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AJ Bell’s five trusts for every kind of investor this ISA season

09 March 2023

The platform highlights several investment trusts for those with different risk tolerances.

By Gary Jackson,

Head of editorial, FE fundinfo

One of the best-known equity income strategies in the UK, a defensive stalwart and two specialist trusts that have struggled over the past year are among the trusts that AJ Bell thinks investors should consider topping up their portfolios with.

In the run-up to the ISA deadline, Alena Kosava, head of investment research at AJ Bell, offers up five investment trusts that could suit cautious, balanced and adventurous investors, as well as those seeking income.


Cautious investors: Personal Assets

Kosava described Personal Assets – which is run by Troy Asset Management’s Sebastian Lyon – as “a solid choice for investors looking to protect and increase (in that order) the value of their investment over the long term”.

Performance of trust vs sector and index over 5yrs


Source: FE Analytics

Like Troy’s flagship Trojan fund, Personal Assets is built around four pillars of defensive holdings: quality blue-chips stocks such as Unilever, Visa and Nestlé, index-linked bonds, gold and cash. This combination has proven effective at making money over the long run while protecting against short-term market volatility.

“The trust has generated steady returns over previous years and tends to do particularly well amid challenging market conditions and souring economic sentiment – conditions experienced throughout 2022 and expected to continue into 2023 – which the trust’s experienced manager Sebastian Lyon had been concerned about for a long time,” the AJ Bell analyst said.

“With a heavy sell-off across equity markets and material repricing across the bond universe, underpinned by fears over the potential for persistently high inflation for a considerable period going forward, the defensive positioning of this trust, and in particular its exposure to inflation protecting assets such as gold and inflation-linked bonds, means it has notable appeal.”


Balanced investors: Fidelity European

For balanced investors, Kosava thinks the approach used by Sam Morse’s Fidelity European trust – which aims for long-term growth in capital and income by investing in companies with strong fundamentals and structural growth prospects – is attractive.

Performance of trust vs sector and index over 5yrs


Source: FE Analytics

“The portfolio is comprised of quality companies trading at reasonable valuations, best thought of as a GARP [growth-at-a-reasonable-price] investment style. The process steers clear of trying to time markets and typically avoids more cyclical stocks and smaller companies in order to manage downside risk,” she added.

“With the manager being a well-resourced and seasoned cautious investor focusing on ensuring capital loss mitigation on the downside, clients are set to benefit from this approach amid continued market turbulence.”

Fidelity European has an overweight to financials, technology and industrials sectors with some household names at the top of its portfolio, including Nestlé, ASML and LVMH Moet Hennessy.


Adventurous investors: Worldwide Healthcare & Fidelity China Special Situations

Kosava gave two options for investors more willing to tolerate higher risk in pursuit of stronger returns, the first of which is Worldwide Healthcare.

Performance of trust vs sector and index over 5yrs


Source: FE Analytics

The trust has faced challenging conditions in recent years, underperforming because of an underweight to the big Covid pharma stocks and an overweight to life sciences, biotech and China.

But Kosava said: “In a recent update, managers talked about biotech being in a ‘sweet spot’ and the place to be in a recession. Despite a widening discount, the managers are bullish about the healthcare sector given its track record of delivering revenue growth and share price outperformance during recessionary periods.”

Performance of trust vs sector and index over 5yrs


Source: FE Analytics

Her second option for adventurous investors is Fidelity China Special Situations. It invests in another part of the market that has had a “torrid time” in recent years, after issues such as the zero-Covid policy and the country’s property slump.

However, China still represents a long-term opportunity for investors. “Long-standing manager Dale Nicholls focuses on providing exposure to companies benefitting from China’s consumption growth opportunity. New consumer spending power and increasing aspirations underpin many of the portfolio’s investments, alongside fast-growing industries such as the internet, e-commerce and healthcare,” the AJ Bell analyst said.


Income seekers: City of London

The UK is a traditional hunting ground for income investors, reflecting the country’s strong dividend culture and The City of London Trust stands out for having the longest track record of dividend increases of any investment trust.

Performance of trust vs sector and index over 5yrs


Source: FE Analytics

“Manager Job Curtis has been running the trust since 1991 and has a valuation-driven conservative investment approach focusing on sustainable income and long-term capital growth,” she explained. “While invested mainly in UK stocks, the companies underpinning the portfolio enjoy overseas revenue streams making for a diverse global exposure.”

City of London has a “relentless focus” on income, aiming for consistent growth in the dividend while offering a level of capital protection in falling markets and the ability to capture the upside.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.