Investment trusts are one of the oldest investment vehicles. For more than a hundred years investors have been using these companies to pool, protect and grow their wealth.
RIT Capital Partners (LSE: RCP) is one of the most successful investment trusts there is. Chaired by Lord Rothschild, since 1988 the company has produced an annual return of 12.9% for investors, turning £1,000 into £30,000.
Since 1990, it has returned 470%, eclipsing the FTSE 100’s return of 19.5% over the same period excluding dividends.
Finding value of the market
Today RIT reported its results for the first half of the year, which showed yet another strong investment performance. Net asset value per share increased to 1,784p with a total return of 4%, from 1,730p, while pre-tax profit rose to £111.1m from £89.6m.
One of the greatest benefits of investing in RIT is that the firm is able to put its money into unquoted companies, offering a level of diversification not available to most private investors. Indeed, today the company reported that its net quoted equity exposure averaged 43% during the first half and management has been looking for more private market opportunities to reduce exposure to expensive public markets. To that end, RIT has invested in US-based Social Capital LP, which it called one of “Silicon Valley’s leading technology investment firms“.
Overall, the investment trust is directing its exposure to “investments which will benefit from the impact of new technologies, and Far Eastern markets, influenced by the growing demand from Asian consumers,” according to Lord Rothschild.
Not cheap
Unfortuntately, because RIT has generated such impressive returns for investors during the past decade, shares in the trust are not cheap. At the time of writing the shares are changing hands at 1,941p, a premium of 8.8% to net asset value. After increasing its interim dividend payout by 3.2% today, RIT is on track to pay out 32p per share to investors for the full-year, giving a dividend yield of 1.6%.
Still, even though it is trading at a premium to net asset value, if the firm can continue to produce double-digit returns for investors every year, this is one company that you can rely on to increase your wealth.
Undervalued
Alliance Trust (LSE: ATST) might be a better choice than RIT if you’re looking for a trust that’s trading at a discount. It has struggled over the past few years, which has resulted in investors avoiding the firm, but a recent shake-up has put an end to the poor investment performance.
Alliance Trust reported a net asset value total return of 12.4% over the six months to June 30. This compares with a 6.4% return from the MSCI All Country World Index over the same period. The better performance, coupled with the trust’s restructuring has sent its shares higher by 22% excluding dividends over the past year, and there could be further gains ahead.
Based on the most recent figures, Alliance’s net asset value per share is just under 749p, 4.6% above the current price of 417p. Management has instigated a stock buyback to try and reduce this discount. The shares support a dividend yield of around 1.8%.
