Over the year, our trust portfolios outstripped the FTSE All-Share and the FTSE All-World indices.
A few wobbles aside, global stock markets have continued to build on the euphoric gains in the second quarter of 2020 when markets bounced back strongly from the initial Covid-19 pandemic panic.
We are delighted to report that, over the year to 30 June, our investment trust portfolios have handsomely outstripped the gains from benchmarks we measure them against – the UK’s FTSE All-Share and the FTSE All-World indices.
The investment trust portfolios that were first introduced in Money Observer magazine several years ago, have been continued by interactive investor.
Each portfolio is comprised of 10 equally weighted closed-ended investment companies, with more than 90% exposure to UK and global markets or private equity (where the trusts invest in entities that are not listed on public stock markets).
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With the general ‘risk-on’ market mood, it is hardly surprising that the 38.8% gain from the 10 trusts that make up the adventurous portfolio has trumped the conservative choices.
However, the latter portfolio has not been a laggard, with the 29.7% uplift usefully higher than the respective 24.6% and 21.5% gains from the FTSE All-World and FTSE All-Share index benchmarks.
Over longer time frames, the gains for investors who follow the portfolios look even better. Even the comparatively more cautious conservative tips have handsomely outstripped the FTSE All-Share, which is up a meagre 6.3% after three years and 36.9% after five years. In comparison, the conservative portfolio has gained 42.5% and 97.7% respectively.
When measured against the FTSE All-World Index, the outperformance is not as pronounced – indeed the conservative portfolio has slightly underperformed the 43.5% uplift from the index over three years but still beats the global benchmark’s 91% gain over five years.
Even better still is the gain seen since the investment trust tips were first measured as portfolios in August 2014. The conservative choices have since rewarded investors with a 125.1% gain compared with the 43% growth in value of the FTSE All-Share.
These gains are especially notable because, taken as a whole, the conservative choices are not as overtly growth-focused as trusts in the adventurous portfolio, with several choices prioritising capital preservation. Constituents of the adventurous portfolio are also more likely to have higher gearing (when a trust borrows money) and they also tend to be more focused on a smaller range of underlying investments.
The growth-focused environment that has largely persisted over the past decade has been reflected in outstanding gains for the adventurous tips, up 38.8%, 51.9% and 139.9% after one, three and five years. And since inception in August 2014, the adventurous portfolio has risen by 186.4% – more than four times the gain from the FTSE All-Share Index.
In the 2020 annual review, we cautioned that an uncertain outlook meant that more cautious investors might prefer to focus on trusts in the conservative portfolio, while investors with stronger stomachs and those saving for the long term would likely be better served by the adventurous choices.
As markets have since continued their strong upward trajectory, this is worth remembering for the near-term as supportive fiscal and monetary measures are gradually scaled back. Last year’s ructions are also a reminder that investors should expect the unexpected: in the first three months of 2020 both portfolios fell by around 20%.
Best in show over the year
UK smaller companies trust BlackRock Throgmorton (LSE:THRG) posted an annual gain of 67.8%, reflecting the sensitivity of smaller company trusts to improved economic sentiment and the mood in markets. We have this trust in the conservative portfolio due to its ability to ‘short’ shares (in expectation of a fall in value), which should provide some protection when markets are falling.
Adventurous choice Standard Life UK Smaller Companies (LSE:SLS) posted a lower 46.9% uplift, but this performance still placed it in the top four performers overall.
Trusts with varying degrees of exposure to private equity performed very strongly: Baillie Gifford US Growth (LSE:USA) has 17% of its portfolio in unlisted investments and the trust returned 66.3% over the year to end June, belying fears that its overtly growth-focused strategy might prove less popular with investors. The pure private equity exposure of NB Private Equity (LSE:NBPE) saw the trust take third place in the rankings with a 56.9% return – far superior to the 38.9% return from conservative cousin Pantheon International (LSE:PIN), but that was still a good enough performance for the trust to take sixth place over the year across all constituents in both portfolios.
Just above this came Montanaro European Smaller Companies (LSE:MTE), building on the previous year’s solid performance with a 44.9% return this time round.
For a trust that emphasises capital preservation, the 38.7% uplift from Schroder Asian Total Return (LSE:ATR) was highly commendable, while six other trusts posted gains of 30%-plus: JPMorgan American (LSE:JAM) (37.6%); ii Super 60 member JPMorgan Emerging Markets (LSE:JMG) (36.2%); Templeton Emerging Markets (NYSE:EMF) (33.1%); JPMorgan Asia Growth & Income (LSE:JAGI) (32.5%); Allianz Technology (LSE:ATT) (30.6%); and Monks (LSE:MNKS)(30.2%).
Aside from a few pedestrian performances from the likes of Troy Income & Growth (LSE:TIGT) (7.5%) and Bankers (LSE:BNKR) (17.3%) it has been a banner year for the two portfolios and the bulk of their constituents.
Tomorrow, we will reveal our picks for the year ahead, and provide a performance breakdown for all constituents over various time periods.
Note: the performance figures quoted in the review are based on mid prices as at 30 June and do not account for associated buying and selling charges, notably 0.5% stamp duty on purchases. The new portfolios will be rebalanced to equal weight following this annual review.
A great year for the trust tips portfolios
|% total return after|
|3 months||6 months||1 year||3 years||5 years||Aug '14|
|FTSE All-Share index||5.6||11.1||21.5||6.3||36.9||43.0|
|FTSE All-World index||7.2||11.2||24.6||43.5||91.0||137.6|
Notes: performance of the portfolios as at 30 June 2021, before deduction of underlying trading charges. Data source: FE Analytics.
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.