A briefer piece this week simply looking at what types of investment trusts have done best and worst so far this year.
The data is as of 18 April 2020 so it’s already little wrinkly. Back then you actually had to pay money to buy oil!
And although many of the figures look pretty grim, they are considerably better than they would have been if I had done this exercise a few weeks earlier!
I’ve put smaller company trusts into their respective regional grouping (i.e. UK, Europe, Asia Pacific, Global etc) to keep things simpler.
Finally, there’s a handful of trusts that didn’t fit in neatly into the buckets I chose. Those have been excluded entirely.
Let’s start at home…
- Number of trusts: 63
- Average: -28.8% (all return figures are share-price total return)
- In positive territory: 0/63
- Best: Finsbury Growth & Income -11.9%
- Worst: Chelverton UK Dividend -52.8%
Many commentators thought the UK market was cheap at the start of this year, even after the short-lived Boris bounce. But that provided no protection. As well as hosting the largest number of trusts, the UK also has the worst average performance.
UK markets were down 23% and the average UK investment trust (weighted towards smaller companies for the purpose of this exercise) is down a fair bit more.
Nick Train’s Finsbury Growth & Income has put in the best individual showing but it’s still lost 12%.
Temple Bar has been the most notable poor performer, down almost by a half. Its manager, Alastair Mundy, has recently taken leave for health reasons (let’s hope he gets well soon) and the trust’s board are reviewing its management arrangements.
- Number of trusts: 14
- Average: -19.1%
- In positive territory: 0/14
- Best: Baillie Gifford European Growth -7.8%
- Worst: Baring Emerging Europe -31.5%
Europe (excluding the UK) is down 15% year to date, so it’s not surprising that this group of trusts has fared a little better.
Baillie Gifford makes the first of many appearances among the best performers, having taken over the management of this trust in late 2019.
And Alexander Darwell’s European Opportunities, the best long-term performer in this group, comes close behind in second place.
3. Asia Pacific (including Japan)
- Number of trusts: 34
- Average: -15.8%
- In positive territory: 1/34
- Best: JPMorgan China Growth & Income +9.0%
- Worst: India Capital Growth -40.5%
Asia Pacific markets are down some 10% year to date and again the average trust failed to keep pace.
But after looking at 111 trusts we now have 1 in positive territory!
In sterling terms, Chinese markets are up 0.25% year to date, so perhaps it’s no surprise a China-focused trust tops this group. This particular trust also seems to have benefited from an announcement in early February that it would set its dividend at 4% of its net asset value.
By way of contrast, the trusts specialising in India all seem to have had a shocker in 2020.
4. North America
- Number of trusts: 9
- Average: -18.1%
- In positive territory: 1/9
- Best: Baillie Gifford US Growth +13.9%
- Worst: Gabelli Value Trust -31.2%
With the US down by 5% this year when measured in pounds, the average trust here is a long way behind.
But there are relatively few funds in this grouping and many of them specialise in smaller companies which have been much harder hit than the US tech giants.
Baillie Gifford notches up its second top slot with a fund that is just two years old.
We now have 2 trusts in positive territory. Happy days!
- Number of trusts: 42
- Average: -15.6%
- In positive territory: 3/42
- Best: Scottish Mortgage +7.2%
- Worst: BlackRock Frontiers -32.4%
Lumping both emerging markets and global smaller companies in with mainstream global funds is probably the major reason that the average trust in this group trails the 11% decrease in global indices so far this year.
Most of the major global funds we know and love have held up pretty well, although F&C (-18%) and Witan (-25%) are notable exceptions.
Scottish Mortgage was long ridiculed for its big stake in Tesla. But Tesla is up some 75% this year and is now the trust’s second-biggest holding. Its biggest — Amazon — is up by a quarter. Combined, these two account for around a fifth of Scottish Mortgage’s portfolio.
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Manchester & London and Edinburgh Worldwide are the other two trusts in positive territory.
6. Tech, biotech and growth capital
- Number of trusts: 15
- Average: -3.4%
- In positive territory: 8/15
- Best: Schiehallion +13.9%
- Worst: Schroder UK Public Private -39.5%
This is the best performing group, both in terms of its average and the proportion in positive territory. In fact, only three trusts here have lost more than 10%.
And it’s victory number four for Baillie Gifford although it is their last appearance in the top slot.
The long-suffering shareholders of Woodford Patient Capital were hoping the appointment of Schroders might spark a recovery in its fortunes, but it’s a horrible time to be a forced seller or looking for fresh funding.
This is also the first of four groups were the majority of trusts are less than 10 years old, so there’s less history on how each sector fared during the last major financial crisis.
7. Infrastructure and renewable energy
- Number of trusts: 20
- Average: -6.3%
- In positive territory: 3/20
- Best: Gore Street Energy Storage +4.3%
- Worst: Premier Global Infrastructure -17.9%
Some of the froth has come off this sector but it’s largely held firm.
Gore Street has struggled for most of the two years it’s been listed, trading either at a small premium or a discount, but it seems to be finding its feet now.
Infrastructure funds seem to have performed worse than renewable energy so far this year, although BBGI and HICL are notable exceptions — both are roughly break-even.
8. Debt and leasing
- Number of trusts: 35
- Average: -26.7%
- In positive territory: 2/35
- Best: RDLZ Realisation +20.5%
- Worst: SQN Asset Finance -68.5%
I’ve always steered clear of this sector as I have a poor understanding of what most of these trusts actually invest in. I’m certainly not regretting that decision.
Only five of these trusts have a 10-year history and I suspect a major shake-up is on the way.
A third of this group is down by more than 35% and the four aircraft leasing funds are all down by more than half.
- Number of trusts: 36
- Average: -19.4%
- In positive territory: 3/36
- Best: Triple Point Social Housing +12.6%
- Worst: AEW UK -39.9%
There are pockets of good news here, with the social housing REITs and the likes of Supermarket Income REIT in positive territory.
I’m a little surprised to see Tritax Big Box down more than 20% as it seems to be held in high regard by many folks. TR Property is down by a third so I may take a closer look at that again.
I always think of this as a fairly well-established sector, but only a quarter of these trusts have a 10-year record.
10. Private equity
- Number of trusts: 18
- Average: -27.7%
- In positive territory: 0/18
- Best: BMO Private Equity -5.7%
- Worst: Electra Private Equity -62.7%
We’re back into the realms of more established trusts now.
There’s been a fair amount of speculation that private equity funds might be slow to write down their investments after the recent market falls. But given this group has the second-worst average performance, it seems many investors aren’t hanging around to find out.
Electra, the biggest loser, is in the process of winding itself up and around two-thirds of its asset value is an investment in TGI Fridays.
The two Better Capital funds continue to struggle but 3i, a long-term star performer, has fallen 30% and has seemingly lost the premium rating it has enjoyed the past seven years.
The BMO fund claiming the top spot is another well-regarded trust and it just pips HGCapital.
11. Flexible and Hedge Funds
- Number of trusts: 30
- Average: -13.0%
- In positive territory: 6/30
- Best: BH Macro 29.1%
- Worst: JZ Capital Partners -61.9%
You would have expected many of these trusts to have weathered the storm to some extent. The two BH trusts (Macro and Global) certainly have and both Personal Assets and Ruffer have posted small increases.
Pershing Square, led by Bill Ackman, who famously hedged its portfolio earlier this year, also made a small gain.
But it’s a varied sector and many have struggled big time. Like many of the poorest performers, JZ Capital went into 2020 in a very sorry state and investors didn’t need a second invitation to leave the party.
It’s been a brutal year (and it’s far from over of course) yet one in twelve trusts have managed to deliver a positive return.
Broadly speaking, only tech/healthcare-heavy trusts and renewable energy have been consistently decent performers. Other sectors have had stars here and there but plenty of laggards, too.
I was hoping this exercise would highlight a few names that had been unfairly bashed but the pickings look fairly slim in that regard. I’ve mentioned a few above and I’m still drawn to UK Smaller Companies as a promising fishing ground despite the savage beating it’s had in 2020.
Instead, it’s another reminder that those of us favouring investment trusts need to be more prepared to take the rough with the smooth.
Not only do discounts tend to widen in bear markets but the level of borrowing that many trusts use often magnifies any drops.
In the long run, both these factors should work in our favour. Markets tend to rise much more often than they fall and the volatility in discounts can provide more attractive entry points.
But you have to stick around and stay invested to reap the benefits.
Please note that I may own some of the investments mentioned above -- you can see my current holdings on my portfolio page.
Nothing on this website should be regarded as a buy or sell recommendation as I'm just a random person writing a blog in his spare time and I am not authorised to give financial advice. Always do your own research and seek financial advice if necessary!
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