Interactive Investor

Ian Cowie: three of my trust picks topped the charts in 2022

5th January 2023 10:15

Ian Cowie from interactive investor

Our columnist runs through the investment trusts he owns that earned a place among the top 10 performers last year. 

With 378 investment trusts to choose from, I am delighted to discover that three in my modest portfolio earned places among the top 10 performers last year. That’s a statistically improbable hat-trick to wind up the passive-aggressive mob, who say we should just stick everything in a tracker. Zzzzz.

More importantly, my triumphant triumvirate illustrate some valuable lessons for investors. They demonstrate the importance of investing internationally, demanding decent dividend income and keeping an eye on the basics, such as food and fuel.

Happily enough, my top-performing investment trust during 2022 according to the analysis by Numis, exemplifies all three themes. Gulf Investment Fund (LSE:GIF) delivered total share price returns of 24.7% last year, from a portfolio largely focused on Qatar, a small state in the Arabian Gulf that is the world’s joint biggest exporter of liquefied natural gas (LNG), alongside the US, and currently yields 3.7%.

Better still, this is no ‘flash in the pan’ fund because independent statisticians Morningstar report that GIF delivered medium to long-term total returns of 167% and 140% over the last decade and five-year periods. Taken together, this sustained outperformance earns GIF the pole position in the Association of Investment Companies (AIC) ‘Global Emerging Markets’ sector over all three of its standard periods of assessment; another impressive hat-trick.

Interestingly for income-seekers, GIF succeeded in increasing dividends by an annual average of 4.27% over the last five years. Despite these facts, this remains a small fund with total assets of $82 million (£68 million) and its shares are priced 5.2% below their net asset value (NAV).

To be candid, I am surprised GIF did not get any uplift from increased awareness of Qatar, following the FIFA World Cup, which ended there last month. Quite the opposite, GIF’s share price has fallen from a peak of $2.36 last year to trade at $1.91 this week.

So bargain-hunters who believe the Russian invasion of Ukraine is likely to continue to squeeze global supplies of oil and gas, might consider some exposure to the Gulf. But very few British investors have any assets in a region that now includes some of the highest gross domestic product (GDP) per head numbers anywhere in the world.

BlackRock Latin American (LSE:BRLA) was my second-best performer in the ‘Investment Companies: Leaders and laggards in 2022’ analysis by Numis. BRLA achieved total returns of 18% last year and continues to yield 5.4% dividend income that increased by an eye-stretching annual average of 10.95% over the last five years.

It’s only fair to add that last year’s delightful share-price samba followed a long period of poor performance, as this shareholder since 2010 knows to his cost. BRLA delivered total returns of just 7.8% over the last decade and a measly 1.8% over five years.

The explanation is that during the go-go ‘growth at any price’ years that ended in 2021, technology was all the rage and very few folk had any interest in the boring old commodities in which Latin America is rich. Now the case is altered, partly as a result of the Ukraine war, and soaring demand for hard and soft commodities, ranging from corn to copper, have given BRLA back its cha-cha-cha or va-va boom, depending on what blows your trumpet.

Even so, this trust trades at a 7.2% discount to its NAV. So you can’t accuse me of only telling you about shares that have been soaring for ages and look fully priced.

Ecofin Global Utilities & Infrastructure (LSE:EGL) came third among my winners in the Numis analysis but is much the most important to me because it sits just outside my top 10 holdings by value and accounts for nearly 4% of my life savings. By contrast, GIF represents over 2% and BRLA is below 1% because I aim to diminish risk with a widely diversified portfolio, rather than seeking to shoot the lights out in any particular year.

Numis states EGL achieved a total return of 12.9% in 2022, while Morningstar reports 101% over five years. There is no decade-long number because this investment trust was launched in 2016, when it was formed out of Ecofin Water & Power Opportunities, where I first invested in March 2011.

Here and now, EGL yields 3.4% dividend income that increased by an annual average of 2.95% over the last five years and trades more or less in line with its NAV. As you might expect, the underlying portfolio is focused on an international variety of renewable energy providers, including wind and solar.

For completeness, it’s only fair to report that BlackRock Energy and Resources Income (LSE:BERI) came first in the Numis analysis, with a total return of 36.6%; CQS Natural Resources Growth & Income (LSE:CYN) came second with 30.2%; and BlackRock World Mining Trust (LSE:BRWM) came third with 26%. My trio ranked fourth, eighth and 10th.

What they all demonstrate is how investment trusts bring the world within reach and why it makes no sense to restrict our asset allocation to a single country, continent or currency.

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

Ian Cowie is a shareholder in BlackRock Latin American (BRLA), Ecofin Global Utilities and Infrastructure (EGL) and Gulf Investment Fund (GIF) as part of a globally diversified portfolio of investment trusts and other shares.

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.