A State Pension of £164 per week is hardly going to leave us in the lap of luxury. And with the retirement age gradually creeping upwards, it’s anyone’s guess how long it will be before today’s young and middle-aged workers will have to wait to get it.
But while shares have beaten other forms of investment hands down for more than a century, a lot of people are wary of picking their own and don’t like the perceived risks. That’s why so many opt for pooled investments, but what’s the best kind?
For me, I don’t want to hand over my cash for someone else to manage and take their commission (and put the interests of their shareholders first, not me).
Capital growth
I think an ideal solution is to buy shares in investment trusts, which makes you the shareholder and the recipient of all that lovely commission. Speaking of which, I’ve been impressed by the performance of Pantheon International (LSE: PIN), which released an August performance update on Wednesday.
Pantheon shares have more than doubled in value over the past five years, while the FTSE 100 has managed a measly 2% gain.
Pantheon, which invests in various other funds including private equity funds, reported a 4.4% rise in net asset value (NAV) over the month, keeping its recent month-by-month rises going nicely. And with a stated NAV of 2,572p per share, and the shares priced at 2,160p after a 3% rise in morning trading, we’re looking at a discount of 16% at the moment. While investment trusts typically do trade at a discount to NAV, 16% looks attractive to me.
Pantheon also generated £14.8m in net cash during the month, and completed five new investments for a total of £29.6m in such fields as healthcare, engineering and biotechnology. So it looks pretty well diversified to me.
Pantheon aims at capital growth, and pension investors will probably be looking for income investments too.
Income
That brings me to North American Income Trust (LSE: NAIT) which has been paying progressive dividends of around 3-4%.
The share price has also done pretty well, with a 65% gain over five years for an impressive total return. As its name suggests, the trust targets its cash mainly at American S&P 500 stocks, so that should provide some clear international, and hopefully Brexit-proof, diversity too.
In its first half, reported Wednesday, the trust saw its NAV per share grow by 7.2%, in sterling terms. And over the past three years, the cumulative NAV return came to 85.6% (against the S&P 500’s 69.5%).
The dividend which, conveniently for income seekers, is paid quarterly, saw a first-half boost of 6.7%, and that’s keeping nicely ahead of UK inflation.
The North American portfolio is currently 93%-invested in equities, covering 41 individual holdings (with a small amount invested in 11 corporate bonds). That looks well diversified to me, and it would be tough for most private investors to emulate that kind of spread.
These two investment trusts look to me like a nice pair for a retirement portfolio.
