09:00.160 --> 0:09:05.800 institutional investors needn't to be more engaged and to focus 0:09:05.960 --> 0:09:09.040 on certain things that they're not focused and just know 0:09:09.559 --> 0:09:12.240 because I mean, see, you don't get enough pupike on 0:09:12.559 --> 0:09:16.160 my wage? Is any we in a we you want 0:09:16.200 --> 0:09:16.439 more of that? 0:09:16.600 --> 0:09:19.080 Get quite a lot in the UK Now there's quite 0:09:19.080 --> 0:09:21.880 a lot of this. There's endless voting again to our tips, etc. 0:09:22.160 --> 0:09:24.439 I think that that has really come a long way 0:09:24.960 --> 0:09:27.280 since you and I started bitching about it. Fifteen twenty 0:09:27.360 --> 0:09:30.080 years ago, so that there's been a shift there. But 0:09:30.200 --> 0:09:32.559 I suppose that the real thing is that we need 0:09:32.600 --> 0:09:35.120 to find it a middle way as usual, you know, 0:09:35.320 --> 0:09:38.560 and the FCA and everywhere they are beginning to recognize 0:09:38.600 --> 0:09:41.440 that the UK has gone too far in wrapping its 0:09:41.440 --> 0:09:45.080 corporates up in endless regulation and too far towards trying 0:09:45.080 --> 0:09:47.000 to make everything safe. And as you know, I'm a 0:09:47.760 --> 0:09:51.040 huge advocate of shareholded democracy than my bookshere Power you 0:09:51.080 --> 0:09:54.000 were just mentioning, is all about that. So I'm a 0:09:54.080 --> 0:09:56.880 huge fan of that. But I'm also much more than 0:09:56.880 --> 0:10:00.680 I'm a fan of anything. I'm a fan of economic 0:10:00.720 --> 0:10:04.559 growth and fan of productivity growth, and a fan of 0:10:04.640 --> 0:10:07.040 us finding ways to grow our economy. That means that 0:10:07.120 --> 0:10:13.040 the entire country can benefit. And if we don't have deep, popular, 0:10:13.440 --> 0:10:16.400 liquid capital markets in the UK, we don't get to 0:10:16.440 --> 0:10:19.360 have any of the rest. So it seems to me 0:10:19.520 --> 0:10:22.360 incredibly important that we look at what's happening now and say, 0:10:22.400 --> 0:10:25.120 do you know what, this isn't working. We've gone too far, 0:10:25.400 --> 0:10:27.280 so we've got to pull back from it a bit. 0:10:27.559 --> 0:10:30.199 And when you see the fund managers coming out and going, oh, well, 0:10:30.280 --> 0:10:32.480 I don't know that doesn't feel safe anymore. I just 0:10:32.520 --> 0:10:34.120 want to go out and shake all of them and say, 0:10:34.200 --> 0:10:34.680 this is. 0:10:34.720 --> 0:10:38.240 Actually your job. Your job. Your job is to. 0:10:38.200 --> 0:10:40.440 Go out there, look through the oputy markets, give it 0:10:40.440 --> 0:10:44.560 a good sift around, and find the companies that are good, 0:10:44.720 --> 0:10:46.800 that you know, aren't going to have governance issues, that 0:10:46.880 --> 0:10:49.200 aren't going to go bust, that aren't going to you know, 0:10:49.240 --> 0:10:52.839 turn out to be fraudulent, etc. That is your actual job. 0:10:53.160 --> 0:10:54.920 So you know, don't be turning around and saying to 0:10:54.960 --> 0:10:56.960 the regulators you need to do more because I can't 0:10:56.960 --> 0:10:59.640 be asked to do the governance myself. Enough of this enough. 0:11:00.080 --> 0:11:01.880 The one thing I actually did want to say, and 0:11:02.120 --> 0:11:03.680 this is something you didn't mention to call them, but 0:11:03.720 --> 0:11:06.280 I was just curious as to how much of this 0:11:06.559 --> 0:11:11.559 you think ties in with the rise of passive investing, 0:11:12.400 --> 0:11:16.800 both in terms of perhaps you know, because I mean 0:11:17.000 --> 0:11:19.360 a lot of the kind of ESG stuff has ended 0:11:19.400 --> 0:11:21.679 up being driven by people like black Rock to try 0:11:21.880 --> 0:11:27.600 and differentiate their offering from other providers passive, and also 0:11:27.640 --> 0:11:30.920 a lot of the fact that the a lot of 0:11:30.920 --> 0:11:33.240 the auxygen being sucked out the global equity markets has 0:11:33.280 --> 0:11:37.920 been partly because obviously passive funds the money. It gravitates 0:11:37.960 --> 0:11:41.240 to where the most money is. And therefore, as other 0:11:41.400 --> 0:11:43.640 markets I've got, as the US has got big, that's 0:11:43.640 --> 0:11:45.000 attracted ever more money. 0:11:46.200 --> 0:11:47.280 I just wonder how much. 0:11:47.120 --> 0:11:51.800 Of this is kind of doubted that almost I don't know, 0:11:52.000 --> 0:11:55.800 kind of automation equity markets have kind of lost some 0:11:55.840 --> 0:11:56.400 of that. 0:11:58.960 --> 0:12:01.640 Sparkle. I guess that then ended up going to Krypto. 0:12:02.520 --> 0:12:03.960 You're an old romantic, aren't you. 0:12:04.040 --> 0:12:07.880 Chance Well, yes, obviously. 0:12:08.880 --> 0:12:11.160 The aswer is I don't know. I just don't know, 0:12:11.400 --> 0:12:13.439 And you and I are always because we great believer 0:12:13.480 --> 0:12:15.840 is in active management or I am anyway, you know, 0:12:15.880 --> 0:12:19.080 I'm always keen to blame passive for absolutely everything, but 0:12:19.800 --> 0:12:21.800 but I'm not convinced that that's what it is here. 0:12:21.840 --> 0:12:26.480 It's driven by the do goodery of the far management companies, 0:12:26.480 --> 0:12:28.640 of course, and as you say, their efforts to differentiate 0:12:28.679 --> 0:12:31.600 themselves by by selling stewardship, ESG, etc. 0:12:31.920 --> 0:12:33.600 But that's not necessarily part of passive. 0:12:33.880 --> 0:12:36.240 But it's also driven by, I think, in the main, 0:12:36.360 --> 0:12:38.920 by the regulatory environment in the UK, where we really 0:12:38.960 --> 0:12:41.080 want to make everything a gold standard and we've done 0:12:41.120 --> 0:12:44.040 our absolute best to add the best governance in the 0:12:44.040 --> 0:12:45.839 world and to make one of the reasons why you 0:12:46.040 --> 0:12:48.680 want to list in the UK because it has the 0:12:48.760 --> 0:12:51.319 best governance. But in fact, you know what the best 0:12:51.400 --> 0:12:55.400 governance isn't necessarily the best. 0:12:55.120 --> 0:12:57.600 Thing for growth. So you know, we have to find 0:12:57.920 --> 0:12:58.480 a middle way. 0:12:58.559 --> 0:13:01.840 That's that's my view. I don't know quite how that 0:13:01.880 --> 0:13:04.640 little way works, but I do know that the the 0:13:04.840 --> 0:13:07.480 reforms to the listing environment the FCA came out with 0:13:07.960 --> 0:13:11.560 earlier this week are an excellent start, but only a start. 0:13:16.360 --> 0:13:19.080 Welcome to Merin Talks Money, the podcast in which people 0:13:19.120 --> 0:13:21.280 who know the markets explain the markets. 0:13:21.360 --> 0:13:22.520 I'm Merrit Sunset Web. 0:13:22.760 --> 0:13:24.800 This week we are going to have a conversation with 0:13:24.920 --> 0:13:28.240 Simon Elliott, who's a managing director at JP Morgan Asset Management. 0:13:28.480 --> 0:13:32.000 He works as the client director for his absolutely vast 0:13:32.080 --> 0:13:35.280 investment trust business. Now, Simon, you and I have been 0:13:35.280 --> 0:13:37.920 talking about investment trust for I don't know how many years, 0:13:38.280 --> 0:13:42.000 both getting old, Yeah, a good, good decade, possibly two decades, 0:13:42.040 --> 0:13:42.840 maybe even more. 0:13:42.920 --> 0:13:44.520 We've been talking about investment trust. 0:13:44.559 --> 0:13:47.360 Now I want to start because I'm not sure that 0:13:47.400 --> 0:13:49.560 all of our audience will be totally okay with what 0:13:49.600 --> 0:13:51.400 makes an investment trust great. 0:13:51.720 --> 0:13:53.839 So before, I believe makes them great. 0:13:53.920 --> 0:13:56.040 So before we get into talking about the sector's problems, 0:13:56.080 --> 0:13:58.520 it's difficulties and the fascinating things that are happening unders 0:13:58.559 --> 0:14:01.920 so many bonnets at the moment, let's start by just 0:14:02.280 --> 0:14:04.920 running through what it is that makes an investment trust 0:14:05.160 --> 0:14:07.360 a special kind of investment. Yeah. 0:14:07.400 --> 0:14:09.600 Well, at the end of the day, an investment trust 0:14:09.760 --> 0:14:12.839 is a PLC. It's a publicly listed company. It has 0:14:12.880 --> 0:14:16.360 the advantage over other forms of collectives of being a 0:14:16.360 --> 0:14:19.560 captive pool of capital, so in theory at least, it 0:14:19.560 --> 0:14:22.120 shouldn't be a full seller at times when market conditions 0:14:22.160 --> 0:14:25.400 become more difficult. It also has a number of advantages 0:14:25.480 --> 0:14:30.120 in terms of dividend payments. So this concept of dividend 0:14:30.160 --> 0:14:33.640 heroes those investment trust companies that have records of twenty 0:14:33.800 --> 0:14:36.840 or more years of consecutive dividend growth, of which I 0:14:36.880 --> 0:14:40.160 think they're about eighteen or so at the moment, led 0:14:40.160 --> 0:14:42.360 by City of London Investment Trusting. That's up to about 0:14:42.400 --> 0:14:45.880 fifty five years now of consecutive diffident growth. In addition 0:14:45.960 --> 0:14:48.760 to that, we've seen a number of investment trust take 0:14:48.800 --> 0:14:53.160 on powers to pay out enhance dividends as well, so clearly, 0:14:53.280 --> 0:14:56.280 dividends can be cut or can be suspended for investment companies, 0:14:56.320 --> 0:14:59.200 but they've got a number of advantages which provides a 0:14:59.200 --> 0:15:01.000 degree of creat dividends certainty. 0:15:01.800 --> 0:15:03.480 Yeah, dividends is quite interesting, isn't it. 0:15:03.520 --> 0:15:04.960 Because it used to be that you weren't allowed to 0:15:05.000 --> 0:15:08.600 pay dividends out of capital. You couldn't, we couldn't effectively 0:15:08.720 --> 0:15:11.240 change capital into income and pay it out. 0:15:11.120 --> 0:15:13.120 As a dividend, and there were very good reasons for that. 0:15:13.360 --> 0:15:15.360 But now it is possible, quite a lot of trust 0:15:15.440 --> 0:15:18.200 of picking it up, and it's still quite a divisive. 0:15:17.800 --> 0:15:19.320 Issue, isn't it. Yeah, No, it is. 0:15:19.760 --> 0:15:21.440 You're right. There was a tax change a number of 0:15:21.480 --> 0:15:24.200 years ago which meant it was possible. A few investment 0:15:24.200 --> 0:15:26.800 trusts have gone down that route, including a few and 0:15:26.840 --> 0:15:28.520 the JP Morgan ranges. It happens, and I think we've 0:15:28.520 --> 0:15:31.880 got six pain enhanced dividends at the moment. I mean, 0:15:31.920 --> 0:15:33.320 it's something to keep an eye on. I mean, the 0:15:33.640 --> 0:15:38.000 arguments against it is that it's tax inefficient. Effectively, you're 0:15:38.040 --> 0:15:41.240 turning capital into income, and we know the differential in 0:15:41.280 --> 0:15:44.760 terms of tax rates between income and capital gains tax, 0:15:44.840 --> 0:15:47.320 so you know, you could argue that perhaps it doesn't 0:15:47.360 --> 0:15:50.440 quite make sense. However, the reality is it does appeal 0:15:50.640 --> 0:15:53.880 seem to appeal to a wider range of investors, and 0:15:53.920 --> 0:15:56.880 particularly retail investors who frankly, you know, are looking for 0:15:56.960 --> 0:16:00.480 sources of income. So if I mean, probably the best 0:16:00.480 --> 0:16:03.480 example is the JP Walgan Global Growth and Income Fund 0:16:03.560 --> 0:16:06.800 that has a four percent enhanced evidend. It's probably gone 0:16:06.800 --> 0:16:09.040 a natural yield between two two and a half and 0:16:09.080 --> 0:16:11.880 then it converts an element of capital and that's proven 0:16:12.000 --> 0:16:14.560 very popular with retail investors and really been a big 0:16:14.600 --> 0:16:15.360 part of its story. 0:16:16.280 --> 0:16:17.120 It's interesting and it. 0:16:17.200 --> 0:16:18.840 Kind of makes those big trusts, I mean, that's a 0:16:18.880 --> 0:16:19.960 classic of the genre. 0:16:20.040 --> 0:16:21.760 Global Growth and Income kind of makes them into you. 0:16:22.160 --> 0:16:23.960 It makes them into annuities to a degree. 0:16:24.000 --> 0:16:25.720 I mean, if you think about what the retail investor 0:16:25.800 --> 0:16:27.600 is after, and one of the reasons why perhaps a 0:16:27.640 --> 0:16:30.320 retail investor is much bothered by the tax element of 0:16:30.360 --> 0:16:31.760 this is because they hold a lot of these big 0:16:31.800 --> 0:16:35.760 trusts inside their I sell or in particular, inside their 0:16:35.880 --> 0:16:38.160 SIP and in the old days, you know, when it 0:16:38.200 --> 0:16:40.520 came to pension time, you'd take all that money that 0:16:40.560 --> 0:16:43.160 you'd saved up and you'd hand it over in exchange 0:16:43.160 --> 0:16:47.440 for an annuity which was effectively turning your capital into 0:16:47.480 --> 0:16:50.720 income over the period until you're death right. And if 0:16:50.760 --> 0:16:52.840 you get one of these big trusts now and you 0:16:53.200 --> 0:16:55.200 can see that they're only making a natural yield of 0:16:55.240 --> 0:16:57.320 one percent or two percent or two and a half percent, 0:16:57.520 --> 0:16:58.960 and they say, well, we're going to pay you four 0:16:59.000 --> 0:17:00.280 and a half percent Now. 0:17:00.360 --> 0:17:01.240 They may or may not. 0:17:01.160 --> 0:17:03.080 Be making the capital game to back that up, but 0:17:03.360 --> 0:17:05.840 they're becoming a type of annuity for the retail investor. 0:17:06.040 --> 0:17:07.800 I mean, I think you make a good point about 0:17:08.240 --> 0:17:10.919 where these investments are held. I mean, tax efficient rappers 0:17:10.920 --> 0:17:14.560 are hugely important and probably explain why there has been 0:17:14.960 --> 0:17:18.920 a good uptake from retail investors for these type of funds. 0:17:19.359 --> 0:17:21.120 I mean, there are people in the wealth management community 0:17:21.119 --> 0:17:23.760 who have greater issues with it, but I think as 0:17:23.800 --> 0:17:25.840 the years have gone by and the kind of strategy 0:17:25.880 --> 0:17:28.239 has become more proven, I think you know, you're likely 0:17:28.280 --> 0:17:29.560 to see even more uptake. 0:17:30.000 --> 0:17:31.680 Yeah, you're not picking up my innuity point. 0:17:32.080 --> 0:17:36.000 I'm trying, really trying, really hard to get the investment 0:17:36.000 --> 0:17:38.600 trust industry to take one of these great big trusts 0:17:38.600 --> 0:17:41.919 and explicitly say, hey, guys, you know what we can make. 0:17:41.760 --> 0:17:43.679 This indur in a nuity for you. You still get 0:17:43.720 --> 0:17:45.120 to control the remaining capital. 0:17:45.359 --> 0:17:47.280 But so far no one has taken my bait, and 0:17:47.359 --> 0:17:49.560 I sense you're not going to either disappointing. 0:17:50.320 --> 0:17:52.359 Well, we'll see. I mean, I think what I would 0:17:52.359 --> 0:17:55.480 say about investment trust is that there's always innovation across 0:17:55.520 --> 0:17:57.800 the sector. I mean, you know, as you well know, 0:17:57.880 --> 0:18:00.639 it's in one hundred and fifty five years history of 0:18:00.680 --> 0:18:04.000 investment trusts, and they have proven to be very adaptable 0:18:04.040 --> 0:18:07.199 and innovative. So you know, things like enhanced dividends or 0:18:07.200 --> 0:18:09.919 other policies or of a strategies that they pursued. I mean, 0:18:09.920 --> 0:18:11.720 there's a reason why they've survived for so long. 0:18:12.359 --> 0:18:13.600 Yeah, and it's not just survive. 0:18:13.720 --> 0:18:16.159