Investment Trust Insights: Strategies For Savvy Buying

Investment trusts are publicly-traded companies that aim to make money by investing in a portfolio of companies or other assets. The best-performing investment trust of 2023 was JP Morgan American (JAM), with a near 25% share price gain. Other top-performing trusts include Henderson European Focus Trust (HEFT) and FTSE 100 giant Scottish Mortgage (SMT).

When considering which investment trusts to buy, investors should take into account factors such as investment philosophy, process, people, price, performance, and size. Trusts that have consistently been among the top-performing in their sectors include Digital 9 Infrastructure plc (DGI9), Downing Renewables & Infrastructure Trust Plc (DORE), and Pacific Assets Trust plc (PAC).

It's important to remember that past performance does not guarantee future results, and investors should always do their own research before making any investment decisions.

Top-performing investment trusts

When considering investment trusts to buy, it's important to remember that past performance is not a guide to future returns. Investment trusts can be riskier than other types of collective investments, and you should hold them for the long term. Here are some of the top-performing investment trusts to consider:

JPMorgan American (JAM)

With a nearly 25% share price gain in 2023, JAM was the best-performing investment trust under Morningstar coverage. It focuses on US large-cap growth companies, which were the winners of 2023.

Henderson European Focus Trust (HEFT)

Holding second place among Morningstar's top performers in 2023, this trust focuses on large-cap companies in Europe.

Scottish Mortgage (SMT)

This trust, which is one of the largest in the market with a valuation of over £10 billion, held third place in Morningstar's rankings for 2023. It is known for its focus on global growth companies.

TR Property (TRY)

Despite turbulence in the property sector, TRY produced a 10% share price return in 2023, making it an outlier among the top performers.

Pacific Assets (PAC)

With an 8% share price gain in 2023, PAC was another strong performer, especially considering the struggles of Asian equities during the year.

Schroder Asian Total Return (ATR)

ATR rose by 6.8% in 2023, even as Asian equities faced challenges. This makes it one of the top-performing investment trusts of the year.

JPMorgan Emerging Markets (JMG)

While JMG sneaked into the bottom 10 of Morningstar's rankings with a 4% share price fall, it is worth noting that it has India as its biggest weighting (24.77%) and a significant investment in China (21.66%).

Personal Assets Trust

This multi-asset investment trust, managed by Troy Asset Management, aims to preserve capital and provide total returns for shareholders. It invests in a mix of equities and lower-risk assets such as government bonds, gold, and cash.

City of London

This UK equity income investment trust is managed by Job Curtis, one of the most highly regarded managers in the sector. It has grown its dividend for over 50 years and has the ability to issue and buy back shares to control its trading price.

Scottish American Investment Company

This trust offers asset class and geographical diversification, investing mostly in global equities but also holding bonds and property. It is managed by Baillie Gifford fund managers James Dow, Toby Ross, and Ross Mathison, who aim to deliver income and capital growth.

JPMorgan Emerging Markets Investment Trust

With a focus on large and small companies in diverse emerging economies such as India, China, Taiwan, and Hong Kong, this trust benefits from an experienced management team with nearly 50 years of investing experience.

HICL Infrastructure

HICL provides stable and sustainable income over the long term, along with some capital growth. It invests in vital infrastructure assets in sectors like transport, utilities, and healthcare, primarily in the UK but also in Europe, North America, and New Zealand.

Investment trusts for diversification

Diversification is a key strategy to reduce risk and volatility in an investment portfolio. By spreading your investments across different asset classes, sectors, and geographic regions, you can lower the impact of specific risks associated with any one investment. Here are some investment trusts that can help you achieve diversification:

• City of London Investment Trust: This trust offers diversification away from US equities by investing in a mix of large, medium, and small UK companies. It has the ability to issue and buy back shares to control its trading price relative to its net asset value.
• Scottish American Investment Company: This trust provides asset class and geographical diversification by investing in global equities, bonds, and property. The managers aim to deliver income and capital growth, and the trust has an impressive dividend growth record.
• JPMorgan Emerging Markets Investment Trust: This trust offers exposure to a diverse range of emerging economies such as India, China, Taiwan, and Hong Kong. The experienced management team looks for high-quality companies with long-term growth prospects.
• HICL Infrastructure: This trust invests in infrastructure assets across sectors like transport, utilities, and healthcare, primarily in the UK but also in Europe, North America, and New Zealand. It aims to provide a stable income and some capital growth.
• Pacific Assets Trust: This trust invests in sustainable companies across the Asia Pacific region and the Indian subcontinent, excluding Japan, Australia, and New Zealand. It focuses on long-term growth and has consistently been a top performer in its sector.
• Personal Assets Trust: This multi-asset investment trust aims to preserve capital and provide total returns by investing in a mix of equities and lower-risk assets such as government bonds, gold, and cash. The managers use a discount control mechanism to reduce share price volatility.

Remember, diversification does not guarantee profit or protect against loss in a declining market. It is important to conduct your own research and consult with a financial advisor before making any investment decisions.

Investment trusts for international exposure

If you're looking for international exposure, investment trusts offer a great opportunity to access stocks from outside the U.S. market. Here are some options to consider:

Fidelity European Trust (FEV)

With £1.7 billion in assets, Fidelity European Trust offers exposure to some of Europe's leading companies. It currently trades at a 5% discount with a yield of 2.3%. Nestle, Novo Nordisk, and ASML are among its top holdings, and it has a five-year total return of 70%.

BlackRock Greater Europe Trust (BRGE)

This investment trust has assets of £590 million and trades at a 4% discount. Its largest holdings include Novo Nordisk, LVMH, and ASML. BlackRock Greater Europe Trust is focused on growth and has no energy exposure. It has returned 53% over the past five years, including income, and currently offers a 1.2% yield.

Henderson Trusts: European Focus (HEFT) and Eurotrust (HNE)

Both European Focus and Eurotrust from Henderson Trusts offer growth-focused strategies with different portfolios. HEFT has 27% in industrials, while HNE has 19% in healthcare. They have assets of £340 million and £290 million, respectively, and trade on 11% and 12% discounts with yields of nearly 2.8%. Over the past five years, they have returned 46% and 42% respectively.

JP Morgan European Growth & Income (JEGI)

With £400 million in assets, JP Morgan European Growth & Income offers a higher yield of 4.4% and trades on a 10% discount. Its shares have returned 41% over five years.

Vanguard Total International Stock ETF (VXUS)

This ETF provides exposure to both developed and emerging markets by tracking the FTSE Global All Cap ex U.S. Index. VXUS spans more than 8,600 international equities weighted by market capitalization, keeping turnover minimal at 3.9% for improved tax efficiency. The ETF charges a 0.08% expense ratio.

IShares Core MSCI EAFE ETF (IEFA)

IEFA is an ETF that focuses solely on developed markets. It tracks the MSCI EAFE IMI Index, which includes small- and mid-cap stocks, providing broader diversification across 2,800 equities. IEFA has over $117 billion in assets under management and charges a 0.07% expense ratio.

IShares Core MSCI Emerging Markets ETF (IEMG)

IEMG is an ETF that tracks the MSCI Emerging Markets IMI Net Index, featuring more than 2,900 market-cap-weighted holdings. It has over $79 billion in assets and charges a 0.09% expense ratio. The top five countries represented are China, India, Taiwan, South Korea, and Brazil.

Franklin FTSE China ETF (FLCH)

For those interested in the Chinese market, the Franklin FTSE China ETF provides exposure to Chinese stocks.

Franklin FTSE Taiwan ETF (FLTW)

Similarly, the Franklin FTSE Taiwan ETF offers access to Taiwanese stocks.

WisdomTree China ex-State-Owned Enterprises ETF (CXSE)

This ETF provides exposure to Chinese stocks while excluding state-owned enterprises, offering a different perspective on the Chinese market.

BNY Mellon Emerging Markets Equity ETF (BKEM)

The BNY Mellon Emerging Markets Equity ETF provides access to a diverse range of emerging markets, including countries such as India, Brazil, and South Africa.

These investment trusts and ETFs offer a great way to gain international exposure and diversify your portfolio beyond the U.S. market. Remember to do your own research and consult with a financial adviser before making any investment decisions.

Investment trusts for income

Investment trusts are a type of fund that is publicly listed and traded on the London Stock Exchange. They invest in a 'basket' of underlying assets, such as equities, bonds or property.

JPMorgan Global Growth & Income

This trust was one of the most purchased investment trusts by ii customers in June 2024, May 2024, April 2024, March 2024, and February 2024.

NextEnergy Solar Fund

This trust was one of the most purchased investment trusts by ii customers in June 2024 and May 2024.

Polar Capital Technology

Polar Capital Technology was one of the most purchased investment trusts by ii customers in June 2024, May 2024, March 2024, and February 2024. It also made the list of the best-performing investment trusts over 3 years.

Pershing Square Holdings

Pershing Square Holdings was one of the most purchased investment trusts by ii customers in June 2024, May 2024, April 2024, March 2024, and February 2024. It also made the list of the best-performing investment trusts over 7 years.

The Renewables Infrastructure Group

The Renewables Infrastructure Group was one of the most purchased investment trusts by ii customers in June 2024.

Merchants Trust plc (MRCH)

Merchants Trust, launched in 1889, focuses on investing in large and mid-cap UK companies. It has been named a "Dividend Hero" by the Association of Investment Companies, increasing annual dividends for 20 years in a row. It has a dividend yield of 5% and is one of the lowest-charging annual fees among its peers.

City of London

The City of London investment trust is a UK equity income investment trust run by Job Curtis, one of the most highly regarded managers in the sector. It has grown its dividend for over 50 years. The trust has the ability to issue and buy back shares to control the trust trading at a premium or discount to net asset value.

Scottish American Investment Company

The Scottish American Investment Company is an income trust that is mostly invested in global equities but also holds bonds and property. It is run by Baillie Gifford fund managers James Dow, Toby Ross and Ross Mathison, who aim to deliver income growth and capital growth for shareholders. It has an impressive dividend growth record, with 49 years of increases and 80 years without cuts.

JPMorgan Emerging Markets Investment Trust

This trust delivers long-term growth by investing in large and small companies from a diverse range of emerging economies such as India, China, Taiwan, and Hong Kong. The managers have nearly 50 years of investing experience between them, and the lead manager, Austin Forey, has run this trust for 29 years.

HICL Infrastructure

HICL Infrastructure aims to provide investors with a stable, sustainable income over the long term, along with some capital growth. It invests in infrastructure assets in sectors like transport, utilities, and healthcare. The majority of the trust's assets are in the UK, with other investments in Europe, North America, and New Zealand.

Personal Assets Trust

Personal Assets Trust is a multi-asset investment trust that aims to preserve capital and focuses on total returns for shareholders. It invests in a mix of equities and lower-risk assets such as government bonds, gold, and cash. The trust has a discount control mechanism to buy back shares when it trades at a discount and issue shares when it trades at a premium to net asset value.

TR Property Investment Trust

TR Property Investment Trust produced a share price return of 10% in 2023 despite some turbulence in the property sector.

Schroder Oriental Income

Schroder Oriental Income is an Asia Pacific Equity Income trust.

Securities Trust of Scotland

Securities Trust of Scotland was recently added to the AJ Bell Investment Trust Select List to provide a dedicated global equity income option.

Investment trusts for capital growth

When it comes to investment trusts for capital growth, there are a few options to consider. Here are some detailed suggestions:

Monks (LSE: MNKS)

Monks, run by Scottish investment manager Baillie Gifford, aims to generate long-term capital growth by investing in global equities. It has a diversified portfolio with exposure to technology and other growth industries, and a strong five-year track record, making it a sound pick for growth. However, its bias towards US stocks could be a risk factor if the US market underperforms.

Scottish Mortgage (LSE: SMT)

Scottish Mortgage has delivered impressive returns in recent years, with a 391% rise in net asset value over the past five years. It tends to make large bets on specific stocks, including Chinese tech companies like Tencent and Alibaba, which can be lucrative but also risky if the stocks decline. Its large positions in Chinese tech come with a high level of regulatory risk due to the Chinese government's crackdown on big tech.

BlackRock Throgmorton (LSE: THRG)

BlackRock Throgmorton is a high-conviction trust investing in small UK growth companies. It has performed well in recent years, returning 166% over the past five years. Its top holdings include Gamma Communications, Impax Asset Management, Games Workshop, and Watches of Switzerland, offering a portfolio that differs significantly from Monks and Scottish Mortgage, potentially providing diversification. However, it has a performance fee, which could increase costs compared to other trusts.

JPMorgan Global Growth & Income

JPMorgan Global Growth & Income was the top-selling investment trust among Fidelity's personal investors in April 2024. It aims to beat the MSCI All Countries World Index over the long term and currently offers a prospective dividend yield of around 3.3%. While the trust's management remains cautious about the macroeconomic environment, they foresee global corporate earnings growth of about 10%.

Pershing Square Holdings

Pershing Square Holdings was among the top ten most-purchased investment trusts by Interactive Investor customers in June 2024. It also appeared in the top ten lists for May and March 2024.

Polar Capital Technology Trust

Polar Capital Technology Trust was the fifth most popular investment trust among Fidelity's personal investors in April 2024. It focuses on mega-cap companies like Nvidia, Microsoft, Meta, and Amazon. The trust's manager, Ben Rogoff, expresses conviction in the long-term tailwinds associated with generative AI.

F&C Investment Trust

F&C Investment Trust, the world's oldest investment trust, has consistently grown its dividends over 53 years. It aims to achieve dividend growth that outpaces inflation and smooth out stock market highs and lows. With investments in over 400 companies globally, F&C offers smaller individual stakes than some other trusts, reducing exposure to mega-cap winners. It was the sixth most popular investment trust among Fidelity's personal investors in April 2024 and appeared in Interactive Investor's top ten lists for May and March 2024.

BlackRock World Mining Trust

BlackRock World Mining Trust, a newcomer to Fidelity's top-selling investment trusts in April 2024, provides investors with exposure to selected commodities like copper, gold, and silver. It was also among the top ten most-purchased investment trusts by Interactive Investor customers in May and June 2024.

Pacific Assets Trust plc (PAC)

Pacific Assets Trust, launched in 1985, invests in sustainable companies across the Asia Pacific region and the Indian subcontinent (excluding Japan, Australia, and New Zealand). It focuses on high-quality, sustainable businesses, with India, Taiwan, China, and Indonesia as its top country allocations. The trust has consistently been a top performer in its sector over the last five years, offering capital growth rather than income, with a modest dividend yield of less than 1%.

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