A number of 2022's top performers have given investors a roller coaster of a ride over the long term.
The chances are most investors will have either zero or a small amount of exposure to the best-performing investment trusts of 2022.
As the table below shows, all the top 20 trusts this year (those with assets over £25 million) are specialist strategies that invest in an adventurous manner. Such trusts are best suited as satellite holdings as part of a diversified portfolio.
The core of the portfolio (around 70% or 80%) should be investments that provide few surprises – such a global or developed market funds – either actively or passively managed. The satellite holdings are spicier funds in the hope of generating higher growth.
Some adventurous strategies are higher risk than others, with the top three performers of 2022 giving investors a roller coaster of a ride over the years. The trio are listed aircraft-leasing funds. During the pandemic, such funds were naturally negatively impacted by airlines not being able to get planes in the air. As economies have re-opened, with international travel returning to normality, these specialist funds have proved to be this year’s best recovery play.
However, it is worth pointing out that despite sky-high returns in 2022, these funds have failed to take off over the long term. For example, over five years Doric Nimrod Air One (LSE:DNA) is down around 40%.
JZ Capital Partners (LSE:JZCP), the fourth best overall performer in 2022, is another example of a highly volatile strategy. The trust, which invests in US and European micro-cap shares and US real estate, is down 61.9% over five years.
A key theme among the top performers is that five renewable energy infrastructure trusts feature: Gresham House Energy Storage Fund (LSE:GRID), Harmony Energy Income Trust (LSE:HEIT), Foresight Solar (LSE:FSFL), JLEN Environmental Assets Group (LSE:JLEN), and Thomas Lloyd Energy Impact Trust (LSE:TLEI).
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In a recent analysis of the sector, we pointed out that studying the sector average performance is not particularly useful due to the variety of strategies in the mix. Some specialist trusts invest in a niche area, either solar, wind, hydrogen, energy efficiency or energy storage, while others have a mix of renewable exposure, with some aiming to benefit both from when the wind blows and when the sun shines.
Investment trusts that specialise in commodities have also fared well, including CQS Natural Resources Growth & Income (LSE:CYN), and BlackRock World Mining Trust (LSE:BRWM). Natural resources stocks have benefited from the high oil price and inflation.
Top 20 performing investment trusts of 2022
Source: FE Fundinfo. Data from 1 January 2022 to 16 December 2022.
The biggest losers of 2022
Year-to-date it has been a tough year for most investment trusts, with the average investment trust down 15.4% in the year to 30 November 2022. Investment trusts’ ability to gear (borrow to invest) has magnified losses as markets have fallen. This has had a big bearing on why most investment trust sectors have fared worse than equivalent fund sectors.
Among the worst performers, specialist strategies again dominate. In the bottom three are JPMorgan Emerging Europe Middle East & Africa Securities (LSE:JEMA), Home REIT (LSE:HOME), and Chrysalis Investments Limited (LSE:CHRY), with respective losses of 88.8%, 88.3% and 69.2%.
The JPMorgan trust was formally called JPMorgan Russian Securities. Last month, its board fended off opposition from an informal group of DIY investors to amend its investment mandate to include emerging Europe, the Middle East and Africa.
In the build-up to the vote, some DIY investors banded together to vote against the proposals. They argued that the trust could be caught up in a flash sale of Russian assets when the Moscow Stock Exchange opens to foreign investors if it needs to reposition its portfolio to include stocks from other regions.
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Home REIT, which invests in accommodation for homeless people across the UK, has experienced notable changes in its share price and discount after a short seller report was published on 23 November. Since then, the shares are down around 40%.
Short seller Viceroy Research made allegations about the financial stability of the underlying assets of Home REIT. A full response was issued by Home REIT on 30 November in which it called Viceroy Research’s allegations “baseless and misleading”. It addressed five key allegations made by the short seller, including financial stability.
Growth capital investment trust Chrysalis Investment Limited has seen its share price fall notably in 2022, as funding for tech companies dried up and investors moved to prioritise profits today over the prospect of future growth.
The trust buys fledgling companies that might make it big, such as buy now, pay later firm Klarna and digital bank Starling.
Its shares rose from around £1.20 at the start of 2020 to a peak of £2.70 (3 September 2021), as investors rushed to own a slice of the future. However, with interest rates rising rapidly, its share price has plummeted to 75p, a drop of 72% from its peak.
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.