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Questor: capital gains on our Income Portfolio fail to shine as Brexit fears take their toll

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Questor Income Portfolio: we have a heavy domestic bias, which is doing us no favours when it comes to share prices, although our income is holding up nicely

As it is the first Friday of the month we publish today our performance table for the Income Portfolio. It tells a familiar story: we are achieving our income goal of 5pc annually but capital performance is less inspiring: we are nursing annual losses of 1.6pc (remember, all figures in the table are annualised).

Much of the cause is our portfolio’s bias towards domestic stocks, shunned by many investors because of Brexit. Among the biggest sufferers are Royal Mail (down 51pc since our tip) and National Grid (down 20pc), which are additionally suspect in many investors’ eyes because, as firms that were once state-owned, they could be first on Jeremy Corbyn’s renationalisation list if the Brexit crisis propels him into No 10.

The property market is seen as a bellwether for the wider domestic economy so our holdings here – such as Lloyds Banking Group, Crest Nicholson and ULS Technology – are hardly sparkling in share price terms.

Next, the retail chain, is the biggest exception: despite its own dependence on the British economy it has gained 23pc in capital terms, showing that managers with a clear, well executed strategy can triumph in difficult circumstances.

Our two long-standing holdings in generalist equity income investment trusts, Schroder Income Growth and Invesco Income Growth, have performed well, as have our bonds.

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IHT Portfolio new holding: Oxford Metrics

In Wednesday’s column we tipped for readers generally a promising Aim-quoted stock called Oxford Metrics.

The firm is a world leader in “motion capture”, which is used to form a digital picture of movements made by human beings in order to improve their performance, develop equipment or make animations.

It’s the kind of business that benefits from proprietary technology and close relationships with customers, resulting in pricing power, high returns on capital and strong cash generation.

Naturally we would therefore like to add it to our Inheritance Tax Portfolio; we just have to be sure first that it is likely to qualify for IHT exemption via “business relief”.

  • Read Questor’s rules of investment before you follow our tips

James Rae of Charles Stanley, whose holding of Oxford Metrics in his firm’s own inheritance tax portfolios prompted our tip, said he had no doubt that the stock qualified for the tax break.

“It does have quite a lot of cash, which can be frowned on by HMRC because businesses are supposed to put their assets to economic use, not sit on them unproductively, if they want to qualify for the relief, but we’ve never had the holding questioned when our clients have died and their estates have received the tax exemption in full.”

While this reassures us that we can add the stock to the IHT Portfolio, what Mr Rae said emphasises the point that qualification for business relief is not set in stone and no one can be absolutely sure of it until the shareholder has died and application is made to the tax office.

Stocks must also have been owned for two years before death.

Questor says: buy

Ticker: OMG

Share price at close: 89.5p

Read the latest Questor column on telegraph.co.uk every Sunday, Tuesday, Wednesday, Thursday and Friday from 6am.

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