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Top 10 Investment Trusts in November

Closed-end fund investors continued to seek developed market exposure in November, according to data compiled by Morningstar

Karen Kwok 5 December, 2016 | 4:23PM

Closed-end fund investors continued to seek out developed market exposure in November, according to data compiled by Morningstar.

Eight out of 10 of the most popular investment trusts in November among Morningstar.co.uk readers are either Gold or Silver Rated. The list is dominated by developed market investments, while biotech, infrastructure and commodities trusts also proved popular.

Scottish Mortgage (SMT)

The most popular investment trust in November was a global equity trust, Gold Rated Scottish Mortgage. This trust has been top of the list for the last five months.

Scottish Mortgage is trading at a 3.8% premium. The trust gains 14.9% year to date and it has 21.8% five years annualised returns. With ongoing charges of 0.45% in 2016, this fund is exceptionally competitive among its peers for very active management and a fairly unique approach to investment in today’s world, David Holder, fund analyst at Morningstar said.

The fund is managed by the long-term global growth team at Baillie Gifford, of which headed by James Anderson, whilst Tom Slater is also a decision-maker on the trust portfolios.

The investment approach followed here focuses on identifying high-growth companies and holding them for the very long term to gain the benefit of compounded growth.

The board’s aim is to pay an annual dividend that historically has increased each year at a rate higher than the prevailing rate of inflation. The dividend has been increased every year except two during the past 41 years.

City of London (CTY)

The second most popular trust in November is Gold Rated City of London. The trust is trading at 2.8% premium and it is up 4.4% year to date. The fund has 11.1% five years annualised returns and 5.4% three years annualised returns.

Holder said the trust remains a highly compelling option for investors, of which one of the main reasons is the consistent approach of the fund manager Job Curtis throughout years.

“Job Curtis has been at the helm for 25 years, a length of tenure that’s rare to see,” Holder said.

“Conservative” is a moniker that permeates through the management of the trust, and Curtis is naturally a cautious investor. This caution has served shareholders well over the years, Holder added.

Also most crucially, investors benefit from the very low costs associated with this fund.

Finsbury Growth & Income (FGT)

This fund is also Gold Rated by Morningstar analysts. It is trading at 1.1% premium. The fund gains 8.5% year to date and it has 16.7% five years annualised returns.

Morningstar fund analyst Simon Dorricott said the fund benefits from the stewardship of a seasoned and talented UK equity manager, Nick Train, who has demonstrated a consistent approach.

Train's process is differentiated and has proved successful over a number of market cycles, Dorricott said. He looks for unique and high-quality companies that offer a high and sustainable return on equity and low capital intensity and are cash-generative.

Murray International (MYI)

The trust is Gold Rated by Morningstar analysts. It is trading at 2.8% premium. The trust gains 41.6% year to date and it has 8.4% five years annualised returns.

Murray international has a dual mandate: The aim of the company is to achieve a total return greater than its benchmark by investing predominantly in equities worldwide, said Holder. Within this objective the manager Bruce Stout seeks to increase the company’s revenues in order to maintain an above-average dividend yield. 

Whilst the long-term performance is strong over Stout’s tenure, returns have been much weaker over the past three years. Whilst analysts cannot ignore short-term performance, the reasons for it are consistent with the investment approach diligently followed here over many years. Therefore analysts’ conviction in the process remains, said Holder.

Biotech Growth (BIOG)

This Silver Rated fund is trading at 0.5% premium. It gains 0.1% year to date and it has 30.9% five years annualised returns.

Holder thinks investors looking for biotech exposure are in safe hands with this trust. The strength of the proposition comes from the in-depth knowledge that the investment team brings to this fast-paced and specialist market, Holder said. Manager Richard Klemm brings industry as well as investment experience, having completed extensive studies in molecular biology, molecular and cell biology, and economics. 

Edinburgh Investment (EDIN)

This Silver Rated fund is trading at 0.8% discount. It losses 0.4% year to date however it has 11.9% five years annualised returns.

Morningstar analyst Peter Brunt said this trust benefits from a very competitive fee structure and an experienced manager in Mark Barnett, who is proving a steady hand despite his increased responsibilities and assets under management. The ongoing charge of this fund is 0.6%.

RIT Capital Partners (RCP)

This infrastructure trust is currently trading at 8.8% premium. The ongoing charge of the fund is 1.3%. It gains 9.3% year to date and it has a three-year annualised return of 15%. It is not rated by Morningstar analysts. The fund has been managed by Ron Tabbouche since December 2012.

Liquidity concerns after the Brexit vote has beaten down valuations of real estates investment trusts according to Chris Beauchamp, chief market analyst at IG Group, who thinks the sector is really cheap relative to where they were before the vote.

Woodford Patient Capital Trust (WPCT)

The trust is trading at 0.1% discount and it is not rated by Morningstar analysts. It is co-managed by Neil Woodford, Paul Lamacraft, Saku Saha and Stepehn Lamacraft. The ongoing charge of the trust is 0.15%. It has lost 9.5% year to date.

BlackRock World Mining Trust (BRWM)

This Silver Rated fund is trading at 13.4% discount. It gains 95.1% year to date. It has 0.4% 10 years annualised returns.

The management team at BlackRock World Mining is highly experienced and has been successful in applying the outcome of its bottom-up and top-down analysis, and investors here have been well compensated over the long term, said Fatima Khizou, fund analyst for Morningstar.

Despite recent years have been challenging for this trust's management and its shareholders, analysts believe that BlackRock’s team is one of the best resourced in the sector, underpinned by its experience and knowledge.

The fund is not overly expensive--its ongoing charge is below the category median at 1.21%, says Khizou.

Jupiter European Opportunities (JEO)

This Gold Rated trust is trading at 6.1% discount. The fund lost 10.8% year to date however it has 18% five years annualised returns.

Morningstar analyst Muna Abu-Habsa thinks the fund is a compelling choice for European equities.

“Alexander Darwall has been in charge of this fund from the start, and we think this stability at the helm is a contributing factor to the fund's success thus far,” said Abu-Habsa.

Analysts added that Darwall takes a high-conviction approach; he builds his portfolios from the bottom up, following thorough fundamental analysis, and in particular he likes management teams that act in the interests of their shareholders. 

Jupiter takes an annual management fee of 0.75% of total assets. There is also a performance fee, the structure of which analysts believe could be a little better.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
Biotech Growth Ord784.00 GBX1.16
BlackRock World Mining Trust plc368.75 GBX1.03
City of London Ord428.90 GBX-0.14
Edinburgh Investment Ord700.00 GBX0.86
Finsbury Growth & Income Ord761.00 GBX-0.39
Jupiter European Opportunities Ord716.00 GBX0.35
Murray International Ord1,260.00 GBX1.20
RIT Capital Partners Ord1,947.00 GBX1.14
Scottish Mortgage Ord437.00 GBX0.00
Woodford Patient Capital Trust84.00 GBX2.07-
About Author Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk