Interactive Investor

Top 10 most-popular investment trusts: February 2022

1st March 2022 13:52

Kyle Caldwell from interactive investor

There’s a new entry to our top 10 table - JPMorgan Russian Securities.

There was a new addition to our top 10 most-popular investment trust table in February and one that goes down as being an opportunistic trade: JPMorgan Russian Securities (LSE:JRS).

The Russian-focused portfolio entered the table in seventh place, having sold off heavily following Russia’s major military assault on Ukraine. Ahead of today’s market open, the trust’s share price had slumped 38% since the market open on 24 February – the day of Russia’s invasion.

The trust had nearly half its assets in three companies at the end January. Its top holding, Gazprom (LSE:OGZD), accounted for 20.5%. Its second and third biggest weightings, both at 13.1%, are PJSC Lukoil (LSE:LKOD) and Sberbank of Russia (LSE:SBER). At the end of January, it had £314 million in assets.

At the end of last week, JPMorgan Russian Securities released a statement that said it is “working to interpret the impact of the new sanctions on the company and its portfolio. Further announcements will be made if required.”

It added: The company's manager continues to monitor the situation in the region closely. The company remains invested and continues to operate within its stated objective and investment policies. The board is being kept fully abreast of developments.”

Following Russia’s invasion there is likely to be greater interest in its annual general meeting (AGM), which is scheduled for Friday 4 March.

Beyond JPMorgan Russian Securities, there are 20 other investment trusts that have exposure to Russia. The data, which was published by investment trust analyst Winterflood, shows that 12 trusts have a weighting that is less than 1.5%. 

Two open-ended funds have so far put suspensions in place, and others are likely to follow suit. Investment trusts do not suffer the same problem.

Eight of the remaining nine trusts in our top 10 table saw their positions change. The exception was Scottish Mortgage (LSE:SMT), which once again claimed the top spot.

The trust, which is down 21.8% since the start of 2022, backs disruptive companies that have a technological edge over competitors. It has a sizeable position, just under 20% of its assets, in unlisted companies and many are at an early stage of development. Therefore, when there’s a heavy sell-off in tech companies, which has been playing out of late, Scottish Mortgage is negatively impacted.

The biggest mover was Polar Capital Technology (LSE:PCT), climbing from 10th to second place. The trust, managed by Ben Rogoff, invests in multi-decade technology themes.

In a recent update to investors, Rogoff explained why he is upbeat about the long-term prospects for technology shares. He said: “What continues to underpin our confidence are technology fundamentals and secular drivers that appear firmly intact. The fourth-quarter earnings season is under way, and based on results so far, five of our eight core themes are looking robust.

“That said, the three themes which experienced the most significant 2020 benefit (e-commerce, payments and digital entertainment-related stocks, including Netflix (NASDAQ:NFLX)) are still suffering uncertainty over what normal growth rates will be for 2022.”

Its tech rival Allianz Technology Trust (LSE:ATT) slipped two places, from fourth to sixth. Allianz Technology, managed by Walter Price, has a bias towards mid-cap companies. It invests in companies that use technology in an innovative way to gain a competitive advantage. 

Both trusts have directly been impacted by the sell-off in tech over the past couple of months, with the market rotating towards value shares. Allianz Technology’s share price is down 24.7% over three months, while Polar Capital Technology has fallen by 16.8%. At the start of this week both were trading on sizeable discounts of around 9%.

In-between the two tech trusts in third position was City of London (LSE:CTY). The trust, which invests in UK dividend-paying shares, last month reported its half-yearly results to 31 December 2021. Over this period, it outperformed the FTSE All-Share index in terms of its net asset value (NAV) return. Its NAV was up 6.9% over the six-month period versus 6.5% for the FTSE All-Share. Its NAV performance was also ahead of the average rival, as the Association of Investment Companies' (AIC) UK Equity Income sector returned 6%.

Its share price, however, fell short of the index. It was up 3.5%, hindered by the trust moving from a small premium to a small discount over the period. Income seekers, however, will be cheered by the trust’s board saying that it is on track to grow its dividend for the 56th consecutive year.

In fourth place is Smithson Investment Trust (LSE:SSON), falling two places from last month. Managed by Simon Barnard, it applies the successful investment philosophy of Terry Smith’s £26.1 billion open-ended Fundsmith Equity fund, but instead focuses on global smaller companies deemed too small for the original Fundsmith fund.

Climbing to fifth place was BlackRock World Mining Trust (LSE:BRWM). The trust, which entered the top 10 last month in eighth place, could be viewed as a way of adding some inflation protection to portfolios. The trust had 16% of its assets in gold at the end of December. The precious metal is considered one of the few ways to protect against high levels of inflation and stock market volatility. The trust’s share price is up 12.3% over one month, and has gained 26.1% over three months.

The final three table constituents were: Capital Gearing (LSE:CGT), Edinburgh Worldwide (LSE:EWI) and Baillie Gifford US Growth (LSE:USA).

The two Baillie Gifford trusts invest in growth shares, which have been negatively impacted by the market rotation since the beginning of the year. The pick-up in market volatility last week in response to Russia’s invasion of Ukraine will also not have helped short-term performance. Over three months, the share prices are down 31.7% and 36.2%.

Capital Gearing (LSE:CGT), which adopts a wealth preservation approach, has lost just 0.8% and 2% over the past one and three months.  

The trust exiting the top 10 is HarbourVest Global Private Equity (LSE:HVPE).

Top 10 most-popular investment trusts in February 2022

Rank Trust Sector Rank change from January One-year performance (%) to 1 March 2022 Three-year performance to 1 March 2022 (%)  
1 Scottish Mortgage  Global Unchanged -14.6 108.1  
2 Polar Capital Technology Technology & Media Up nine 1.2 83.3  
3 City of London UK Equity Income Up two 9 62.3  
4 Smithson Investment Trust Global Smaller Companies Down two -2.1 42  
5 BlackRock World Mining Commodities & Natural Resources Up three 28.5 137.4  
6 Allianz Technology Technology & Media Down two -5 89.7  
7 JPMorgan Russian Securities Country Specialist New entry -42.5 -21.8  
8 Capital Gearing Flexible Investment Up one 9.2 26.1  
9 Edinburgh Worldwide Global Smaller Companies Down six -38.6 23.6  
10 Baillie Gifford US Growth Trust North America Down three -33.5 81.9

 

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

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