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Which Top-Rated Investment Trusts Can You Buy At A Discount

Six top-rated investment trusts are trading at discounts, despite strong gains in 2016 - and are among the most popular trusts with Morningstar readers

Karen Kwok 7 February, 2017 | 10:18AM

Investment trusts that have delivered consistent gains over a number of years remain some of the most popular investments on Morningstar.co.uk. But investors have the opportunity to buy many of these top-performing trusts at a bargain price – as six out of the top 10 are currently trading at a discount to their net asset value.

Six Top Rated Trusts At Discount

Among January’s 10 most popular investment trusts on Morningstar.co.uk, six are trading on discounts. These trusts all have a coveted gold or silver rating.

These trusts are:  Gold Rated Finsbury Growth & Income trust (FGT), Gold Rated The City of London investment trust (CTY), Gold Rated Murray International trust (MYI), Silver Rated BlackRock World Mining trust (BRWM), Silver Rated Witan Investment trust (WTAN) and Silver Rated Edinburgh Investment trust (EDIN) are trading at discounts despite their gains in 2016.

Finsbury Growth & Income trust is currently trading at a 0.1% discount, despite delivering gains of 12.6% gains in 2016. Over a five-year period it has delivered annualised returns of 16.3%. The fund has produced gains in the past eight years and it came second in January’s most popular investment trusts list.

Simon Dorricott, analyst with Morningstar said the fee structure of this fund gives it an advantage over its peers. The fund also benefits from a highly-experienced manager Nick Train, who looks for high quality companies which offer a high and sustainable return on equity and low capital intensity.

The City of London investment trust came third in our top 10 investment trusts in January. It is trading at 0.6% discount. It gained 9.3% in 2016 and it has annualised returns of 10.7% over the past five years. The fund has gained consistently in the past eight years. “Conservative” is a moniker that permeates through the management of the trust, and Curtis is a naturally cautious investor. This caution has served shareholders well over the years, Morningstar fund analyst David Holder said.

Murray International trust is trading at 1.7% discount despite gaining an impressive 50.5% in 2016. It came forth on the most popular trust list. Holder said the aim of the fund is to achieve a total return greater than its benchmark by investing predominantly in global equities. Within this objective, the fund manager Bruce Stout seeks to increase the company’s revenues in order to maintain an above-average dividend yield, Holder said.

100% Gains For BlackRock World Mining

Fifth on the list is BlackRock World Mining trust, one of the top performing trusts in 2016 with phenomenal gains of 100.6%. The fund is trading at a 7.6% discount. It’s performance longer term has been more volatile and over a 10-year period it has annualised returns of 2%. This trust carries significant risks, as its holdings incorporate high exposure to movements in base-metal and gold prices, said Fatima Khizou, Morningstar fund analyst. She said it is only for investors seeking dedicated exposure to miners. Khizou added the management team at the trust is highly experienced and investors here have been well compensated over the long term. 

Witan Investment trust and Edinburgh Investment trust came seventh and ninth on the most popular trust list in January. Witan is trading at 5.3% discount. It gained 18.4% in 2016 and it has consistent gains over the past five years, where it has delivered annualised returns of 16.4%. Holder said this trust is a solid choice for investors seeking core global equity exposure.

Edinburgh Investment trust is trading at 4.9% discount. It gained 3.1% in 2016 and it has consistent gains in the past eight years. Over five years it has delivered annualised returns of 11.9%. Morningstar senior analyst, Peter Brunt, said this trust benefits from a very competitive fee structure and an experienced manager Mark Barnett, who is proving a steady hand despite his increased responsibilities and assets under management.

Scottish Mortgage Remains Popular in the Past Seven Months

Gold Rated Scottish Mortgage Investment Trust (SMT) continues to top the most popular trust list in the past seven months and it is trading at a 2.9% premium. It gained 16.5% in 2016 and it has five-year annualised returns of 21.9%. During these five years it has delivered consistent positive gains. The trust has almost half of its assets (46%) invested in the US.

With ongoing charges of 0.45% this trust is exceptionally competitive among its global large growth equity Morningstar Category peer group for active management, Morningstar analyst David Holder said.

“The nature of the portfolio is likely to encourage volatility at times, but we are reassured by the experience of the fund managers James Anderson and Tom Slater and the wider approach at Baillie Gifford,” said Holder.

Other investment trusts on the top 10 list in January are RIT Capital Partners trust (RCP), Woodford Patient Capital trust (WPCT) and Gold Rated Jupiter European Opportunities trust (JEO). 

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
BlackRock World Mining Trust plc368.00 GBX2.01-
City of London Ord429.70 GBX0.87
Edinburgh Investment Ord737.50 GBX0.55-
Finsbury Growth & Income Ord755.00 GBX1.07-
Jupiter European Opportunities Ord708.50 GBX0.78-
RIT Capital Partners Ord1,957.00 GBX0.36-
Scottish Mortgage Ord431.70 GBX0.86-
Witan Ord1,044.00 GBX0.77-
Woodford Patient Capital Trust102.00 GBX0.59-
About Author Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk