There are three new entries in our table of the most popular investment trusts.
Investment trusts that focus on technology and healthcare continue to be in high demand, but the big trend for the month of August was investors boosting exposure to global trusts.
Our top 10 table of the most popular investment trusts among interactive investor customers now contains four trusts that invest globally, up from two in July.
One potential driver is investors readjusting their portfolios in response to the UK economy entering recession last month for the first time in 11 years following the Covid-19 pandemic. As a result, markets are expected to become more volatile in the short term, which increases the appeal of global investment trusts, as they can provide some sort of protection.
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Given that global trusts, whether they are income- or growth-focused, have the flexibility to invest wherever they see fit, such trusts should, in theory, hold up better when markets fall sharply compared with those that are constrained to investing in a single region.
The four investment trusts in our top 10 that invest globally are: Scottish Mortgage (LSE:SMT), Edinburgh Worldwide (LSE:EWI), Murray International (LSE:MYI) and Monks (LSE:MNKS), with the latter two being the new entries.
Performance has varied considerably over one and three years. Murray International is going through a rough patch of performance, owing to its emerging market exposure, which accounts for around half the portfolio.
In a bid to turn around performance, fund manager Bruce Stout has been adding risk, shifting from defensive fixed income into equities where he sees potential for long-term earnings and dividend growth.
Over one year, the trust is down 13.6%, while also showing a loss over three years of 15.7%. Its long-term shareholders will be aware that Murray International’s performance ebbs and flows, and some may view its discount of 3.3% (as at 31 August, according to Numis) as too cheap to ignore.
Monks, on the other hand, is in a purple patch of form, up 24.9% over one year and 61.8% over three years. The trust changed managers and its approach more than five years ago (March 2015), switching from a “value” style of buying recovery stocks to a growth focus, seeking the “best of the best”.
Its subsequent performance following the overhaul of the portfolio under Charles Plowden and his team (co-managers Spencer Adair & Malcolm MacColl) has impressed. In May, it was announced that Plowden will retire on 30 April 2021, with Adair stepping up to become the trust’s lead manager.
The other two global trusts are regulars in our top 10. Scottish Mortgage maintains pole position and has the highest returns out of the top 10 on a one-year view. It has returned 85.9% over one year and is up 124.7% over three years.
Such strong returns over the short term led investment trust analyst Stifel to argue (on 19 August) that now could be a good time to bank some gains. Stifel noted that performance has been driven by some of the trust’s top 10 technology holdings: Tesla (NASDAQ:TSLA), Amazon (NASDAQ:AMZN), Tencent (SEHK:700) and Alibaba (NYSE:BABA).
Edinburgh Worldwide, which invests in global smaller companies, slips two places to sixth place, but comfortably retained its position in the top 10.
The trust, managed by Douglas Brodie, invests in “initially immature entrepreneurial companies, typically with a market capitalisation of less than $5 billion at [the] time of initial investment, which are believed to offer long-term growth potential [over at least five years].” Its performance has been stellar, up 42.3% over one year and 114.3% over three years.
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In a further sign that investors are repositioning portfolios in response to the UK entering a recession, Personal Assets broke into the top 10. This is one of a small number of “wealth preservation” investment trusts, which prioritise protecting investor capital. The trust has a low weighting to equities and plenty of defensive armoury, such as low-risk inflation-linked bonds and a small weighting to gold.
City of London investment trust, which is managed in a conservative fashion by Job Curtis, was once again popular, but has slipped two places to eighth.
In July, the trust increased its dividend for the 54th consecutive year, despite the difficult dividend backdrop. In our Funds Fan podcast, recorded in mid-August, Curtis explained the changes he made to the portfolio in response to more than 400 companies listed on the London Stock Exchange either cancelling, cutting or suspending dividend payments.
Three of the remaining four trusts in the top 10 specialise in investing in technology or healthcare companies: Polar Capital Holdings (LSE:POLR), Allianz Technology Trust (LSE:ATT) and Worldwide Healthcare (LSE:WWH).
Finally, there was increased enthusiasm for precious metals among investors, with BlackRock World Mining Trust (LSE:BRWM) rising by four places in the rankings. Managed by Evy Hambro and Olivia Markham, the trust has around 30% exposure to gold-mining stocks. The price of gold hit an all-time high last month of more than $2,000 an ounce, amid continued uncertainty over the Covid-19 pandemic.
The trusts that have exited the top 10 are the three trusts that occupied the bottom three places in the top 10 in July: Baillie Gifford US Growth (LSE:USA), Biotech Growth (LSE:BIOG) and Pacific Horizon (LSE:PHI).
Top 10 most popular trusts: August 2020
|Investment trust||AIC sector||Rank change from July||1-year return % (as at 1 September 2020)||3-year return % (as at 1 September 2020)|
|Scottish Mortgage||Global||no change||85.9||124.7|
|BlackRock World Mining Trust||Sector Specialist: Commodities & Natural Resources||up 2||22.3||22.4|
|Polar Capital Technology Trust||Technology & Media||no change||55.8||107.3|
|Allianz Technology||Technology & Media||down 2||48.7||138.5|
|Worldwide Healthcare||Sector Specialist: Biotechnology & Healthcare||up 2||25.3||35.3|
|Edinburgh Worldwide||Global Smaller Companies||down 2||42.3||114.3|
|Murray International||Global Equity Income||new entry||-13.6||-15.7|
|City of London||UK Equity Income||down 2||-17||-13.7|
|Personal Assets||Flexible Investment||new entry||7.2||14.9|
Source: FE Analytics. Note: The top 10 is based on the number of “buys” during the month of August.
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