Scottish Mortgage (LSE:SMT) has returned to pole position after being pushed into second place in last month's top 10 by City of London.
Our table, which ranks investment trusts by the number of “buys” each month, has been dominated by Scottish Mortgage. Barring last month, it has been the most-bought investment trust each month since June 2019.
Scottish Mortgage owns growth companies (with around 30% in private companies), whose profits are generally going to come a long way in the future. In industry-speak, these assets are long duration, and when interest rates rise the valuations of such investments fall due to the availability of better returns on lower-risk investments. As a result, Scottish Mortgage has seen its share price returns slump over the past three years, down 34.4%.
Due to rate rises, investors have been turning to income-focused strategies in an attempt to receive some “jam today”, particularly while battling inflation. This trend is reflected in most constituents in the top 10 paying an income, apart from new entry India Capital Growth (LSE:IGC). Even Scottish Mortgage, despite its growth focus, pays a small dividend. Its dividend yield is 0.6%.
However, much higher dividend yields can be found elsewhere, including the investment trusts that are second and third in the rankings, Greencoat UK Wind (LSE:UKW) and City of London (LSE:CTY), which respectively yield 6% and 5.1%.
Greencoat UK Wind is a renewable infrastructure investment trust managed by Stephen Lilley. It aims to provide investors with a yearly dividend that increases in line with RPI inflation. This has been successfully achieved each year since the trust launched in 2013.
City of London, which has been managed by Job Curtis since 1991, predominately invests in dividend-paying FTSE 100 firms. Curtis adopts a conservative approach in focusing on companies with good cash generation. City has raised its dividends for 57 years in a row.
Both Lilley and Curtis visited our recording studio recently to make the case for their respective strategies. You can watch the interviews by following the two links below.
- Greencoat UK Wind: interest rate rises have left us grossly underpriced
- City of London: our ultimate backstop to keep paying a rising income
In fourth place is JPMorgan Global Growth & Income (LSE:JGGI), which adopts a total return approach in aiming to outperform the MSCI All Country World Index over the long term. Its dividend yield is 3.8%.
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 high dividend yield of 7.3%.
However, the dividend yield for BlackRock World Mining is not progressive. In the event of mining companies becoming less generous with their payouts, the dividend will be vulnerable.
Multi-manager strategy Alliance Trust is in seventh place. Its external fund manager, Willis Towers Watson, selects managers with a balance of investment styles, which means Alliance Trust effectively takes style risk off the table. It aims to deliver both growth and income, with a yield of 2.4%.
Gore Street Energy Storage yields 8.8%. This trust seeks to use industrial batteries to profit from fluctuations in the supply and price of wind-generated electricity. Like other alternative asset investment trusts, its share price has sold off in response to higher interest rates. This is due to the higher level of income that investors can obtain through lower-risk assets, with cash and government bonds that have short lifespans offering yields of around 5%. As a result, there’s less appeal in trying to obtain bigger returns for a higher amount of risk.
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The biggest yield on offer among the top 10, at a sky-high 11.7%, is from Henderson Far East Income. However, in terms of total returns, losses of 15.2%, 16% and 10.5% over one, three and five-year periods shows that having a high yield does not necessarily correlate with market-beating returns. It was announced this week that long-standing fund manager Mike Kerley will be retiring, which has prompted a strategy review that will see the trust attempt to strike more of a balance between delivering both growth and income.
In 10th place is Merchants. It is managed by Simon Gergel and aims to deliver an above-average level of income by investing mainly in higher-yielding large UK companies. Its yield is 5.2%.
As previously mentioned, the growth focus of India Capital Growth means it is the outlier in the top 10 by not paying any income.
India Capital Growth’s one- and three-year returns are the highest in the top 10. Funds have poured into Indian equities and bonds at a very rapid rate this year, often at the expense of China. Another driver is that its stock market has been enjoying a purple patch. The S&P BSE 100 index has been the best-performing market since Covid, up 149% from 3 April 2020 to 27 November 2023. In second place is the Nasdaq 100 index, which has gained 112%.
For more on India, including whether its valuations have become too pricey, check out our long-read feature.
Top 10 most-popular investment trusts in November 2023
|Change from October
|One-year return to 29 Nov (%)
|Three-year return to 29 Nov (%)
|Greencoat UK Wind
|City of London
|JPMorgan Global Growth & Income
|BlackRock World Mining
|India Capital Growth
|Gore Street Energy Storage
|Henderson Far East Income
Performance data sourced from FE Fundinfo. Performance data to 29 November 2023. Rankings are based on the number of "buys" during November 2023.
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