Interactive Investor

Top 10 most-popular investment trusts: December 2021

4th January 2022 14:39

Kyle Caldwell from interactive investor

There were two new entrants in our top 10 list of the most-bought investment trust at the end of 2021.

In the last month of 2021, investors appeared to be on the lookout for both value opportunities and inflation-proofing ideas.

This is reflected in the two new entrants to our top 10 list of the most-bought investment trusts in December.

The first is Polar Capital Technology Trust (LSE:PCT), which occupies fourth place. The trust, managed by Ben Rogoff, was last in the top 10 in July. Tech shares suffered a wobble early on in 2021, but bounced back as the market rotation towards value shares fizzled out. Over one year, Polar Capital Technology Trust is up 18.4%, slightly behind the 18.7% return for its rival Allianz Technology Trust (LSE:ATT), which was the fifth most-bought trust last month.

For most of last year, both trusts were trading on discounts to their net asset value. At the start of December, Polar Capital Technology’s discount was more attractive, at -8.7% versus -2.6% for Alliance Technology. Both have seen their discounts narrow on the back of an increase in investor demand. As things stand today, figures from Winterflood show that Polar Capital Technology is trading on a discount of -4%, while Alliance Technology has moved to a small premium, of 1.3%.

Polar Capital Technology is more benchmark-aware than Allianz Technology. It is not beholden to it, but its portfolio takes into account how the benchmark (Dow Jones World Technology Index) is constructed in an attempt to outperform it. As a result, Polar Capital Technology tends to have bigger stakes in the biggest companies in the index. Allianz Technology, meanwhile, is more flexible in being less wedded to its benchmark, which is also the Dow Jones World Technology Index. As well as investing in large tech companies, it has a bias towards mid-caps. 

The other new entrant was Personal Assets (LSE:PNL) in 10th place. It was only briefly out of the top 10, having last appeared in October. It adopts a multi-asset approach, and is one of a small number of wealth preservation trusts. Another trust that invest in this manner is Capital Gearing (LSE:CGT), which was the seventh most-popular trust in December.

The management teams of both Personal Assets and Capital Gearing have built in plenty of inflation-protection to their portfolios. Both expect inflation to be sustained for much longer than central bankers are forecasting.

In its half-yearly report, published in November, Personal Assets’ investment manager Sebastian Lyon cautioned: “Wage growth will be an important determinant of whether this current bout of inflation is 'transitory'.  If wages rise, this is likely to feed the inflationary beast. 

That said, we do not necessarily see a return to the bogeyman of 1970s levels of inflation when unionised labour had a far stronger voice. For now, we believe it is crucial to remain open-minded, cognisant that markets are not currently discounting structurally higher rates of inflation.”

Peter Spiller, fund manager of Capital Gearing, is also less optimistic about inflation than the market is generally. He told interactive investor, as part of our Fund Insider video interview series: “Although we fully concede that a lot of the current levels of inflation are driven by shortages of one kind or another as economies re-emerge from Covid-19, there is a real danger in our view that the current levels of increase get embedded in wage increases.

Both Personal Assets and Capital Gearing have exposure to inflation-linked bonds and small weights to gold to protect against inflation.

Moving on to the rest of the top 10, Scottish Mortgage (LSE:SMT) once again took the top spot. Compared to the previous year, the trust had a more modest 2021, up 10.5%. In 2020, the trust returned over 100%. Earlier in the year, Tom Slater, who will become lead manager from next April when fellow joint manager James Anderson retires from fund management, sounded a note of caution and urged shareholders to judge performance over longer-term time horizons. Slater said: “We are focused on the long term. We do not believe that our returns in any given year convey much information about the strength or otherwise of our investment approach. Far longer periods are required to make such an assessment.”

Climbing three places to second place is Smithson Investment Trust (LSE:SSON). Since its launch in October 2018, it has been highly popular with investors. Managed by Simon Barnard, it applies the successful investment philosophy of Terry Smith’s £28.9 billion open-ended Fundsmith Equity fund, but instead focuses on global smaller companies deemed too small for the original Fundsmith fund.

Advancing one place to third is HarbourVest Global Private Equity (LSE:HVPE). The trust entered the rankings in October, reflecting a growing interest in private equity among investors. The trust is a private equity-focused fund-of-funds. Its strategy is designed to give investors “part-ownership of a diversified portfolio of underlying private companies, spanning investment stages from early venture to large-cap buyouts”.

The final three members of the top 10 are: City of London (LSE:CTY), Monks (LSE:MNKS) and Edinburgh Worldwide (LSE:EWI). City of London slipped three places to sixth, Monks advanced two spots to eighth, and Edinburgh Worldwide is unchanged in ninth place.

The two trusts no longer in the top 10 are Alliance Trust (LSE:ATST) and Pacific Horizon (LSE:PHI).

Top 10 most-popular investment trusts: December 2021

Rank Trust Sector Rank change from November One-year performance to 31 December 2021 (%) Three-year performance to 31 December 2021 (%)
1 Scottish Mortgage  Global no change 10.5 190.1
2 Smithson Investment Trust Global Smaller Companies up three 18.1 102
3 HarbourVest Global Private Equity Private Equity up one 47.5 112.9
4 Polar Capital Technology Trust Technology & Media new entry 18.4 147.1
5 Allianz Technology Technology & Media down three 18.7 188.9
6 City of London UK Equity Income down three 11.8 18.9
7 Capital Gearing Flexible Investment down one 10.8 30.6
8 Monks Global up two 1.2 90.3
9 Edinburgh Worldwide Global Smaller Companies no change -21 98.2
10 Personal Assets Flexible Investment new entry 12 33.2

Source: interactive investor. Note: the top 10 is based on the number of “buys” during the month of December. 

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