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ISA 2012: the best investment trusts
As part of our ISA season coverage we look at the 15 investment trusts in Citywire Selection.
by Caelainn Barr on Mar 15, 2012 at 14:47
Our pick of investment trusts
Investment trusts are the oldest form of investment scheme in the UK. They are companies in their own right and invest in the stocks and shares of other companies.
Owning shares in an investment trust can be a cost-efficient way of investing in a wide range of companies and markets. However, many of these trusts are quite high risk, and are only suitable for the long-term saver.
Shares in investment trusts often trade beneath the value of their investment holdings. This is called a discount to net asset value (NAV). Sustained discounts can depress investor returns, but in the short term they can be viewed as a buying opportunity if the discount narrows and the share price rises. See more of our pick of the best investment ideas on Citywire Selection.
Artemis Alpha Trust
The Artemis Alpha Trust is regarded as a bit of a ‘best ideas’ fund run by experienced Artemis managers John Dodd and Adrian Paterson. The portfolio is quite high risk and is concentrated in UK and some international shares.
Its shares have generated a total return of 31.54% over the past five years to the end of February, compared withthe benchmark Hoare Govett Small Cap total return of 16.81%.
The trust is mostly invested in small-cap companies, making up 82% of the trust, and a third of the portfolio is in unlisted companies, which has excluded it from some of the gains of the New Year market rally.
Its key holdings are in North Sea-focused oil and gas exploration company Hurricane Exploration, Russian gas group Vostok Energy and aircraft sales group Lynton Holdings Asia.
The trust was badly hit in the last year when its share price fell 15.8% and its NAV shed 9.1%, but the portfolio’s performance improved in January as its holdings in Providence Resources, Cove Energy and Ithaca Energy boosted its earnings.
Citywire Selection comment: ‘Unlisted holdings in this investment trust have been a drag on short term performance. Notwithstanding that, experienced co-managers John Dodd and Adrian Paterson have an uncanny knack of picking winners in the under-researched small-cap space.'
The trust is currently trading at 275.5p, or a 5.7% discount to its NAV of 292.1p.
BlueCrest AllBlue is a fund of AllBlue hedge funds managed by Michael Platt.
The trust’s share price has given a total return of 65.53% over the past five years to the end of February, compared with the benchmark FTSE World total return which increased 26.17%.
Citywire's Jonathan Miller says: ‘The trust continues to act as a useful diversifier, offering protection when equity markets fall. It invests in a range of in-house hedge funds across a variety of strategies.’
The trust is currently priced at 164.8p a 3.6% discount to its NAV of 170.9p
Murray International Trust
The Murray International Trust invests in global equities and is managed by Bruce Stout who also acts as senior investment manager at Aberdeen Asset Management.
The trust’s share price has beaten its benchmark four-fold, with an impressive total return of 96.48% over the past five years to the end of February, compared with the benchmark MSCI All Country World index’s total return of 22.51%.
It is focused on the Asia and developed Europe with key holdings in British American Tobacco, Brazil’s BAT subsidiary Souza Cruz and Unilever Indonesia. The portfolio also has a small position, at 7%, in bonds.
Citywire Selection says: ‘Veteran fund manager Bruce Stout has been concerned about the market recovery running out of steam and has steered his fund towards defensive blue-chip companies with a large allocation to Asia and emerging markets. With around 7% also invested in bonds, Stout is currently in capital-preservation mode.’
The trust is currently trading at £10.02, a 5.7% premium to its NAV of 947.8p.
RIT Capital Partners
RIT Capital Partners invests in quoted and unquoted companies and is managed by Micky Breuer-Weil. Lord Rothschild is chairman of the trust and has over £200 million invested in its shares.
The trust has become increasingly defensive, moving into areas such as healthcare and technology, while increasing its exposure to frontier markets.
Its key holdings are in North Sea-focused Agora Oil and Gas, investment group Findlay Park and technology consultancy Titan Partners.
The trust’s share price has given a total return of 32.36% over the past five years to the end of February, compared with the benchmark FTSE World total return index, which added 26.17%.
It’s currently priced at £12.40, a 0.6% premium to its NAV of £12.33.
Ruffer Investment Company
Steve Russell is investment director of the Ruffer Investment Company, which featured in our ISA tips for ‘novice’ savers.
The trust has an impressive record in avoiding losses. It invests in bonds and global blue-chip companies and has a 24% stake in Japanese equities. Jonathan Ruffer, chief executive of the trust and founder of Ruffer Investments, has a £2 million stake in the trust.
Its top holdings are in index-linked US treasuries, Vodafone and Japanese financial group T&D Holdings. The trust’s total return has nearly doubled over the past five years, compared with the benchmark FTSE World index, which generated a total return of 26.17%.
Citywire’s Jonathan Miller says: ‘Long-term performance returns remain very strong from one of the leaders in multi-asset investing which has a strong focus on capital preservation.’
The trust is currently trading at 203.3p, or a 2.8% premium to its NAV of 197.7p.
Scottish Oriental Smaller Companies Trust
Scottish Oriental Smaller Companies has been the top performer of all selection funds over the past three years, with impressive total returns of 225.69%, which is its share price including dividends.
The trust is run by First State Investments and is overseen by Susie Ripingall, who took charge of the portfolio in 2000 after five years on the Asian equities team at Stewart Ivory & Co.
It focuses on smaller companies with market capital of less than £636 million in the Asia Pacific region, and its shares have returned 140.39% over the past five years to the end of February, ahead of the benchmark MSCI Asia ex Japan index, which rose 68%.
The trust’s key holdings are in consumer goods and financials, with a focus on China and Hong Kong, a low weighting in India. The portfolio excludes Japan.
Its biggest positions are in shipping company TK Corp, offshore platform builder Ezion Holdings and medical goods supplier Supermax.
TR Property Investment Trust
TR Property is the only property-focused investment trust in Citywire Selection. The trust is overseen by Marcus Phayre-Mudge with core holdings in European equities and UK property.
Following a rough period for European property valuations the trust’s shares made a loss of 23.62% over the past five years to the end of February, compared with the benchmark FTSE, which shed 33.42%.
Its key areas of investment are in retail and office properties, with a focus on developed Europe and the UK. The trust’s top holdings are in Unibail-Rodamco, which is Europe’s leading commercial property group with a focus on shopping centres; Land Securities; and British Land.
In 2011 the trust reduced its exposure to Continental Europe to increase its exposure to the UK property market. The trust is currently trading at 158.9p a share, a 12.8% discount to its NAV of 182.2p.
Citywire Selection says: ‘The discount on this trust widened significantly towards the end of 2011 as the value of the companies it invests in rose while the price of the trust remained static.
‘The discrepancy is certain not to last long as the consistent performance of the trust has attracted a large following.’
BH Macro invests in the Brevan Howard Master hedge fund and was founded by Alan Howard in 2003.
Private investors can’t access the hedge funds directly, and the complexity of its trades make it difficult to mirror the fund’s performance. However the fund tends to give an inverse return versus the FTSE. In the 59 months to the end of February, when the FTSE World total return only took on 23.83%, the trust’s share price added 100.69%.
However, in the three years to the end of February its share price gave a total return of 39.38%, compared with the benchmark FTSE World total return which added 70.65%.
Ewan Lovett-Turner, associate director at Numis Securities, comments: ‘The fund has a good track record and we believe it remains attractive for investors seeking consistent returns with low volatility and little correlation to equity markets.’
The trust is currently trading at £20.45, a 0.6% premium to its NAV of £20.32
HgCapital Trust is a private equity trust investing in 31 companies with a focus on telecoms, media and technology (TMT); healthcare; and industrials.
The trust is managed by Ian Armitage, Frances Jacob and Nic Humphries and its top holdings are in European companies, with 7.3% in Italian business software company TeamSystem, 6.4% in Visma and 5.2% in UK business development group, SHL.
Visma provides accounting and payroll software to SMEs in the Nordic region. During its four-year investment in the company, earnings before tax have risen 265% and the trust has since started to sell its stake in the group.
The trust’s share price has produced a total return of 46.86% over the past five years to the end of February, compared with the benchmark LPX50 index, which has made a loss of 29.35%. It is currently trading at 975p, an 11.1% discount to its NAV of £10.96.
Montanaro European Smaller Companies Trust
As its name suggests, the Montanaro European Smaller Companies investment trust focuses on the shares of smaller European companies. Its share price has soared 82% in the past three years, although over five years the shareholder return has been just 3%. Fund manager Charles Montanaro thinks markets will pause for breath but remains optimistic for the year ahead. His largest holding is in Rational, a German manufacturer of ovens and kitchen equipment. The trust’s share price trades 14% below the value of its investments, which could provide a buying opportunity for long-term investors.
Citywire’s Jonathan Miller says: ‘The trust’s discount has recently widened and although this is a punchy pick, it offers an attractive entry point for contrarian investors.’
British Empire Securities & General Trust
The British Empire Securities & General Trust is a fund of funds, focusing on companies whose share prices are trading at a discount compared with their underlying value, and is managed by John Pennink
Its biggest positions are in French media company Vivendi, Norwegian consumer goods company Orkla and Jardine Strategic, a holding company which invests across a number of businesses in the Jardine group.
The trust had a difficult 2011 and its most recent fall in share price is partly down to a 55% drop in the value of Vivendi, which makes up almost 10% of the trust’s holdings.
Citywire Selection says: ‘Pennick has been taking profits on stocks that have performed well and used his significant cash pile to invest in selective companies that have lagged the market.’
Its price has given a total return of 12.95% over the past five years, compared to the benchmark MSCI World index’s total return which has added 22.51%. The trust is currently priced at 445p, an 8.1% discount to its NAV of 484.6p.
Edinburgh Worldwide Investment Trust
The Edinburgh Worldwide Investment Trust has holdings in about 40 global companies with a view to long-term growth. Its investments are concentrated in the US, China and Brazil with a focus on consumer services, industrials and technology.
The trust is run by Baillie Gifford and managed by Mark Urquhart. Its key holdings are in Amazon.com, Apple and China’s leading search engine, Baidu.
Urquhart says the portfolio reaped the benefits of holding Amazon, Hermes and eBay over the past year, but he regrets holding Banco Santander, which he expects will face further struggles under tougher banking regulations.
Citywire Selection notes: ‘The trust’s manager does not let macroeconomic issues cloud his judgment on companies, and the gradual shift of global GDP from West to East. The discount has swung widely of late, so keep an eye on this for an entry point you are comfortable with.’
The trust’s share price has given a total return of 29.02% over the past five years to the end of February, compared with the benchmark MSCI World index’s total return of 26.44%. The trust is currently trading at 294p, or a 12.2% discount to its NAV of 334.9p.
BlackRock Latin American Investment Trust
Will Landers oversees the BlackRock Latin American investment trust with holdings in large– and mid-cap companies across the region.
The trust’s share price has given a total return of 80.4% over the past five years to the end of February, underperforming the benchmark MSCI EM Latin American index’s total return, which increased 104.4%.
This is a higher risk fund for someone looking for specific exposure to Latin America. The fund is two thirds invested in Brazil, the continent’s biggest economy, but also has several big holdings in Mexico and other countries. Its share price has given investors a roller-coaster ride in recent years but as it currently trades below the value of its investments, there is an opportunity for a long-term investor.
The trust is currently trading at a 6.2% discount with shares trading at 620p, compared with its NAV of 660.6p.
Citywire's Jonathan Miller says: ‘Investment in the area is dominated by Brazil and fund manager Will Landers is backing its banks and domestic consumption. The trust had a difficult period last year, but we feel it can bounce back strongly from a recovery in the region and the trust currently trades at a discount.’
BlackRock World Mining Trust
The BlackRock World Mining trust invests in global mining companies, precious metals and diamonds, and is managed by Evy Hambro and Catherine Raw.
The trust was launched in 1993 and since then has grown to £1.5 billion in its total assets.
Its biggest geographical focus is Latin America and Australasia, with key holdings in mining giants Rio Tinto, BHP Billiton and Vale.
The portfolio suffered last year as concerns about the prospects of a hard landing for China hit commodity prices and the total returns on its net asset value (NAV) are down 6% in the past 12 months.
Over a five-year period to the end of February its share price has given returns of 76.3%, compared with the benchmark FTSE World Mining index, which has added 76.5%. It is currently trading at a 10.2% discount with shares priced at 713p, to its NAV of 794.3p.
It has a dividend yield of 1.98% having recently boosted its pay-out from 6.6p in 2010 to 14.7p per share.
Citywire's Jonathan Miller says: ‘When commodities do well, this trust will handsomely outperform and despite giving back some gains in 2011 it has still returned more than 150% over the last three years.’
Impax Environmental Markets
Bruce Jenkyn-Jones and Jon Forster manage the Impax Environmental Markets trust, which focuses on investing in waste technology and alternative energy.
The environmental sector has suffered with the credit crisis and sentiment has yet to pick up. The trust's share price has given a loss on its total return of 10.53% over the past five years to the end of February, to marginally outperform to the benchmark FTSE ET50 index, which dropped 10.58%.
The trust’s key holdings are in heat pump maker Nibe, electrical manufacturer Regal-Beliot and water filer manufacturer Pall.
Commenting on the environmental sector, Citywire's Frank Talbot says: 'Despite poor performance, the structural drivers for investment in this area are sound, and there are binding international commitments for the world to become more energy efficient and environmentally aware. However, it may take a period of prosperity for the gloom to lift.'
The trust is currently trading at 103.3p, a 20.3% discount to its NAV of 103.3p.
More about this:
Look up the investment trusts
- Artemis Alpha Trust (Ordinary Share)
- BH Macro GBP (Ordinary Share)
- BlackRock Latin American (Ordinary Share)
- BlackRock World Mining Trust (Ordinary Share)
- BlueCrest AllBlue GBP (Ordinary Share)
- British Empire Securities (Ordinary Share)
- Edinburgh Investment (Ordinary Share)
- HgCapital Trust (Ordinary Share)
- Impax Environmental Markets (Ordinary Share)
- Montanaro European Smaller (Ordinary Share)
- Murray International (Ordinary Share)
- RIT Capital Partners (Ordinary Share)
- Ruffer Investment Company (Ordinary Share)
- Scottish Oriental Smaller Cos (Ordinary Share)
- TR Property SIGMA (Ordinary Share)