After a decade of underperformance, value stocks as well as other areas hit by the pandemic have roared back into contention after the announcement of the Pfizer/BioNTech vaccine on 9 November.
‘Vaccine Monday’, as it became known, gave investors belief that the world would return to a semblance of normality in the middle of 2021 and caused them to pile into the areas which had suffered as a result of Covid-enforced lockdowns.
But which investment trusts have made the highest returns under these conditions? Similar to what we saw in a previous article on open-ended funds, trusts focusing UK equities are the reoccurring top performers since Vaccine Monday.
Data from FE Analytics showed the IT UK Equity Income, IT UK All Companies and IT UK Smaller Companies sectors all made impressive returns since November.
Furthermore, two trusts even made triple-digit returns over this period.
Top performing investment trusts since 9 November 2020
Source: FE Analytics
With the highest total return by quite some distance, the £36.4m Geiger Counter trust has made 135.85 per cent since 9 November 2020. Commodities in general have been a challenging part of the market for much of the past decade, although they have surged more recently thanks to a stronger economic outlook.
Managed by Rob Crayfourd and Keith Watson, the fund invests primarily in the securities of companies involved in the exploration, development and production of energy - predominantly in the uranium industry.
Uranium mining equities rose strongly in early February 2021 and, despite giving back some early gains, the net asset value (NAV) of the trust ended that month alone up 31.6 per cent.
Also securing a triple-digit return, the Chelverton UK Dividend trust has made 102.94 per cent since the announcement of the Pfizer vaccine.
Run by David Horner and Oliver Knott, the fund initially screens the UK equity market for stocks of any size that on a 12-month view will yield at least 4 per cent.
A company can only be held in the portfolio if it is believed that it will yield 4 per cent over a year. This means, unlike a barbell approach of blended high and low yield, every company held contributes to the overall yield of the fund.
According to Rayner Spencer Mills Research, the simple approach of focusing on the dividend yield of all companies as a leveller to remove sectoral differences is quite compelling and has worked throughout the life of the strategy.
In third place, the £126.2m Henderson Opportunities Trust, managed by James Henderson and Laura Foll.
With a return of 81.47 per cent, the fund runs a portfolio of 70 to 100 investments on an unconstrained basis across the whole range of market capitalisations.
Focusing on growth, recovery and special opportunities, the manager believes the portfolio should achieve a higher than average rate of capital growth over the medium to long term.
Staying in the UK, there are several IT UK Smaller Companies trusts that have made similarly strong returns.
Aberforth Split Level Income, River and Mercantile UK Micro Cap, Miton UK MicroCap and Aberforth Smaller Companies all generated some of the highest returns of the Association of Investment Companies universe since 9 November 2020.
Aberforth Split Level Income sector allocation – 31 Mar 2021
Source: Winterflood Research
With a return of 80.3 per cent, the £205m Aberforth Split Level Income trust has a large proportion of its portfolio in industrials, financial services and consumer cyclicals – three of the hardest hit areas in the UK’s Covid-related lockdowns.
Geiger Counter managers Rob Crayfourd and Keith Watson have another commodities trust on the list of best performers: New City Investment Managers’ CQS Natural Resources Growth and Income trust.
The £99m fund, also run by Ian Francis, has made a total return of 65.06 per cent since early November. It invests in mining and resource equities, as well as in mining and industrial fixed interest securities.
The management team commented in March that commodity prices were mixed in the month preceding, outlining that: “The drag from dollar strength, rising treasury yields and slow European vaccine roll out weighed was offset by US president Joe Biden’s $1.9tn pandemic stimulus plan being approved by the house.”
Another beneficiary of Biden’s policies, namely the ‘Green New Deal’, is the BlackRock Energy & Resources Income trust, run by FE fundinfo Alpha Manager Tom Holl and Mark Hume.
According to Winterflood Investment Trusts, the fund invests in a combination of mining and energy companies, with the allocation reflecting the managers’ macro views.
They added that the recent increase in its allocation to companies expected to benefit from the move to a lower carbon economy is an interesting differentiator within the peer group.
Indeed, Holl explained that the fund’s exposure to mining aligns with this new strategy as mined materials are necessary to achieve a lower carbon world and an increase in the global standard of living.
Commodity winners include copper, nickel and lithium, and it’s in these areas that the managers are forecasting long-term demand growth, independent of price increases.