The trend of investors turning to income strategies continued in March, with a new UK equity income entrant to our top 10 most-bought table.
Compared to a year ago, our top 10 most-bought investment trust table shows that investors are taking more of an optimistic stance.
Last March, four wealth preservation investment trusts featured in our table. However, the only one remaining last month – RIT Capital Partners (LSE:RCP) – has now departed the top 10. Over the past couple of months, rivals Capital Gearing (LSE:CGT), Ruffer Investment Company (LSE:RICA) and Personal Assets (LSE:PNL) all lost their places in the table.
Instead, investors have increasingly focused on income strategies, a trend that continued in March with Law Debenture Corporation (LSE:LWDB) entering the top 10 in ninth place. Our table ranks investment trusts by the number of “buys” over the month.
The UK equity income trust is different from rivals as it has two separate arms – an investment portfolio and an independent professional services business. The latter, according to Law Debenture, generates income to support the dividend, while also giving the investment portfolio managers “greater flexibility in stock selection”.
The fund managers of Law Debenture are James Henderson and Laura Foll, who manage other funds and investment trusts, including Lowland (LSE:LWI). Law Debenture pays a quarterly dividend, and yields 3.6%.
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The other nine trusts in the table also featured in the previous month. At the top of the table remains Scottish Mortgage (LSE:SMT), which invests in companies that have a technological edge over competitors. The types of companies Scottish Mortgage invests in – high-growth shares, including a third of the portfolio in more speculative, unlisted companies – have been firmly out of favour for the past 12 to 18 months. This is due to interest rate rises, which have devalued the expected future earnings of growth companies.
Last week, Scottish Mortgage fund managers Tom Slater and Lawrence Burns addressed concerns over its unlisted exposure being at the 30% limit, notable short-term underperformance, and the trust's rising discount.
Swapping places in the table this month are City of London (LSE:CTY) and F&C Investment Trust (LSE:FCIT), which occupy second and third place respectively. Both are “dividend heroes” having raised payouts for 56 and 52 years in a row. However, City of London has much more of an income focus, reflected by its 5.1% yield versus 1.5% for F&C.
City of London, which has been managed by Job Curtis since 1991, predominately invests in dividend-paying FTSE 100 firms.
F&C adopts a global approach and holds a mix of growth and income stocks, including having around 13% of its assets in private equity. The trust’s manager, Paul Niven of BMO Global Asset Management, oversees the strategic and tactical asset allocation. He selects managers to run various strategies, which are predominantly within BMO. It offers investors, particularly beginners, a one-stop-shop due to being highly diversified.
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Another trust that is also a one-stop-shop for investors is Alliance Trust (LSE:ATST), which was the fourth-most popular trust in March. The multi-manager trust is externally managed by Willis Towers Watson. It selects managers with a balance of investment styles, which means Alliance Trust effectively takes style risk off the table.
In fifth place is BlackRock World Mining Trust (LSE:BRWM). Natural resources stocks are beneficiaries of inflation. This is because as commodity prices rise, mining and oil stocks make more money. These higher profits are returned to investors through share buybacks and higher dividend payments. This has resulted in BlackRock World Mining offering a dividend yield of 6%.
The other four trusts in the top 10 table have eye-catching yields. In sixth place is Murray International (LSE:MYI), managed by veteran investor Bruce Stout. Its yield of 4.2% is higher than most global equity income funds and investment trusts, which typically yield around the 3% mark.
Occupying the seventh spot is Merchants Trust (LSE:MRCH), yielding 4.8%. It aims to deliver an above-average level of income and income growth, as well as long-term growth of capital, through investing mainly in higher-yielding large UK companies.
In eighth place is Greencoat UK Wind (LSE:UKW). The trust, which entered our top 10 a year ago, has a yield of 5.6%. It aims to provide investors with a yearly dividend that increases in line with RPI inflation. This aim has been successfully achieved each year since the trust launched in 2013. In its recently published annual results, the trust said it was confident that its RPI target would be achieved once again in 2023.
Rounding off the top 10 table is Renewables Infrastructure Group (LSE:TRIG), yielding 5.8%. As well as investors looking to ensure that their money is invested in businesses ‘doing good’ in some form or other, the high yields on offer among renewable energy investment trusts is a key attraction, particularly at time when inflation is at its highest level in decades and investors are hungry for income.
Top 10 most-popular investment trusts in March 2023
|Rank||Trust||Change from February||One-year performance to 1 April 2023 (%)||Three-year performance to 1 April 2023 %)|
|1||Scottish Mortgage||No change||-33.3||24.6|
|2||City of London||Up one||4.2||55.8|
|3||F&C Investment Trust||Down one||7.1||75.2|
|4||Alliance Trust||Up four||1.3||69.2|
|5||BlackRock World Mining||Up two||-5.3||195.2|
|6||Murray International||No change||10.5||79.5|
|7||Merchants Trust||Up three||4.9||88|
|8||Greencoat UK Wind||Down four||6.3||38.5|
|9||Law Debenture||New entry||3||106.1|
|10||Renewables Infrastructure Group||Down five||-2.9||17.4|
Source: interactive investor. Performance figures: FE fundinfo. 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.
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