We name the top 10 investment trust performers of the year and detail the losers.
The twin themes of big tech and online retail delivered impressive returns for investors in 2020, a year in which the S&P 500 index hit a record high. The pandemic has reshaped the way we work and shop, and those companies that have been able to tap into that trend have done spectacularly well over the last 12 months.
That’s why investment trusts focusing on US equities, growth and technology have made it into the list of top-performing investment companies for 2020.
Baillie Gifford, a Scottish fund house with a growth investing bias, dominated the winners’ list this year among both open-ended funds and investment trusts, as growth stocks continued to outperform. Baillie Gifford has four investment trusts among the top 10 performers, including the top three.
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“It is no surprise that Baillie Gifford as a house has many trusts near the top of the 2020 leaderboard given its stylistic biases to growth in the online economy and information technology,” says Thomas McMahon, senior analyst at Kepler Partners.
|Top 10 performing investment trusts in 2020|
|Investment Trust||Performance (%)|
|Pacific Horizon (LSE:PHI)||130.4|
|Baillie Gifford US Growth Trust (LSE:USA)||113.5|
|Scottish Mortgage (LSE:SMT)||96.4|
|JPMorgan China Growth & Income (LSE:JCGI)||82.5|
|Allianz Technology Trust (LSE:ATT)||74.9|
|Edinburgh Worldwide (LSE:EWI)||70|
|Fidelity China Special Situations (LSE:FCSS)||66.6|
|Pershing Square Holdings (LSE:PSH)||64.3|
|Biotech Growth (LSE:BIOG)||62.1|
|Golden Prospect Precious Metals (LSE:GPM)||60.3|
|Source: FE Analytics. Share price total returns. Data from 1 January 2020 to 9 December 2020. Note: Venture Capital Trusts have not been included. Trusts in the unclassified sector are also excluded.|
Asia Pacific and China stand out
This year’s top trust, Pacific Horizon (LSE:PHI), delivered an impressive 130% to investors over the course of 2020. The trust has been able to benefit from the extra growth potential of technology and online services in developing markets. McMahon explains that its “exceptional share price performance” was due in part to a large holding in SEA, a Singapore-listed company with e-commerce businesses across the ASEAN region which “has seen its share price appreciate by almost five times in dollar terms this year”.
Also among the best performers are China-focused equity funds JPMorgan China Growth & Income (LSE:JCGI) and Fidelity China Special Situations (LSE:FCSS). Scottish Mortgage (LSE:SMT) also benefited from its exposure to China this year, as well as the US.
Sarah Godfrey, director of investment companies research at Edison Group, says the performance of net asset value returns (NAV) and share prices this year demonstrated the strength of momentum investing.
“One thing to remember about investment trusts is that the NAV, which reflects the underlying assets, and the share price, which also takes account of investor sentiment, do not always move hand in hand. However, the winners in 2020 on an NAV total return basis were the same 10 funds as the top performers by share price total return, albeit in a slightly different order,” she says.
“To me, this proves how important momentum has been in this extraordinary year: the global investor preference for growth stocks – particularly those tech companies in the US and China that have helped facilitate the shift to online working and shopping – has driven stock markets to new highs, and the investment trusts in which they feature heavily have also led the charge.”
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Against the backdrop of Covid-19 and the race for a vaccine, it is no surprise that healthcare and biotech stocks have also outperformed. Frostrow Capital’s Biotech Growth (LSE:BIOG), for example, makes the top 10 with a 62% return this year. But the themes supporting these sectors are not just transitory, says McMahon, pointing to the long-term trends of technological advancements and an ageing population.
Elsewhere, New City Golden Prospect Precious Metals trust (LSE:GPM), just made the top 10 with a 60% return. This is noteworthy as the trust invests in gold miners. “It is interesting to see a gold mining trust make it into the top performers,” says McMahon.
“This is largely a defensive play. While some see gold as a hedge against inflation, it may better be seen as a tail risk hedge, and at times the huge government spending and disastrous unfolding of the pandemic made having savings outside the system attractive.”
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Trusts that have lagged
Two aircraft leasing funds were among the laggards this year - the worst-performing trust of 2020 was DP Aircraft (LSE:DPA), an aircraft leasing fund which fell 92%, while Amedeo Air Four Plus (LSE:AA4) was down 53%.
“The worst performers have spent 2020 leasing grounded aircraft to struggling carriers, as well as lower-rated debt, shopping-focused real estate and leisure,” explains Godfrey.
Commercial property trusts also feature among the bottom 10. Trusts across the sector saw their share prices slump notably in the first quarter of the year, amid concerns over the impact Covid-19 would have on the economy.
Looking ahead to 2021, given that the majority of fund managers are expecting stronger economic growth, it should be a more favourable backdrop for commercial property trusts.
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Commercial property is a bellwether for the wider economy, so it is an economically sensitive asset class. The commercial property market is made up primarily of shops, offices and industrial buildings such as warehouses.
Kepler’s McMahon says: “Commercial property has suffered as doubts have been expressed over future shopping and working habits. We have seen property start to recover a bit towards the end of the year, but discounts remain wide, so this could be an interesting area to watch in 2021.”
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Full performance can be found on the company or index summary page on the interactive investor website.