Interactive Investor

Top 10 most-popular investment trusts: June 2024

The investment trusts climbing the rankings show that some investors are upping risk. Kyle Caldwell runs through the top 10, which includes four new entrants.

1st July 2024 14:59

by Kyle Caldwell from interactive investor

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The three investment trusts that departed the top 10 most-bought table in May made a swift return in June.

Tech duo Polar Capital Technology (LSE:PCT) and Allianz Technology Trust (LSE:ATT) re-entered in sixth and eighth place respectively, while Pershing Square Holdings (LSE:PSH) returned in ninth.

The trio were joined by a fourth new entrant, The Renewables Infrastructure Group (LSE:TRIG), in 10th place.

Exiting the top 10 were BlackRock World Mining Trust (LSE:BRWM), 3i Group (LSE:III), F&C Investment Trust (LSE:FCIT) and Gore Street Energy Storage Fund (LSE:GSF).

The investment trusts climbing the rankings, based on the number of buys during the month, show that some investors are upping risk.

Both Polar Capital Technology and Allianz Technology have plenty of exposure to the artificial intelligence (AI) theme. Polar Capital Technology owns five of the so-called Magnificent Seven tech giants in its top 10 holdings, excluding Amazon (NASDAQ:AMZN) and Tesla (NASDAQ:TSLA). Allianz Technology has top 10 positions in six of those seven stocks, with Tesla again failing to make the cut.

Both trusts are dedicated technology investors, but they approach the market in subtly different ways. Polar Capital is more “benchmark aware”, meaning that it tends not to stray too far from what its technology stocks’ benchmark looks like and makes small overweight and underweight positions in an attempt to outperform it.

Allianz Technology has built up larger stakes in smaller companies over the years compared to Polar Capital Technology, but fund manager Mike Seidenberg, who took over in the summer of 2022, has moved to make the portfolio look more like the benchmark and focused on more financially secure companies as interest rates rose. As well as AI, another key sector for the duo is cybersecurity.

The increased appetite for tech came in the same month that AI computer-chip maker Nvidia (NASDAQ:NVDA) became the world’s most valuable company, overtaking Microsoft (NASDAQ:MSFT).

As at the end of May, Nvidia was the top holding for both trusts, accounting for more than 11% of each portfolio. Both trusts are trading on discounts of around -10%, which offers investors the opportunity to buy tech at cheaper prices.

The Bill Ackman-managed Pershing Square Holdings has been in and out of our top 10 for several months. It is a concentrated portfolio of US-listed stocks, meaning it is more suited to investors with a stomach for risk.

Ackman seeks out companies that are conservatively financed, have predictable recurring cash flows, and high barriers to entry, including Alphabet (NASDAQ:GOOGL) and Hilton Worldwide Holdings (NYSE:HLT).

Despite Ackman’s strong performance track record, with the trust up 224% in share price total return terms over the past five years against 161% for the North America sector, Pershing Square consistently trades on a big discount, which is -25.5% at present.

The fourth new entrant has been attracting the attention of income seekers. The Renewables Infrastructure Group, which invests in wind farms and solar parks in the UK and Europe, is yielding 7.8%. Its one- and three-year returns are in negative territory.

Rising bond yields are putting pressure on infrastructure and property investment trusts as returns from “risk-free” developed market bonds provide competition for strategies whose aim is to generate a steady income for shareholders.

TRIG’s wide discount of -25.3% is being viewed by some investors as a potential bargain.

In the rest of the table, Scottish Mortgage (LSE:SMT) is unchanged in pole position. It invests in global businesses, including up to 30% in private companies, that are tapping into technological advancements. In our recent On The Money podcast episode, we examined whether Scottish Mortgage can sustain its recent return to form.

Over one year, it is up 33.9%, but losses of -31.6% are sizeable over three years. Among the reasons for the upturn in performance are technology shares performing well and a share buyback plan succeeding in narrowing the gap between the share price and the value of the trust’s investments, the NAV.

When Scottish Mortgage announced that it would make at least £1 billion available to buy back its own shares over the next two years, its discount stood at -15%. The current discount is -8.6%, so the move has paid off so far.

In second place, moving up one position, is Greencoat UK Wind (LSE:UKW). It has grown income payouts ahead of the RPI inflation measure each year over the past decade.

It offers a dividend yield of 7.6% and increased its target dividend for 2024 to 10 pence per share, above the Retail Prices Index for December 2023. In common with peers, it has a big discount, currently -17.4%.

Dropping one place to third is JPMorgan Global Growth & Income (LSE:JGGI). It has a total return approach in aiming to outperform the MSCI All Country World Index over the long term. It is “style neutral”, meaning it does not favour a particular category of stocks, such as value or growth.

Over the past three years, its approach has paid off, despite a few high-growth tech stocks dominating global markets during the past 18 months. JGGI is up 48.9% over three years, ahead of the average global equity income trust return of 19.1%. On the back of its popularity and strong performance it is trading on a small premium of 1.8%.

Fourth in the ranking is another style-neutral global strategy that has performed well over three years, Alliance Trust (LSE:ATST), which is up 30.8%. Last week, it was announced that Alliance Trust and Witan (LSE:WTAN) have proposed to join forces to create Alliance Witan, which would swell net assets to around £5 billion.

Alliance Witan intends to adopt Alliance Trust’s strategy of investing in external fund managers who pick 10 to 20 of their best stock ideas. Both Alliance Trust and Witan have multi-manager structures in which stock picking is outsourced. The merger is expected to see Alliance Witan be of sufficient size to enter the FTSE 100 index.

If given the green light by both sets of shareholders, the merger will mean the continuation of a progressive dividend policy. Both Alliance Trust and Witan are “dividend heroes” with 57 and 49 years of consistent dividend increases.

The duo are two of the UK’s oldest investment trusts, established in 1888 and 1909 respectively. Alliance Trust trades on a small discount of -4.8%.

In fifth place is NextEnergy Solar Fund (LSE:NESF). It yields a sky-high 10.4% and offers a discount of -22.3%. As share prices and yields have an inverse relationship, a high yield more often than not is a sign that a stock, for whatever reason, is out of favour. It is therefore crucial to do some digging to check whether the yield on offer is sustainable.

In the case of NextEnergy Solar Fund, in May the board approved a 1% increase in the dividend target for its next financial year, ending 31 March 2025. If achieved, this would be NextEnergy Solar Fund’s 11th consecutive year of dividend growth.

The other investment trust retaining its place in the top 10 is City of London (LSE:CTY), in seventh place. Managed by Job Curtis since 1991, it predominately invests in dividend-paying FTSE 100 firms. Curtis adopts a conservative approach by focusing on companies with good cash generation.

City has raised its dividend for 57 years in a row, making it one of 10 investment trusts with a track record of more than 50 years of income increases. It has a market-beating dividend yield of 5%. It very rarely trades on a big discount, and is currently on a discount of -2.2%.

Top 10 most-popular investment trusts in June 2024 

Ranking Investment trust Change from May One-year return to 28 June 2024 (%)Three-year return to 28 June 2024 (%) 
1Scottish Mortgage No change 33.9-31.6
2Greencoat UK Wind Up one 0.223.1
3JPMorgan Global Growth & Income Down one 28.348.9
4Alliance Trust No change 2330.8
5NextEnergy Solar Fund Up one-7.32.6
6Polar Capital Technology New entry 49.740.1
7City of London Down two 9.922.6
8Allianz Technology New entry 50.836.7
9Pershing Square Holdings New entry 51.267.7
10The Renewables Infrastructure Group  New entry -9.4-11.9

Source: FE Analytics. Performance data to 28 June 2024. Rankings are based on the number of “buys” during June 2024.

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.

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