10 most popular investment trusts: July 2019

by Kyle Caldwell from Money Observer |

We reveal the most-bought trusts and how investors reacted to Woodford Patient Capital's difficulties.

We reveal the most-bought trusts and how investors reacted to Woodford Patient Capital Trust (LSE:WPCT) difficulties.

The trouble with trying to buy on the cheap is the risk of catching the proverbial falling knife, with Woodford Patient Capital a case in point.

In June, the poor-performing investment trust climbed up to the top of the leaderboard to become the most purchased closed-ended fund among customers of interactive investor, the parent company of Money Observer.

It knocked Scottish Mortgage (LSE:SMT) off the top spot, a position that the Baillie Gifford-run trust had occupied every month since May 2015.

Investors were attempting to 'buy low', as in the month of June Woodford Patient Capital saw its share price come under heavy pressure following the suspension of Woodford's flagship open-ended fund, Woodford Equity Income. It fell 28.6% in June and its discount widened to over 30%, as concerns mounted over the high crossover of holdings between the two portfolios.

Fast-forward one month and the situation now looks even more precarious, after it came to light that Neil Woodford had sold over half his personal stake in Woodford Patient Capital ahead of potentially being axed by the trust's board.

An announcement from the board to shareholders in late July stated that it would "engage with a broader range of third-party managers...which may or may not lead to a change in the company's management arrangements".

In July, Woodford Patient Capital remained under pressure, with the share price falling 15.5% across the month, from 56.1p to 47.4p. Its discount has widened out further to 41.9%, as at 2 August. In contrast, over the past 12 months the trust has trading on an average discount of 16.6%, according to Winterflood, the broker.

During July, customers of interactive investor were still drawn to the bargain credentials of the wide discount, but interest cooled somewhat and Woodford Patient Capital fell from the top spot to fifth place in the rankings.

Scottish Mortgage regained the top spot, with performance over both short and long time periods continuing to impress. The FTSE 100 listed company, managed by James Anderson and Tom Slater, favours companies that are using technological change to their advantage. 

In second place, climbing up the leaderboard from eighth last time around, is Lindsell Train Investment Trust (LSE:LTI). On 5 July, the trust's share price declined by 22%, following Hargreaves Lansdown's decision to remove two of Lindsell Train's open-ended funds from its Wealth 50 list of recommendations. As a result, its sky-high premium of over 80% dramatically fell, to 43%.

Over the course of the month, Lindsell Train Investment Trust staged something of a recovery, before the shares headed south once again. For the month of July, the share price fell by 29.6%, from £19.03 to £13.40. Its premium at the end of July stood at just under 60%.

Therefore, its increased popularity over the month of July is a sign that investors were again attempting to take advantage of share price weakness. But in doing so, investors are also choosing to accept the excessive premium that comes attached with the trust. 

Also climbing up the rankings is Smithson Investment Trust (LSE:SSON), which last autumn raised £822.5 million, a record for an investment trust. The trust aims to replicate the investment philosophy of Terry Smith's Fundsmith, the company under which it was launched, but instead focuses on global smaller companies. Performance has been promising since launch, with Smithson up 19.9%.

Next, in fourth spot, is Finsbury Growth & Income (LSE:FGT), a regular in the top 10. Around a third of its assets are invested in either out-and-out tech companies such as Sage Group (LSE:SGE), or companies that are radically improving productivity through technology.

Outside of the top five, there are two new entrants in July: Syncona (LSE:SYNC) and Polar Capital Technology (LSE:PCT), joining Allianz Technology Trust (LSE:ATT), Monks (LSE:MNKS) and City of London (LSE:CTY), who all retain their places in the top 10. 

Rank Investment trust AIC sector Rank change from June 1-year return (as at 5 August) 3-year return
1 Scottish Mortgage (LSE:SMT) Global 1 2.80% 89.40%
2 Lindsell Train Investment Trust (LSE:LTI) Global 6 20.50% 91.50%
3 Smithson Investment Trust (LSE:SSON) Global smaller companies 3 N/A N/A
4 Finsbury Growth & Income (LSE:FGT) UK equity income -1 16.70% 54.30%
5 Woodford Patient Capital Trust (LSE:WPCT) Growth Capital -5 -44.20% -49.40%
6 Allianz Technology Trust (LSE:ATT) Technology & Media 2 19.20% 148.20%
7 Syncona (LSE:SYNC) Biotechnology & healthcare New entry -1.20% 95.90%
8 Monks (LSE:MNKS) Global 2 9.10% 99.30%
9 Polar Capital Technology (LSE:PCT) Technology & Media New entry 13.70% 100.80%
10 City of London (LSE:CTY) UK equity income -6 1.80% 19.40%

This article was originally published in our sister magazine Money Observer. Click here to subscribe.

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.

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