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The winning investment trusts of 2012 and ideas for 2013

It’s January and many investors will be looking at how their portfolios performed in 2012, writes James Carthew.

 
The winning investment trusts of 2012 and ideas for 2013

It’s January and many investors will be looking at how their portfolios performed in 2012. Given how miserable many of us felt this time last year, it is perhaps surprising how well 2012 turned out.

The MSCI World Index ended the year up 11.4% on a total return basis. We have survived, for now, the Chinese slowdown, the US fiscal cliff (though some may be lamenting that the relief rally arrived in 2013 rather than at the tail end of 2012) and the economic muddle in Europe.

Of course, we are not yet out of the woods – 2012 appeared to be another year of procrastination when it came to resolving the West’s vast debt burden and doubtless we will see plenty more macroeconomic scares this year (and possibly for many years to come).

Fixation with macro outlook

I think many investors were fixated on the macroeconomic picture last year, particularly those flirting with calamity by trying to squeeze the last drops of performance out of the government bond markets before their inevitable collapse.

However, equity investors that focused on companies in reasonable shape – and, in most markets, those paying healthy and sustainable dividends – were rewarded and I think there is a good chance this pattern will persist in 2013.

As often happens, some of the best performing investment companies of 2012 were the penny stocks bouncing from lows – companies such as Loudwater, Ingenious Media Active Capital and Economic Lifestyle Property.

Loudwater raised £75 million in January 2007. The idea was to invest in pre-initial public offering (IPO) stocks but it was not long before the credit crisis hit and IPOs dried up. Loudwater found it had unwittingly become a long-term investor in these companies.

It decided to return cash to shareholders and gave back £13.8 million in 2008 but over the course of the next couple of years, disposals were hard to achieve, the net asset value (NAV) started to fall away and, unsurprisingly, the discount widened.

A sale early in 2011 freed up enough cash to let Loudwater return a further £4.5 million but in 2012 it made real progress. A string of sales was crowned by the sale of its stake in AgraQuest Inc in July for £27.3 million – four times its value in Loudwater’s books at the time and a substantial premium to the Loudwater’s market cap.

In November, Loudwater reckoned the combined value of the cash it had given back and the NAV of what was left in the fund was just over £70 million. Its discount was 21% at the end of the year, having been as wide as 79%.

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17 comments so far. Why not have your say?

Tony Ryan

Jan 23, 2013 at 14:54

Does anyone have strong ideas on quality inv. trusts (or equities) to benefit from the aging UK demographic profile

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Chris Marshall (Citywire)

Jan 23, 2013 at 14:59

Hi Tony

That's an interesting question - might I suggest that you post it in our forums, here: http://moneyforums.citywire.co.uk/yaf_topics6_Investing.aspx

That way you should get more responses

Chris, Citywire

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David Meyer

Jan 23, 2013 at 15:13

I bought Acorn Income in July 2011 and I am sitting on a capital gain of over 23% plus dividends.

A cracking fund still trading at a discount to NAV.

Pile in!

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Jimbob

Jan 23, 2013 at 17:05

Will `trail commissions` continue to be paid on investments established prior to

1st January 2013

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AA

Jan 23, 2013 at 18:49

Are you kidding, these are all too risky, avoid at all costs.

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NGR

Jan 23, 2013 at 20:34

Scottish Mortgage Trust is a good general trust which invests based on what it sees as big themes over the coming years. It is not constrained by indices, and is consistently among the top performers in the Global Growth category, without ever being a flash in the pan (top one year bottom the next). I would recommend it. Have a good read about it on their website and see if you agree with their ideas, and if so it might be worth investing in. I first bought some shares in 1998, and have added to over the years, and am very pleased with the performance.

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n hedley

Jan 23, 2013 at 20:49

DIGNITY

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Malcolm Priaulx

Jan 23, 2013 at 21:24

I would agree with Scottish Mortgage Trust. I am also in World Wide Health (WWH) and The Biotec Growth Trust (BIOG).

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john kenny

Jan 23, 2013 at 21:33

Hello all,

Are these actually Investment trusts? Finding myself in a pedantic mood I would welcome someone who knows whether an IT can be registered in The Channel Isles?

Surely these are Investment Companies and regulated and managed rather differently?

Let's hope Damille does well for its backers as it has eye wateringly high charges - (although it wasn't on your recent list of expensive Its).

Having got that off my chest I would welcome as many articles on ITs as you can write!

What about a look at pharmaceutical trusts or other specialists like Herald or the difference between the smaller company ITs that take a growth versus a value style, single country trusts etc.

What about some data about which trusts are being bought - or sold - by professional investors?

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Maverick

Jan 23, 2013 at 22:12

Before you put your money anywhere near Ingenious Media Active Capital, go on to Trustnet and see how much it has lost over the last 6 months . . . . Trustnet give it a volatility index of 425 (when the FTSE 100 is 100).

Do your own research on Trustnet and don't follow anybody's tips.

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Tony Ryan

Jan 24, 2013 at 11:50

Maverick, Thanks for the intro' to Trustnet, together with H&L this will help provide a good coverage .

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John Osborne

Jan 27, 2013 at 11:24

Dignity very richly valued with huge gearing and low yield. No shortage of customers unfortunately., but too expensive for me, yesterday's story until it drops back again.

Agree that big drug companies and biotech are going to have many more customers as well. WHH may take advantage of this trend.

re. other trends for 2013, it appears likely that the £ will continue to be devalued more than other currencies as QE corrodes our economy.

But where in the world to invest to take advantage of this apart from WHH? Japan risky and a lot of the gains may have been missed now. Asean region looks interesting.

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Ian Holmes

Jan 29, 2013 at 07:55

Two ITs that I would heartily recommend from personal experience are:

Aberdeen Asian Smaller Companies (AAS) which has performed exceptionally well for me in my ISA this year with a return of over 50% (and a small dividend payment of about 1.3% to boot).

Aberdeen New Thai (ANW) has been even better for my SIPP with an annual return of over 70% and a slightly better dividend.

Both are managed by exceptional teams of investors based in Singapore and Bangkok.

Having spent some time in Thailand and travelling in SE Asia over the last couple of years, I could see the place is "booming". So I "put my money where my mouth is" to quote the vernacular!

Both trusts have a buy/sell spread and you need to check the price to NAV to make sure you see the full picture, but from my experience the spread and the NAV/Price difference are soon resolved with the appreciation of the asset.

Check Citywire and Fundsnet for a full picture. Aberdeen's own website will provide you with the factsheets and top holdings.

Without any deeper research than observing these top holdings in operation over here, they are trading very well indeed. Also check the SET (Stock Exchange of Thailand) to see how that has performed over the last few years.

(http://www.tradingeconomics.com/thailand/stock-market)

Good luck for 2013. I will be "holding" both of these ITs for the year.

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Maverick

Jan 29, 2013 at 13:43

Ian - While I said above "Do your own research on Trustnet and don't follow anybody's tips," I would just say I put AAS and ANW in my daughter's SIPP last year.

However, they both had a period between September 2010 and January 2012 when they did nothing at all. My rule always has been to sell a share if it does nothing for 4 months, and buy it back when it starts performing again.

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Ian Holmes

Jan 29, 2013 at 14:53

I agree with you wholeheartedly, Maverick. Own personal research is essential and there was a quiet period for both trusts' performances, but I remained confident having been to the region and seen what was happening. Also the shares didn't head south, they just marked time for a short while, as if taking a breather! This is where patience, nerve and further confirmatory research is needed.

The secret now will be judging when to sell and tie in the gains! I think (again, personal view - do your own research) they're good for substantial gains again in 2013.......... Hopefully you didn't sell your holdings too early!!

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Ian Holmes

Jan 29, 2013 at 15:59

PS:

Just after I posted the above comment, I received an e-mail on the same subject. If you're considering ASEAN investment it is worth a read. You'll find it at:

http://www.moneyweek.com/news-and-charts/economics/asia/new-world-get-ready-for-the-flood-62429

There are links within the article to additional articles on the subject. Its well worth a read and contains more than an element of truth!

Treat it as just one item of research before investing!

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Maverick

Jan 30, 2013 at 22:50

Ian - No, I still have all of AAS, ANW and SST at present - but I've always been what I would call a "performance tart", so if I can see better performance elsewhere I have no particular loyalty and I will move into (e.g.) JRS or JMC or MYI if they are performing better. I do, however, keep a "Sold but watch" list on Moneyextra and I am quite prepared to buy AAS and ANW again if they start performing again.

I remain unconvinced that "buy-and-hold" works properly in these days of split-second electronic trading.

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  • Acorn Income Fund Ltd
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