There are three new entries in our top 10 table, with investors snapping up potential bargains.
There was plenty of change in July among interactive investor’s top 10 ranking of the most-popular investment trusts, which is based on the number of buys during the month.
Two China trusts have re-entered the list, an indication that some investors view the sell-off in the China equity market as an opportunity to take advantage of cheaper valuations. Fidelity China Special Situations (LSE:FCSS) and JP Morgan China Growth & Income (LSE:JCGI) last appeared in our top 10 table a couple of months ago, in April and March.
China stocks took a big hit last week, due predominately to continued concerns about the government’s regulatory crackdown on Chinese technology and education companies.
Some of China’s biggest public companies, which many China, Asia and emerging market fund managers have heavy weightings towards, have seen large price declines, including tech giants Alibaba (NYSE:BABA) and Tencent (SEHK:700).
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As a result, this has proved a big headwind for both Fidelity China Special Situations and JPMorgan China Growth & Income. Both trust’s share price returns and net asset value returns (the performance of the underlying investments) have been negatively impacted.
Over the past month, Fidelity China Special Situations’ share price has declined by 13.7%, while its net asset value (NAV) return shows a loss of 19.4%. Over three months and six months, its share price is down 16.3% and 13.1%. Longer-term shareholders, however, are unlikely to be disappointed. Despite last week’s sell-off, the trust is showing share price returns of 19.9%, 58.5% and 141.4% over one, three and five years.
JPMorgan China Growth & Income has posted losses over one month, three months and six months. Over those periods, its share price has given up 21%, 16.1% and 21.3%. Its NAV return for those periods are losses of 13.9%, 8.1% and 14.6%. Again, its longer-term shareholders are sitting on big gains. The trust has returned 24.3%, 113.7% and 243.4% over one, three and five years, in share price returns.
Despite the sell-off, Fidelity China Special Situations is trading on a small premium of just over 0.5% (as at 31 July), according to the investment trust broker Winterflood. In contrast, JPMorgan China Growth & Income is trading on a discount, of 5.5%. Over the past year, the trust has typically traded on a small premium.
Fidelity China Special Situations has just over 20% of its assets in Tencent and Alibaba, which had respective weightings at the end of June of 10.9% and 10.2%. The duo are also the top two holdings for JPMorgan China Growth & Income, with 8.3% held in Alibaba and 7.7% in Tencent at the end of June.
Investors drawn to this frontier market
Vietnam Enterprise (LSE:VEIL) has entered our top 10 table in second place. The trust listed on the London Stock Exchange five years ago, and our columnist Ian Cowie explained in early July why he holds it as an alternative to China in his ‘forever fund’.
In share price terms, the trust is up 144% over five years, 49% over three years and 68% over one year. It is down 7% over the past month, but showing positive returns of 2% and 14% over three months and six months.
For the remaining seven trusts, Polar Capital Technology (LSE:PCT) climbed up three places to take bronze on the podium. The trust, which is managed by respected investor Ben Rogoff, recently reported full-year results to the end of April. Over the 12-month period, the trust narrowly underperformed its benchmark in terms of its underlying investments. Its net asset value return was 45.5% versus 46.4% for the Dow Jones World Technology Index.
In share price terms, though, shareholders picked up a lower return of 33.3%. This was due to the trust moving from a premium of 3.4% to a discount of 5.3% over its financial year.
Its wide discount, which currently stands at 7.5% and compares favourably to its 12-month average discount figure of 6.1%, caught the eye of Ian Cowie and has also been the subject of one of our investment trust Bargain Hunter columns. Both writers pointed out that its discount is a way for investors to gain exposure to technology shares at a cheaper price.
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The biggest loser in terms of positions in the table was Capital Gearing (LSE:CGT), which moved from fifth to 10th place. The trust, managed by veteran investor Peter Spiller, is a multi-asset portfolio of bonds, equities and property, with small holdings in infrastructure, gold and cash. The trust has been managed by Spiller since 1982 and is positioning for higher inflation to be permanent for the next couple of years rather than transitory.
Elsewhere, there was little change in our top 10. As ever, Scottish Mortgage (LSE: SMT) continues to occupy the top spot, which has been the case since June 2019. The trust focuses on disruptive businesses that have a technological edge over competitors.
City of London (LSE:CTY) and Monks (LSE:MNKS) both slipped one place, but retained their places in the top five. Smithson Investment Trust (LSE:SSON) moved up one rung to sixth, while Edinburgh Worldwide (LSE:EWI) remained in ninth position.
Top 10 most-popular investment trusts in July
|Trust||Sector||Rank change from June 2021||One-year performance to 1 August 2021 (%)||Three-year performance to 1 August 2021 (%)|
|1||Scottish Mortgage||Global||No change||52||150.1|
|2||**Vietnam Enterprise||Country Specialist||New entry||68||49|
|3||Polar Capital Technology||Technology & Media||Up 3||24.8||91.1|
|4||City of London||UK Equity Income||Down 1||30.8||5.8|
|6||Smithson Investment Trust||Global Smaller Companies||Up 1||25.6||*|
|7||Fidelity China Special Situations||China/Greater China||New entry||19.9||58.5|
|8||JP Morgan China Growth & Income||China/Greater China||New entry||24.3||113.7|
|9||Edinburgh Worldwide||Global Smaller Companies||No change||23.6||80|
|10||Capital Gearing||Flexible||Down five||13.3||26.4|
Source: Interactive investor. FE Analytics used for performance figures. Note: the top 10 is based on the number of “buys” during the month of July 2021. * Insufficient track record. **Performance figures for Vietnam Enterprise sourced from Winterflood, as not available on FE Analytics.
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