76 Saturday December 18 2021 | the times
Money
Here’s why I am putting
Adidas in my son’s Isa
T
he wisdom or not of our
parental choice is a constant
worry, whether it’s what you
serve them at mealtimes,
how much screentime they
have, or how you invest for their
future. When it comes to choosing
funds for my own Isa I find myself
agonising over each pick and it is
even worse for my son’s Junior Isa.His account was opened just after
he turned one — a little later than
planned, but the time just flies in
those early days, doesn’t it?
My husband and I decided to go
large on risk with our fund selection.
After all, our boy has a long
investment time horizon of almost 20
years, maybe more depending on how
this money is eventually used. I’mrather hoping he doesn’t suddenly
want to blow it all once he gets his
hands on it when he hits 18.
The profile of smaller companies
fitted our investment strategy down
to the ground, since they have the
potential to outperform larger
companies over the longer term.
They’re generally higher risk because
smaller firms can be more volatile
and at risk of bankruptcy in difficult
economic times compared with larger
rivals.
Happy to take this risk, we chose
three smaller companies funds to kick
off our junior investment journey. A
narrow choice, admittedly, but it’s
paid off so far. His portfolio is up
more than 70 per cent in almost five
years.
The top performer is ASI Global
Smaller Companies run by the small-
cap veteran Harry Nimmo, and
Kirsty Desson, who has been co-
manager since February last year, but
has been involved with the fund since
launch.
The pair use a computer
programme that sifts through
categories of things they do and don’t
like about businesses to uncover
hidden gems around the globe. Their
methods have returned 135 per cent
over five years.
River & Mercantile UK Equity
Smaller Companies also made the
cut in the hope that the manager Dan
Hanbury will unearth some home-
grown beauties. The fund has
returned a very pleasing 97 per cent
in five years.
Lastly, we added Schroder US
Smaller Companies, managed by
Robert Kaynor. The top ten holdings
include whizzy tech companies such
as Semtech, global supplier of high-
performance semiconductors, and
California-based LiveRamp, which
provides a data platform for
businesses. Over five years the fund
has returned 64 per cent.
Having revisited our fund selection
for this column, it’s reminded us that
we have some work to do. Now that
the value of the holdings has grown,
we can look to diversify a little bit.
There’s already a shortlist.
For someone of the next
generation, it’s only fitting that we
add some sustainable funds that can
make an impact on the world. Baillie
Gifford Positive Change is a definite
maybe. Since the fund’s launch in
January 2017 it has returned nearly
300 per cent.
The fund’s successes were
magnified in 2020 — when it
returned a whopping 80 per cent —
by being heavily weighted in tech and
growth sectors and avoiding oil and
airline stocks that slumped last year.
Returns are more modest this year at
13 per cent, which is slightly behind
the sector average at 15 per cent. As a
long-term commitment, it’s a yes
from me.
We’re also weighing up Royal
London Global Sustainable
Equity.
A top ten holding is
Adidas. Since my son
regularly sports their
trainers, below,
perhaps
adding this
to his
portfolio
would give
me an “in” to
start explaining his
investments to him. If he
can handle a split digraph in
phonics, how hard can the stock
market be?
Next stop: the investment trust
aisle. For long-term investing, the
unique features of investment trusts
make them a smart choice. One
highly coveted quality of a trust
versus a fund is the ability for their
managers to borrow money if they
think there is an opportunity in a
particular market and want a biggerpiece of the action. It can be high risk,
of course, but potentially there are big
rewards.
Also, their closed-ended structure
means that a fund manager cannot be
forced to sell at a time he or she
doesn’t want to, in order to meet the
needs of investors who want their
stakes back. This allows that manager
to make truly long-term investment
decisions in shareholders’ interest,
without having to worry about
holding sufficient cash to pay out.
I’m tempted by the F&C
Investment Trust. It has an
impressive track record, having
increased its dividend payout every
year since 1970 (a nice boost for
reinvesting and compound growth)
and the manager Paul Niven has been
at the helm since 2014. Its recent
annual report details its commitment
to steering firms it invests into
behaving more responsibly towards
the environment, society and in
governance (ESG) matters.
However, I can’t deny I’m not taken
by the nostalgia attached to it, being
the oldest investment trust launched
in 1868. Records list an earl, a farmer,
a “married woman”, a leather cutter,
an army officer and a flax spinner
among its first investors. The list
reaffirms that investing is and has
always been for everyone, and is not
a preserve of the wealthy. Over five
years the trust has returned 73 per
cent.
For a higher risk punt (yet with
higher growth potential) there’s
Fundsmith Emerging Equities Trust.
The fund was set up by Fundsmith
founder Terry Smith in 2014 and is
managed by Michael O’Brien. The
focus of the fund is healthcare,
technology and consumer-driven
companies with superior cash
generation across emerging
markets, many of
which have been hit
particularly hard
during the
pandemic, so
there’s plenty of
opportunity for
recovery. Over five
years it has returned
31 per cent.
This wishlist will
possibly require more
discussion at home. But one
thing is certain, investing for
children rather than leaving
money twiddling its thumbs in a
savings account, is a no-brainer.
Returns from cash are guaranteed to
be a loss in real terms, yet most
parents stubbornly save in cash Isas.
The fund choices for our son might
not stack up of course, but that’s a
risk I’m more than willing to take.
Had we put the same money in a cash
Junior Isa, the returns so far would
have not been worth writing about.Thinking small
Performance (%)Source: Morningstar140%120100806040200-20
2017 18 19 20 21 22ASI Global
Smaller Companies
R&M UK Equity
Smaller Companies
Schroder US
Smaller CompaniesHolly
Thomas
Get rich slowlyh slowly