It can be hard to look past day-to-day cares and worries and give proper thought to achieving a financially comfortable retirement. However, if you want to enjoy a decent quality of life after you bring your career to a close then you must devote more attention to your pension.

Investment trusts, held within a SIPP (self-invested personal pension), can be a useful vehicle to help you achieve your goals. They trade on the stock market just like normal stocks and shares, they are easy to buy and sell and they typically have a good deal of transparency.

In this article we identify eight products – four suitable for those building up their retirement pot and four for those already in retirement. Read on to discover the trusts in question and why they earn a place in our two separate portfolios.

Four trusts for building up your pension pot

Assuming you have at least a decade to go until you retire then your priority should be on growing your retirement pot as much as possible. For this reason, it is worth taking on a little more risk in order to achieve a higher level of return. In our view the following collection of trusts achieves this in a balanced way.

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Polar Capital Global Healthcare (PCGH) 

Buy at  323.9p

Healthcare is an attractive sector from an investment perspective. Demand for healthcare is inelastic and, to an extent, is immune to the vicissitudes of the wider economy.

Another point in its favour for someone with a lengthy investment timeframe is the favourable demographics in the Western world which is seeing its population get progressively older and require more medical interventions.

Polar Capital Global Healthcare is an effective way to play the theme with a strong long-term track record. It is a concentrated portfolio with just 43 holdings and has a high active share (a metric which shows how much its holdings deviate from the benchmark) of 80.8%.

It holds one of the top performing pharma names of 2023, Eli Lilly (LLY:NYSE), which has been propelled higher by the development of new treatments for two of the globe’s biggest public health issues in obesity and Alzheimer’s, as well as investing its UK-listed peer AstraZeneca (AZN).

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Strategic Equity Capital (SEC)  

Buy at  308.5p

If you are investing for the long term your portfolio needs to be able to cope with several different economic and market cycles.

The approach of Strategic Equity Capital should help with these ups and downs given manager Ken Wotton’s emphasis on reviewing his portfolio to ensure it is suited to the prevailing environment.

The trust’s parent Gresham House looks to employ a private equity approach to public markets. In practice this means Wotton looks for smaller businesses with little or no debt, higher levels of profitability, strong earnings streams and an operating model robust enough to withstand periods of stress and volatility.

Wotton also looks to tap into structural themes like sustainability and digital transformation. This strategy has delivered strong returns over the last decade and helps to justify an ongoing charge slightly in excess of 1%. The company recently saw a top holding, teleradiology provider Medica, taken over in a £269 million premium-priced deal.

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JPMorgan Emerging Markets (JMG)  

Buy at  106.6p

Emerging markets are at a different stage of their development and this means they have greater growth potential than developed economies. Their more youthful demographics also create a compelling dynamic.

These markets can be more volatile but with time on your side you can ride out bumps in the road.

There has been a transition away from the commodity and/or export driven story of 20 years ago towards greater levels of innovation.

When it comes to diversified exposure to this space, JPMorgan Emerging Markets is a strong performer and ongoing charges of 0.84% are competitive with the peer group.

The focus on quality should help limit exposure to the historically more elevated risks around corporate governance and financial stress in emerging markets.

The trust leans on a team of more than 90 research and investment specialists who conduct in excess of 3,000 company visits a year.

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Allianz Technology Trust (ATT)  

Buy at  265.5p

The companies which have shifted the dial in the last decade or more can be found in the technology space and the development of AI (artificial intelligence) seems to be providing new life to the sector.

Valuations may be demanding but given the upside potential any long-term investor realistically needs exposure to this theme as part of a diversified portfolio.

Allianz Technology Trust is an excellent way to achieve it, particularly as it is trading at a substantial discount (13%) to the value of its assets.

Based close to the epicentre of the global tech industry in Silicon Valley in San Francisco, the portfolio is run by Mike Seidenberg who took over from the long-serving and highly regarded Walter Price in 2022. Reassuringly, Seidenberg had been part of the team for almost 15 years.

The trust has 42 holdings which are overwhelmingly based in North America – with AI star Nvidia (NVDA:NASDAQ) in the top 10 by weighting. 

The team behind trust has the experience, resources and skills to look past the hype to identify the genuine opportunities.

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Four trusts for income and growth in retirement

If you are going to remain invested in your retirement, i.e., go into drawdown rather than purchasing an annuity providing a guaranteed income for life, then it makes sense to have an eye towards growth as well as income.

Current UK life expectancies mean a 65-year-old man could expect to enjoy nearly 20 years of retirement and a woman of the same age a little more than two decades.

We have constructed our hypothetical portfolio with this in mind, looking for a mix of regular income alongside the potential for capital appreciation. At the same time, we have avoided higher risk investments.

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Target Healthcare REIT (THRL)  

Buy at  74.9p

Property is often seen as useful source of income and, as a real asset, a protector of wealth during periods of inflation.

We like Target Healthcare REIT because it operates in a care home space which has significant demographic drivers, something it 
looks to play in a responsible way. It invests in purpose-built facilities with single-occupancy rooms and ensuite wet rooms.

Real estate stocks have been hurt by the sharp rise in interest rates which have increased the attractions of cash as an asset, meaning a lot of people have turned their back on property-focused investments and thus share prices have fallen across the sector.

This trend has negatively affected Target Healthcare REIT’s share price, however it has left the stock looking attractive both from a discount to net asset value (32%) and yield perspective (7.5%).

Looking at the track record the income on offer should be secure with long-term leases which are tied to inflation. The extra costs of managing property as an asset class means the ongoing charges (1.5%) are higher than those for equity-focused trusts.

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STS Global Income & Growth Trust (STS)  

Buy at  219p

It may have changed name from Securities Trust of Scotland but this vehicle continues to pursue what has been a successful strategy over many years.

The investment manager behind it, Troy Asset Management, has an inherently cautious philosophy which underpins how STS looks to achieve income and growth from global stocks.

This is a high-conviction portfolio of 31 names with a bias towards the sort of solid and dependable companies which do not need to invest huge amounts of capital to expand and therefore are able to fund healthy dividends.

Managers James Harries and Tomasz Boniek also look for businesses which have robust balance sheets and which enjoy competitive advantages which can sustain high returns over the long term.

Top holdings include snacks and drinks firm PepsiCo (PEP:NASDAQ), HR and payroll outsourcing outfit Paychex (PAYX:NASDAQ) and pharmaceutical firm Novartis (NOVN:SWX).

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Dunedin Income Growth (DIG)  

Buy at  266p

If longevity is any measure of success, then this trust must be doing something right, having recently marked its 150th anniversary.

The remit is to target regular and growing dividends, principally from the UK market. This portfolio of 35 names includes the likes of data analytics business RELX (REL) and consumer goods firm Unilever (ULVR).

While the 4.9% yield may be less than you can currently get on cash savings, the scope for dividend growth is attractive thanks to the type           of companies in its portfolio.

The ability to consistently grow a dividend implies a company is cash generative and shareholder friendly. You can draw the conclusion that management see scope for value accretion in their business over the coming years.

Given Dunedin has stakes in a collection of businesses with these qualities, one might expect to see both a rising share price and a steady increase in dividends from the investment trust over time, although understanding that neither are guaranteed.

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TwentyFour Select Monthly Income (SMIF)  

Buy at  73.9p

A product which pays out a generous rate of income on a monthly basis can be invaluable for someone looking to cover their regular outgoings.

TwentyFour Select Monthly Income invests in a range of different credit opportunities and has a decent track record of delivering income. It has an 8.7% yield based on the historic payments over the past 12 months.

While the departure this month of manager Gary Kirk is not ideal, broker Numis it says should not have a significant impact on the management of the fund given the multi-sector bond team has grown to include five partners and 10 further investment professionals.

Bond funds have been out of favour over the past 18 months thanks to rising interest rates. However, there is a feeling that we’re close to the peak of the rate hike cycle and therefore it’s worth looking at the bond space again.

Bond fund managers will be hoping to reinvest money from maturing bonds into ones trading on lower prices, thereby locking in higher yields.

Numis says TwentyFour Select Monthly Income offers ‘an attractive way to generate a high yield, through a diversified portfolio focused on areas of the debt market benefiting from an illiquidity and complexity premium’, a strategy which it observes is a good fit with the investment trust structure.

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DISCLAIMER: Daniel Coatsworth who edited this article owns shares in Polar Capital Global Healthcare

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