The first half of 2017 saw the inauguration of Donald Trump as US president, the invoking of Article 50 by the UK government to exit the EU and several European elections, including a snap UK general election which resulted in a minority government for the ruling Conservative party.
Despite some of the headwinds facing markets during the first half, things have looked better in the closed-end fund space
“The investment trust sector delivered a fifth consecutive quarter of positive performance in the second quarter of 2017,” noted consultancy Winterflood Investment Trusts.
“So far in 2017 the investment trust sector is up 10.6 per cent compared with an increase of 5.5 per cent for the FTSE All Share.”
Winterflood noted that there had been a tightening of discounts during the second quarter of the year, narrowing from 5.8 per cent at the end of the first quarter to 4.1 per cent.
The first half of the year favoured growth strategies over value-oriented funds, as the FTSE World Growth index rose by 9.96 per cent against a 2.51 per cent return for its FTSE World Value counterpart.
Against this backdrop, the IT European Smaller Companies was the best performing sector of the first half with the average trust returning 32.35 per cent to 30 June, although it should be noted that the sector is comprised of just four trusts.
Three other smaller companies-focused regional sectors were also among the top 10 performing sectors, including Japan, UK and Global, as the chart below shows.
Source: FE Analytics
Indeed, there was little change at the top of the sector performance tables, quarter-on-quarter, as the IT European Smaller Companies and IT Japanese Smaller Companies remained unchallenged as the first and second top-performing sectors.
However, the IT Europe sector jumped to third place with an average return of 21.53 per cent over the first six months of the year.
The IT Tech Media & Telecommunications sector remained fourth-placed with a return of 17.1 per cent, while the average IT Country Specialists Asia Pacific rounded out the top five. The IT Country Specialists Asia Pacific sector includes several China-focused strategies, which were the best performers in the Investment Association universe of open-ended funds.
At the opposite end of the table could be found other single-country specialist sectors, while North American equities strategies also struggled in H1.
Outside of the VCT and alternatives sectors, the best performing trust was RDP Global Resources which was up by 53.13 per cent.
The best performer from the IT European Smaller Companies sector – and the more conventional sectors – was the £612m four FE Crown-rated TR European Growth Trust, managed by Janus Henderson’s Ollie Beckett. It was up by 38.28 per cent.
Performance of trust vs sector & benchmark over H1
Source: FE Analytics
The best five FE Crown-rated fund was the £198.1m Schroder Asian Total Return Investment Company, co-managed by Lee King Fuei and FE Alpha Manager Robin Parbrook, which rose by 23.66 per cent.
Other notable funds with a five-crown rating included the £291.7m Baillie Gifford Shin Nippon fund, managed by Praveen Kumar, which was up by 20.57 per cent. The £181.4m Rights & Issues Investment Trust also delivered a return of more than 20.05 per cent during the first half.
The best performing trust overseen by an FE Alpha Manager was the F&C European Assets Trust, which is run by Sam Cosh. The £425.9m trust returned 30.17 per cent during the first half of the year. Cosh has managed the European smaller companies-focused trust since 2011.
Performance of trust vs sector & benchmark over H1
Source: FE Analytics
At the other end of the performance table was the five crown-rated Lindsell Train Investment Trust, managed by FE Alpha Manager Nick Train, which lost 18.47 per cent during the first six months of the year.
Three other FE Alpha Manager trusts also returned more than 25 per cent during the first six months.
FE Alpha Manager Alexander Darwall’s Jupiter European Opportunities fund was up by 27.17 per cent. Meanwhile, the SVM UK Emerging trust managed by Colin McLean and FE Alpha Manager Margaret Lawson was up by 25.21 per cent. Finally, the Premier Fund Managers Acorn Income co-managed by Paul Smith, Fraser Mackersie and FE Alpha Manager Simon Moon was up by 25.2 per cent.
For the second consecutive quarter, the BlackRock Commodities Income investment trust was the worst closed-end fund overseen by an FE Alpha Manager.
The trust is co-managed by FE Alpha Manager Tom Holl and Olivia Markham. During the first six months of the year the trust recorded a loss of 19.76 per cent.