There are signs investors are taking some risk off the table after a strong 15-month spell for markets.
Despite many predictions that a second major correction would play out at some stage, global markets continue to advance and maintain momentum.
Some investors, however, now appear to be looking down rather than up, by increasing exposure to defensively focused investment trusts. In June, Capital Gearing (LSE:CGT) moved up interactive investor’s top 10 most-bought table, rising from eighth to fifth place. In addition, just falling outside the top 10 in 11th and 12th place are RIT Capital Partners (LSE:RCP) and Personal Assets (LSE:PNL).
All three trusts prioritise protecting investor capital. This is achieved by having defensive armoury, such as inflation-linked bonds and gold, which in theory perform well in a market sell-off.
Capital Gearing, which is a member of interactive investor’s Super 60, successfully protected investor capital during last year’s Covid-19 sell-off. Its maximum net asset value (NAV) fall over the period was limited to just 1.5%.
But, as has been the case since June 2019, Scottish Mortgage (LSE:SMT) was the most-popular trust among interactive investor customers. The trust, which focuses on disruptive businesses that have a technological edge over competitors recently dipped its toes into cryptocurrency.
Monks (LSE:MNKS), regarded as a less aggressive version of Scottish Mortgage, climbed three placed up the table to fourth place. The trust has lately been reducing exposure to household-name technology giants in favour of “a new wave of digital companies”.
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The shift in focus for Monks was detailed in its annual results, which were released this month. Over its financial year to 30 April 2021, Monks’ NAV total return was 55.5% compared to a total return of 33.9% for the FTSE World Index. Monk’s share price total return for the same period was 53.1%.
BlackRock World Mining, which entered the top 10 last December, is benefiting from commodities being in a rich vein of form. Investment bank Goldman Sachs believes the rally has only just started, having predicted the start of a commodities super-cycle – a multi-year bull market.
City of London, meanwhile, continues to see performance picking up as the outlook for dividends continues to improve. In the first quarter of the year, figures from Link, which keeps tabs on the amount of dividends firms pay, showed that half of UK companies either increased, re-started or held their dividends steady in the first quarter of this year, compared to just one-third in in the fourth quarter of 2020.
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HG Capital Trust (LSE:HGT) is a new entry, in ninth position. The private equity trust is trading on a small premium of 6%, but this does not appear to be dissuading investors. In our article on private equity trusts in April, Andrew McHattie of the McHattie Group, which publishes the Investment Trust Newsletter, described HG Capital Trust as “a truly outstanding performer for an extended period”. Over five years, the trust is the best performer in the private equity sector, with gains of 236%.
Alliance Trust (LSE:ATST), which entered the table in April, lost its place in the top 10.
Baillie Gifford continues to dominate, with four of its trusts in the top 10: Scottish Mortgage, Monks, Baillie Gifford US Growth and Edinburgh Worldwide.
Top 10 most-popular investment trusts in June
|Trust||Sector||Rank change from May 2021||One-year performance to 1 July 2021 (%)||Three-year performance to 1 July 2021 (%)|
|1||Scottish Mortgage||Global||No change||62||154.8|
|2||BlackRock World Mining||Commodities & natural resources||No change||70.1||86.6|
|3||City of London||UK Equity Income||Up 1||21.1||4.6|
|5||Capital Gearing||Flexible||Up 3||11.5||25.5|
|6||Polar Capital Technology||Technology & Media||Down 3||14.7||88.5|
|7||Smithson||Global Smaller Companies||Up 3||20||N/A*|
|8||Baillie Gifford US Growth||North America||Down 2||64.7||185|
|9||HG Capital Trust||Private Equity||New entry||49.7||95.9|
|10||Edinburgh Worldwide||Global Smaller Companies||Down 5||35.4||99.8|
Source: Interactive investor. FE Analytics used for performance figures. Note: the top 10 is based on the number of “buys” during the month of June 2021. * Insufficient track record.
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.