Interactive Investor

The 10 most-popular investment trusts: June 2022

1st July 2022 10:44

Sam Benstead from interactive investor

Three investment themes dominate the list: growth, capital preservation and natural resources.

Investors continued to buy the dip in Scottish Mortgage shares in May, as the investment trust hit its largest-ever discount to net asset value.  

The giant £10.7 billion trust’s shares slumped 9% in June, sending its discount to more than 18% for the first time ever. However, investors saw this as a bargain, topping up shares. 

Shares in growth investment specialist Scottish Mortgage are falling as interest rates rise, pushing up bond yields. Higher returns from safe assets such as bonds reduce the appeal of companies that promise to make money in the future but are short in the way of profits – and dividends – today. 

Balancing out demand for risky Scottish Mortgage shares, investors also bought defensive “capital preservation” trusts in June. 

Capital Gearing, Ruffer Investment Company and Personal Assets all made the top 10 most-bought list. Ruffer fell down the ranks from second to fifth place,  while Capital Gearing rose from sixth to fourth. Personal Assets held steady in 10th place.  

These funds are heavily invested in inflation-linked bonds, which act as a defence against rising inflation. However, prices of these bonds have fallen as interest rates have risen.  

Investors also bought natural resources trusts last month, with BlackRock World Mining up one place to third and BlackRock Energy & Resources arriving as a new entry in ninth place.

This came despite a poor month for resources. The trusts’ shares dropped 19% and 24% respectfully as investors dialled up bets that a recession is around the corner. Declining economic growth would be bad for natural resource prices as demand would fall.  

This suggests that investors are bullish on natural resources, buying into the thesis that a lack of investment in new mines and oil wells will keep prices high because demand will keep growing.  

City of London was a big riser in May, jumping from fifth to second place. It is a “dividend hero”, having raised its payout to investors for 55 consecutive years. It yields 4.8%, providing an income boost when the cost of living is rising faster than wages.  

NewRiver REIT, a specialist listed real estate trust focused primarily on retail and leisure property, was a new entry in seventh place. Just ahead of it in sixth place was Greencoat UK Wind, another specialist “real asset” fund that owns wind farms in the North Sea. It generates an income by selling wind power to the grid and returns it to shareholders via quarterly dividends. Yielding 4.7%, it has been a big beneficiary of higher power prices. 

European Assets was another new entry, in eighth place. It owns small and mid-sized quoted companies in Europe, excluding the UK. 

Top 10 most-popular investment trusts: June 2022

Position ETF Change from May One-year performance to 30 June (%) Three-year performance to 30 June (%)
1 Scottish Mortgage No change -46.1 36.5
2 City of London Up three 7.7 9.4
3 BlackRock World Mining Up one -8 51.2
4 Capital Gearing Up two 2.9 20.8
5 Ruffer Investment Company Down three 6.4 43.7
6 Greencoat UK Wind Down three 28.2 27.3
7 NewRiver REIT New entry 9 -44.6
8 European Assets New entry -28.7 -1.4
9 BlackRock Energy & Resources New entry 18.4 48
10 Personal Assets No change 1.9 17.3

Source: FE FUNDINFO, 30 June 2022. Note: the top 10 is based on the number of “buys” during the month of June.

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