There were two new entries in our top 10 table in May. Kyle Caldwell explains why this duo have climbed the rankings.
Europe has been a star stock market performer of late, and some investors have positioned to profit in the hope the rally has legs.
This is reflected in Fidelity European Trust (LSE:FEV) being one of two new entrants in our top 10 most-bought investment trust table in May, storming up the rankings into third place.
A key driver behind European markets’ buoyancy is strong share price performance from Europe’s luxury goods companies. Such companies have seen sales boosted by the re-opening of China’s economy, as well as benefiting from the resilience of spending power among wealthy consumers during the cost-of-living crisis.
The trust, managed by Sam Morse and Marcel Stotzel, has exposure to this trend in its top 10 holdings through LVMH Moet Hennessy Louis Vuitton SE (EURONEXT:MC), which is made up of fashion brand Louis Vuitton and drinks companies Moët and Hennessy. French cosmetics giant L'Oreal SA (EURONEXT:OR) is also a top 10 position.
The other new entrant is 3i Group (LSE:III), which invests in private equity. A couple of weeks ago, on 11 May, the FTSE 100-listed investment company reported its annual results (to the end of March 2023), which showed a 36% total return on opening shareholders’ funds. The resilient returns in a rising interest rate environment caught the eye of some investors, reflected by 3i rising up the rankings to seventh place in May.
Over the past year, 3i Group has vastly outperformed all other private equity trusts, with a share price total return of 64.8%. In contrast, over half of the 18 private equity trusts' returns have been flat or negative.
On the back of its recent strong performance, broker Numis yesterday (31 May) altered its recommendation from buy to add, but says its positive view remains unchanged. The broker highlighted that 3i Group has a “conservatively positioned portfolio”, which makes it “less sensitive to changes to the debt market compared to many private equity peers”.
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Exiting the top 10 were Murray International (LSE:MYI) and Henderson Far East Income (LSE:HFEL), which were in ninth and 10th place respectively in April’s table.
Among the eight trusts in the top 10 Scottish Mortgage (LSE:SMT) once again claimed the top spot, which it has retained since June 2019.
The global portfolio continues to enjoy plenty of support among DIY investors despite its short-term performance disappointing. In mid-May it reported its annual results, which showed a share price loss of 33.5% (to 31 March 2023).
The performance of its underlying investments – the net asset value (NAV) – was down 19.7%. This notably undershot the benchmark, the FTSE All World Index, which was down 0.9% over the period.
The types of companies Scottish Mortgage invests in – growth companies with disruptive technologies, including 30% 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.
In second place in table is City of London (LSE:CTY). It is one of the eight investment trusts boasting more than half a century of annual pay rises. Managed by Job Curtis for more than three decades, it has a yield of 5.3%, which is achieved by mainly sticking to FTSE 100 stocks.
Two other dividend heroes with more than five decades of dividend increases – Alliance Trust (LSE:ATST) and F&C Investment Trust (LSE:FCIT) – have also continued to prove popular. The duo have more of a capital growth focus, reflected by their lower yields of 2.4% and 1.5%.
Alliance Trust switched fund manager and strategy six years ago. In a Fund Insider video interview published this week, Craig Baker of Willis Towers Watson, which oversees the portfolio, gives his take on how performance has fared, and explains why there’s plenty of runway for its progressive dividend policy to continue.
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The other four investment trusts in the table all have eye-catching yields. The highest, at 6.8%, is BlackRock World Mining Trust (LSE:BRWM). Its fund manager Evy Hambro discussed in a recent On The Money podcast episode why we are a couple of years into a potential new commodities ‘supercycle’, where demand outweighs supply for a sustained period.
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Next, with a yield of 5.9%, is Greencoat UK Wind (LSE:UKW). A key attraction is that the trust aims to increase its dividends in line with retail price index (RPI) inflation.
It is followed by Merchants Trust (LSE:MRCH), yielding 5.1%. Managed by Simon Gergel, the trust aims to deliver an above-average level of income through investing mainly in higher-yielding large UK companies.
Completing the top 10, with a yield of 3.8%, is JPMorgan Global Growth & Income (LSE:JGGI). It adopts a total return approach, aiming to outperform the MSCI All Country World Index over the long term.
Top 10 most-popular investment trusts in May 2023
|Rank||Trust||Change from April||One-year performance to 1 June 2023 (%)||Three-year performance to 1 June 2023 (%)|
|1||Scottish Mortgage||No change||-16.1||-9.2|
|2||City of London||No change||0.2||35.8|
|3||Fidelity European Trust||New entry||19.5||46.7|
|4||Greencoat UK Wind||No change||4.7||23.2|
|5||F&C Investment Trust||Down two||8.3||37|
|6||BlackRock World Mining||Up two||-13.3||92.8|
|7||3i Group||New entry||64.8||160.9|
|8||Alliance Trust||Down two||4.6||38.5|
|9||Merchants Trust||Down two||-0.6||66.7|
|10||JPMorgan Global Growth & Income||Down five||6.3||54.1|
Source: interactive investor. Performance figures: FE fundinfo. Note: the top 10 is based on the number of “buys” during the month of May.
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.