Message from Alasdair McKinnon, Manager
The coronavirus, COVID-19, is a public health crisis and our thoughts are with those affected by the virus. I realise that stockmarket matters may not be foremost in many investors’ minds but, as we have seen some dramatic price movements in recent weeks, I thought it would be helpful to provide a brief update.
Even prior to this crisis, we had found the degree of complacency in stockmarkets perplexing and concerning. We had already positioned ourselves to seek to avoid the ‘hot’ areas of the market which we judged vulnerable to a change in mood.
We take a contrarian approach to investing and, having observed the economic impact of the virus in China, we were surprised that this was initially shrugged off by markets. In response to these developments, we made some changes in advance of the current market correction and increased exposure to investments with resilient revenues and downsized parts of the portfolio that are more economically sensitive. Our goal was to preserve capital in a tough environment.
As well as a more defensive equity portfolio, we also modestly increased our cash position to reduce exposure to stockmarkets overall. A key tenet of our philosophy is that protecting capital, as best we can, is an important part of maximising long-term returns.
We cannot be certain how significant the eventual impact of the coronavirus pandemic will be, but we do know that, eventually, it will pass.
Although the suddenness of the market correction will undoubtedly have been troubling for many investors, we feel the portfolio is positioned correctly for such circumstances. When we emerge on the other side, the restoration of confidence will undoubtedly offer attractive opportunities. We are monitoring for signs of change and will act accordingly.
Please remember that past performance may not be repeated and is not a guide for future performance. The value of shares and the income from them can go down as well as up as a result of market and currency fluctuations. You may not get back the amount you invest.
The Scottish Investment Trust PLC has a long-term policy of borrowing money to invest in equities in the expectation that this will improve returns for shareholders. However, should markets fall these borrowings would magnify any losses on these investments. This may mean you get back nothing at all.
Investment trusts are listed on the London Stock Exchange and are not authorised or regulated by the Financial Conduct Authority.
Please note that SIT Savings Ltd is not authorised to provide advice to individual investors and nothing in this article should be considered to be or relied upon as constituting investment advice. If you are unsure about the suitability of an investment, you should contact your financial advisor.