Chinese, technology and smaller companies strategies emerged as the best performing investment trusts of 2020, whilst leasing, global income and property strategies were the worst performing.
During the early part of 2020, the coronavirus pandemic caused markets to experience their swiftest decline ever in financial history, as nations struggled to combat Covid-19. This was followed by global central bank intervention and one of the most rapid market recoveries ever seen.
Source: FE Analytics
Of the investment trust sectors (excluding the unclassified, multi-manager and VCT sectors), IT Asia Pacific was the top performing peer group on average. It benefitted from a large weighting to China which returned to economic ‘normal’ faster than the rest of the world.
Elsewhere, a swift rally in tech stocks that were seen to be benefiting from the accelerated adoption of technology during the pandemic led the IT Technology & Media sector to benefit. The average trust here was up 36.94 per cent during the year.
The IT Global and European Smaller Companies sectors also performed well, however, it is worth noting there are only five trusts in the Global sector and four in the European sector. All of which performed similarly, without abnormally large variances between them.
Looking at the performance of individual trusts, the best performer in 2020 was the £938.9m Baillie Gifford US Growth Trust with a total return of 133.45 per cent.
Managers Gary Robinson and Helen Xiong, like many managers at Baillie Gifford, take a long-term approach to investing in growing companies and apply this philosophy to the US equity market.
The trust has benefited from a large rally many of its overweight positions in US tech companies such as Shopify, Netflix and Zoom, as well as a large holding in Tesla, which returned over 700 per cent in 2020.
Commenting on the data, Fairview Investing’s Ben Yearsley said: “There was only one name in the fund and trust world last year: Baillie Gifford. They truly dominated both open- and closed-end universes the like of which I have never seen before.”
“Four of the top five trusts were managed by Baillie Gifford as they hit the sweet spot in so many different areas.”
Source: FE Analytics
Commenting on the best investment trusts, Yearsley added: “The trust world was also fairly esoteric with US, tech, precious metals and China all featuring – and of course the daddy of the trust world, Scottish Mortgage.”
Indeed, the £17.5bn Scottish Mortgage Investment trust, the third highest performer, delivered a total return of 110.49 per cent for the year.
Managed by Baillie Gifford’s James Anderson and Tom Slater, it has benefited from a strong performance from its largest holding in Tesla, as well as from other global companies such as Dutch chip-maker ASML and Chinese EV-manufacturer NIO.
It has also been the beneficiary of a number of private companies experiencing successful public market debuts this year, with the likes of Palantir more than doubling in value since it went public in late September, and AirBnB doubling on its first day of trading in December.
Also in the top five, the £509.1m JPMorgan China Growth & Income trust delivered a total return of 97.5 per cent for the year.
Managed by Howard Wang, Shumin Huang and Rebecca Jiang, it was one of the three Asia Pacific strategies focused on Chinese equities amongst the top 25.
Chinese equities were the best-performing market year-to-date, as the country recovered the fastest from the coronavirus pandemic after a ‘first-in, first-out’ encounter with Covid-19, following its initial emergence in November of 2019.
Elsewhere, the £8.3bn Pershing Square Holdings trust was the only hedge fund to make the top 25, benefitting from a short position that US manager Bill Ackman made on the corporate bond market before the coronavirus pandemic, which turned a $27m bet into a $2.6bn windfall
The New City Investment Managers-run £45.7m Golden Prospect Precious Metals Limited trust was the eighth highest performing trust in 2020, with a total return of 69.84 per cent.
The gold-focused trust benefited from a strong rally in gold and silver prices as investors fled to safety during the pandemic. Gold also benefited from fears surrounding currency debasement and central bank quantitative easing during the year.
Another notable trust was the £629m Biotech Growth trust, the only biotechnology focused strategy in the top 25.
Managed by Orbimed Capital’s Geoffrey Hsu, it benefited from large positions in healthcare and biotechnology companies that have experienced a strong year as scientific progress continued in the biotech space despite the pandemic.
The three worst performing peer groups for the year were the IT Leasing, IT Global High Income and IT Property Securities.
IT Leasing was hit hard by heavy losses in aircraft leasing and secured loan investment trusts, which have been decimated by the halt of global travel. As Yearsley explains: “Owning and leasing aircraft was not the place to be last year.”
Income strategies were hit particularly hard by the slashing of corporate dividends worldwide and property strategies suffered from heavy write-downs in commercial property values as economies were locked down and workers were encouraged to stay away from the office.
The biggest loss recorded in 2020 by an investment trust was from DP Aircraft I Limited, which was down 92.3 per cent for the year.
Source: FE Analytics
Other strategies at the bottom of the table were KKV Secured Loan and JZ Capital Partners LTD, which lost 78.14 and 73.86 per cent respectively.