Interactive Investor

Top 10 most-popular investment trusts: March 2022

1st April 2022 12:43

by Kyle Caldwell from interactive investor

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There are four new entries in our league table, as investors rejig portfolios in response to various headwinds markets are facing.

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In the first quarter of 2022 there was a significant change in the stock market winners and losers of recent years, with value shares outperforming growth shares. The question going forwards is whether this will be sustained.

In March, four growth-focused trusts exited our top 10 most-bought table – an indication that investors believe there could be more short-term pain to come for growth shares.

Two technology-focused trusts,  Allianz Technology Trust (LSE:ATT) and Polar Capital Technology (LSE:PCT), slipped out of the rankings. The share prices of both came under the cosh over the past three months, down 20.7% and 16.8%, respectively. For those tempted to ‘buy low’, their discounts have become more attractive, currently -10.2% and -12.1%.

The tightening of monetary policy by central bankers is the big driver boosting value shares. This backdrop benefits value shares because such companies tend to be more economically sensitive and make a lot of profit today. High-growth sectors, including technology shares, are negatively impacted by high inflation and rises in interest rates because both devalue expected future earnings.

The rotation has hit the short-term performance of Baillie Gifford funds and investment trusts, which invest in high-growth businesses. Edinburgh Worldwide (LSE:EWI) and Baillie Gifford US Growth (LSE:USA), which were two of the best-performing trusts in 2020, have gone from hero to zero. The share price losses are sizeable for both trusts over three months, six months and one year. In March, both trusts lost their places in our top 10.

Scottish Mortgage (LSE:SMT), however, which has also been negatively impacted by the market rotation, continues to be as popular as ever. It has consistently occupied the top spot since June 2019.

The global trust, which is down 20.4% since the start of 2022, backs disruptive companies with a technological edge over competitors. It has a sizeable position,  around 25% of its assets, in unlisted companies and many are at an early stage of development. Investment trust analysts have continued to back it, with those at Numis and Stifel saying they expect the innovative companies Scottish Mortgage invests in to continue growing value for long-term shareholders.

The four new entrants in March show that investors are in two camps. Some are viewing defence as the best strategy at a time when there’s no shortage of headwinds including the war in Ukraine, inflation at its highest level in decades, and interest rates moving higher. This is reflected by RIT Capital Partners (LSE:RCP), Ruffer Investment Company (LSE:RICA) and Personal Assets (LSE:PNL) entering our top 10 most-bought table for March, while Capital Gearing (LSE:CGT) kept its place. The quartet are “wealth preservation” investment trusts, which prioritise protecting investor capital. Each trust has plenty of defensive armoury in an attempt to weather stock market storms.

Other investors have been on the lookout for opportunities, including through JPMorgan Russian Securities (LSE:JRS) , which is in the top 10 for the second consecutive month.

Investors have also been adding to commodities.BlackRock World Mining Trust (LSE:BRWM) is continuing to prove popular, having entered our top 10 trust table in January. Commodities have been on a tear for the past two years, with some predicting the early stages of a new ‘super-cycle’, which is being driven by the global green revolution as major economies strive to decarbonise. In March, BlackRock World Mining advanced to third place in our table. 

Inflation concerns are another factor behind the popularity of both open-ended fund JPMorgan Natural Resources and BlackRock World Mining Trust. It will also have been a driver for Greencoat UK Wind (LSE:UKW)'s entry into the top 10 trust table. The trust, which as the name suggests invests in wind farms in the UK, aims to provide investors with an annual dividend that increases in line with RPI inflation. 

The two remaining trusts in the top 10, in fourth and seventh place respectively, are City of London (LSE:CTY) and Smithson Investment Trust (LSE:SSON).

City of London, which has a formidable reputation as an income-producing investment trust, recently reported that it is on track to grow its dividend for the 56th consecutive year. However, the UK equity income trust has underperformed its sector on a total return basis over three and five years.

Smithson, managed by Simon Barnard, applies the successful investment philosophy of Terry Smith’s open-ended Fundsmith Equity fund, but instead focuses on global smaller companies deemed too small for the original Fundsmith fund. In its 2021 annual report, released in mid-March, Barnard explained that the market rotation will not cause him to deviate from his strategy of paying a premium for high-quality companies.

He said: “Owning high-quality companies with sustainable growth is a winning strategy over the long term, has been shown to work through several economic cycles, and is one which we know we can execute successfully.”

Top 10 most-popular investment trusts: March 2022 

RankTrustSectorRank change from FebruaryOne-year performance (%) to 1 April 2022Three-year performance to 1 April 2022 (%)
1Scottish Mortgage GlobalUnchanged-11.6102.2
2JPMorgan Russian SecuritiesCountry SpecialistUp five-77.1-69.2
3BlackRock World MiningCommodities & Natural ResourcesUp two38.9141.2
4City of LondonUK Equity IncomeDown one15.416.5
5Capital GearingFlexible InvestmentUp three1027
6RIT Capital PartnersFlexible InvestmentNew entry828
7Smithson Investment TrustGlobal Smaller CompaniesDown three-1.441.6
8Greencoat UK Wind*Renewable Energy InfrastructureNew entry2528.7
9Ruffer Investment CompanyFlexible InvestmentNew entry8.248.8
10Personal AssetsFlexible InvestmentNew entry12.729

Source: interactive investor. Performance figures FE fundinfo and *AIC for Greencoat UK Wind. Note: the top 10 is based on the number of “buys” during the month of March.

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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