Ian Cowie's column
Ian Cowie's column in the Money Section of the Sunday Times last Sunday talked about the importance of sustainable income for pension investments and gave a list of 12 investment trusts that met certain criteria, namely a yield of more than 3.1%, increasing the yield by more than 3.1% per annum over the last five years and holding cash reserves equal to at least one year's payouts.
While I agree with his recommendation of investment trusts for pension investment I was not so sure about some of the trusts on his list. Some are quite small, two having a market cap of less than £100 million. If 1% of Cowie's readers were to buy them they would quickly go to a premium. More to the point I avoid trusts with a small market cap as I cannot be sure there will be buyers should I decide to sell. Until now I have used a cutoff point of £100 million but am considering raising it.
Lindsell Train is one of the trusts on the list. I see that the trust has 46% of its assets in Lindsell Train Limited, its management company. This makes me uncomfortable as, although Lindsell Train has had a strong record in the past, a significant holding in a management company could lead to increased price volatility.