10 most-bought investment trusts in October 2018

by from interactive investor |

Was October a blip, or should investors look at previously unloved markets? Rebecca O'Keeffe, interactive investor's head of investments, reveals the biggest buys of the past month.

Markets suffered a sharp fall in October, led by US technology stocks.  At its lowest point, the NASDAQ was down over 12% intra-month, recovering a little to a decline of 9.2% for the month as a whole.    

Among the big US tech stocks, Amazon and Netflix fell by over 20%, and Facebook extended its decline since summer highs, having lost more than a third of its value from the summer high to its October low.  

Despite the volatility, users of the interactive investor trading platform continued to put money into global investment trusts in October.

While investors would love to avoid down months, it is almost impossible to time the market effectively over long periods of time. Although the correction of early-2016 felt immense at the time, the NASDAQ is up a stunning 70% since that early-2016 low (even after October's decline).  Investors who decided to cash in at that point would have missed out on some spectacular gains.

Yet again Scottish Mortgage remained the most popular investment trust, although it suffered from the poor performance of many of its top holdings. It was a similar story for other large global and tech focused trusts. Allianz Technology, run by the veteran tech investor Walter Price, and Edinburgh Worldwide, run by Douglas Brodie had a torrid October as their US technology holdings came under particular pressure. 

In all three cases the trusts suffered double-digit falls - which were a combination of the performance of their underlying holdings and their premium narrowing or being eroded entirely. 

Amid market corrections, many investors are keen to buy on dips to pick up a bargain.  As well as focusing on individual equities, investors should also look closely at moves in investment trusts.  During sharp corrections, investment trust prices are not only affected by the decline in the value of their underlying investments, but they may also experience substantial shifts in the premium or discount to their underlying NAV.

New entries to the list in October included Smithson, which launched during the month and Monks

The huge success and popularity of Fundsmith finally persuaded Terry Smith to launch a new investment option for investors. Such was the interest in the launch that Smithson raised £822.5 million, surpassing the previous recordholder - Woodford Patient Capital - which raised £800 million in 2015.  The trust will be investing in global smaller companies and is expected to be a regular member of the Top 10 list.  

Monks, which has a fifth of its holdings in tech, also entered the rankings. Manager Charles Plowden and his two deputies, Malcolm MacColl and Spencer Adair, took over Monks in 2015 and have led a turnaround in performance which has seen its popularity increase.   

The past year has seen the US market, especially technology stocks, soar ahead of alternatives, significantly benefitting trusts and funds which have been overweight the sector. The key question is whether October was a blip in one long bull run and this outperformance can continue - or if, on a relative valuation measure, investors would be better off looking at other, previously unloved, markets.

Most-popular investment trusts bought in October 2018

Rank Fund AIC sector Previous Rank*
1 Scottish Mortgage Global 1
2 City of London UK Equity Income 3
3 Allianz Technology Technology, Media & Telecommunications 2
4 Baillie Gifford Shin Nippon Japanese Smaller Companies 6
5 Edinburgh Worldwide Global 4
6 Smithson Global Smaller Companies New Launch
7 Monks Global New Entry
8 Foreign & Colonial Global 8
9 Fidelity China Special Situations Asia Pacific 5
10 Finsbury Growth & Income UK Equity Income 7

*September 2018

Source: interactive investor, 4 November

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.