GLOBAL OPPORTUNITIES TRUST: Fund profits if shares rise OR fall

Dr Alasdair ‘Sandy’ Nairn has been involved in fund management for over 30 years. He founded boutique asset manager Edinburgh Partners – subsequently bought by global fund giant Franklin Templeton – and was head of investment for Scottish Widows’ fund management arm.

Today he writes high-brow financial books, collects paraphernalia related to financial bubbles – and runs the £96m investment fund Global Opportunities Trust (GOT) – listed on the London Stock Exchange. Nairn and his immediate family own 15 percent of the trust’s shares.

This represents significant “skin in the game,” which some analysts like because it means he has a major financial interest in ensuring value growth of the trust’s assets.

Nairn is a pragmatic investor. While he is a strong proponent of long-term equity investments, he fears the consequences of the world’s adjustment to higher interest rates.

His latest book, The End Of The Everything Bubble, to be published in 2021, very clearly conveys his thinking: that bond and stock prices are facing a major correction, a process that has already started but has yet to go.

It is a message he has returned to in an article entitled ‘An opera of canaries’ for the trust’s website. Opera is the collective noun for a large number of singing canaries, and it refers to early warnings of danger.

His view is that the problems with cryptocurrencies (the collapse of platform FTX), UK pension funds (liability-driven investments) and banks (Silicon Valley Bank and Credit Suisse) are not isolated incidents.

Nairn believes they are all “warnings of deep underlying systemic problems” as the Western world moves away from the quantitative easing approach (central bank support for financial assets to boost economic growth) introduced in the aftermath of the 2008 crisis.

He warns of “politically difficult economic choices being made against a backdrop of recession,” adding, “The canaries of the financial world are gradually being dethroned.” Last week, the International Monetary Fund warned of a new wave of financial crises. Given this pessimistic outlook, it’s not surprising that GOT’s portfolio is cash heavy – 38 percent compared to 28 percent a year ago. The trust’s two largest holdings — Templeton European Long-Short Equity and Volunteer Park Capital (VPC) Fund — are also defensive.

As the name of the Templeton fund implies, it makes money for investors when stock prices fall as well as rise. The VPC fund has interests in unlisted investment managers. “We are still concerned about stock price valuations — and we unequivocally believe that more stock market corrections are on the way,” says Nairn. The portfolio is divided over 22 holding companies. The largest equity holdings are in energy stocks such as TotalEnergies and ENI – and big brands such as Unilever and Samsung Electronics, which are resilient but undervalued.

The trust’s performance reflects Nairn’s prudent approach. Last year, GOT achieved a total return of 13.1 percent. This compares to the average global trust’s loss of 7.4 percent. Five-year returns are broadly similar, although GOT shareholders have had a smoother journey. In the past financial year, a dividend of 5 pence per share was paid, which corresponds to an annual income of 1.6 percent. The trust’s annual fee totals 0.9 percent, the exchange identifier is 3386257, and the market ticker is GOT. Trusts with a similar defensive backbone include Capital Gearing, Personal Assets, and Ruffer.