Interactive Investor

Up 72% or down 34%: a wild month for specialist investment trusts

Investment trusts investing in a narrow area of the investment universe come with greater levels of risk, as the last month has proven. Kyle Caldwell explains why.

4th October 2023 10:19

by Kyle Caldwell from interactive investor

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Investors are often told that the minimum holding period for funds – whether actively managed or passive – is five years. That period is viewed as an ample amount of time to ride the inevitable ebbs and flows that come with stock market investing.

However, the most adventurous strategies can, on occasion, shoot the lights out or plummet over very short time periods.

Examples of specialist funds and investment trusts include those invested in a single-country emerging market, such as China, India and Vietnam. Other specialists focus on a particular niche within a certain asset class, theme or sector.

The key thing to remember with such approaches is that performance can quickly blow hot and cold. The performance of specialist investment trusts in September proves this point. As the table below shows, the best-performing specialist returned 72%, while the worst lost 34%.

Specialist risers in September

Investment trust

Return (%)

Round Hill Music Royalty (LSE:RHM)


Symphony International Holding (LSE:SIHL)


Nippon Active Value (LSE:NAVF)


Geiger Counter (LSE:GCL)


Life Science REIT (LSE:LABS)


Specialist fallers in September

Source: FE Fundinfo. Data from 1 September 2023 to 30 September 2023.

Round Hill, which specialises in music royalties, saw its share price soar on the back of accepting a takeover.  

In contrast, bottom of the pile was digital infrastructure specialist Digital 9. Its share price plunge was in response to the 6p dividend target being scrapped for its 2023 financial year, as well as its second-quarter dividend not being declared. The scrapping of the dividend target was particularly punished given that its board had said in mid-July that the policy would remain in place.

Commenting on the performance of specialist investment trusts last month, Ben Yearsley, a director at Shore Financial Planning, said: “It wasn’t a great month for specialist investment trusts, with Digital 9 having a shocker after abandoning the dividend and effectively saying they were running short of cash.”

He adds that Civitas and Home REIT Ord (LSE:HOME) are other examples of specialist trusts that have turned sour. 

Yearsley continued: “Specialist trusts could do with better corporate governance. Once the darling of the trust world, it feels like many specialist trusts have a lot of work to do to regain investors’ interest.”

It also serves as a reminder that while investment trusts have plenty of attractions for private investors they tend to be more volatile than open-ended funds. Unlike open-ended funds, the professionals running investment trusts are not forced sellers during periods of heavy investor selling due to them having a fixed pool of capital. However, the downside is that the market can take a dim view of the outlook and force down share prices.

The reality is that every investment has an element of risk and there are no guarantees a return will be achieved. While most people think about risk as losing money, academic finance defines risk as volatility. In the simplest terms, this means how much the price of an investment fluctuates over a given period of time.

It is important that investors have an understanding of where the funds and/or trusts they hold sit on the risk spectrum. At one end are cautious strategies, such as wealth preservation trusts, while the other is occupied by those that are adventurously invested, such as those specialising in a certain area or niche. 

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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