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The first quarter’s most popular trusts with professional investors

13 April 2017

We find out which investment trust sectors were popular with fund pickers in the first three months of the year and which products they were researching.

By Gary Jackson,

Editor, FE Trustnet

Professional investors were most heavily researching global, UK equity income and flexible investment trusts during the opening three months of 2017, analysis of research behaviour on FE Analytics shows.

The FE Analytics Market Intel Tool allows us to see what funds and trusts have attracted the most attention from the professional investors using FE Analytics. While open-ended funds attracted the bulk of research behaviour, investment trusts are also being viewed by financial advisers.

When looking at the Association of Investment Companies universe, we see that the IT Global sector is the most popular with the professionals in the first quarter of the year, followed by IT UK Equity Income and IT Flexible Investment.

In the following article, we find out which individual investment trusts from these three sectors have been the most research by the investors using FE Analytics.

 

IT Global

Starting with the most popular sector and the most researched trust was Scottish Mortgage, which has Baillie Gifford’s James Anderson as lead manager and Tom Slater as deputy. As the largest listed equity fund in the UK, it has a strong following from professional and private investors thanks to its long-term record of outperformance.

Performance of trust vs sector and index over 10yrs

 

Source: FE Analytics

As the chart above shows, the £5bn trust has made a 300.11 per cent total return over the past 10 years and outperformed its average peer and the FTSE All World index by a wide margin. This return is the second highest from the sector over this time frame.

The portfolio is built around the managers’ aim to “be different” to the typical trust and tends to focus on companies benefitting from innovation or change in global markets and trends.

Anderson prefers companies that are strong, well run businesses and the best potential durable growth opportunities for the future. The top holding is Amazon.com, followed by Illumina, Tesla Motors, Tencent and Inditex.

Another Baillie Gifford-managed trust – Monks, which is headed up by Charles Plowden with Malcolm MacColl and Spencer Adair as deputies – comes in second place.

The £1.4bn trust is a growth-orientated global equity portfolio based on the managers’ global alpha approach. It had struggled under previous managers until Baillie Gifford took over in March 2015; since then it has made a 52.11 per cent total return, ranking it in third place in the sector.


The Monks Investment Trust counts the likes of Amazon.com, Prudential, Royal Caribbean Cruises, Naspers and Alphabet among its top holdings. The portfolio typically holds more than 100 stocks that display a range of different growth profiles.

Other global trusts being research by professional investors include Foreign & Colonial Investment Trust, British Empire Trust and Alliance Trust.

 

IT UK Equity Income

Finsbury Growth & Income Trust is the most researched trust from the second most popular sector with financial advisers. The £1bn Finsbury Growth & Income Trust is run by FE Alpha Manager Nick Train and holds five FE Crowns.

The trust has made a 183.46 per cent total return over the past decade, ranking it first in the sector and meaning it has beaten the FTSE All Share more than twice over. It is also comfortably ahead of its average peer and benchmark over three- and five-year periods.

Performance of trust vs sector and index over 10yrs

 

Source: FE Analytics

Train is known for a very long-term investment approach, which focuses on consumer goods and services companies that are leaders in their field, financial stocks that are seen as market proxies and firms that are using technology to improve productivity. Unilever, Diageo and RELX are its top holdings.

This has translated into first quartile alpha generation numbers for the past decade, while the trust is always one of the best in its peer group when it comes to risk-adjusted returns as indicated by the Sharpe ratio and its number of positive months.

The second most researched trust from the sector is Edinburgh Investment Trust. This £1.4bn vehicle has been headed up by Mark Barnett since January 2014; prior to this it was managed by UK equity income veteran Neil Woodford.

Edinburgh Investment Trust, which has Reynolds American, British American Tobacco and BP as its largest holdings, has outperformed its average peer and the FTSE All Share over three, five and 10 years but has slipped into the bottom quartile and is lagging the index over 12 months.

Professional investors have also been researching IT UK Equity Income funds such as The City of London Investment Trust, Perpetual Income and Growth Investment Trust and Temple Bar Investment Trust during 2017’s opening quarter.

 

IT Flexible Investment

The final sector we looked at is also the most recently established, as the Association of Investment Companies only launched it at the start of 2016. Over the past three months, the most researched member of the IT Flexible Investment sector was RIT Capital Partners.


The £2.9bn trust, which holds five FE Crowns, has a strong focus on capital preservation and has established a track record of protecting capital in down markets while managing to keep up in rising ones. Over 10 years, it has posted a top-quartile 109.47 per cent total return.

Performance of trust vs sector over 10yrs

 

Source: FE Analytics

RIT Capital Partners’ portfolio is diversified, with investments split into areas such as quoted equity, private investments, absolute return and real assets. The largest allocation at the moment is long quoted equities at 36 per cent although this has been reduced from 55 per cent in 2015.

Earlier this year, Lord Rothschild – the trust’s chairman – revealed how the trust will remain defensive with events such as Brexit on the horizon: “The success of our asset allocation depends on capturing the right market themes, the excellence of our external managers, stock selection, private investments and a continued emphasis on absolute return and credit strategies.

“At this time of upheaval and uncertainty, our investment portfolio will continue to be well diversified. There could well be a period ahead of us when the avoidance of risk is as high a priority as the pursuit of gain."

FE Alpha Manager Sebastian Lyon’s Personal Assets Trust is the second most researched fund. This is another portfolio with a clear focus on capital preservation, which has helped it to avoided the worst of the market’s falls.

Like Lyon’s open-ended Trojan fund, the £792.3m trust is built around blue-chip equities, index-linked bonds, gold and cash. Its top equity holding is Philip Morris, followed by British American Tobacco, Nestlé, Microsoft and Coca-Cola.

Ruffer Investment Company, Capital Gearing Trust and Miton Global Opportunities were the next most popular IT Flexible Investment members with professional investors in the first quarter.

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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.