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Top 10 Investment Trusts in May

European trusts and closed-end funds investing in small and mid sized companies prove popular with Morningstar.co.uk readers in May

Karen Kwok 12 June, 2017 | 3:31PM

Closed-end funds investors are looking to profit from the recent European equities rally – as evidenced by the Gold Rated Jupiter European Opportunities Trust (JEO) coming second in the most popular investment trusts list last month.

It followed the Gold Rated Scottish Mortgage Investment Trust (SMT), which has been the most viewed trust on Morningstar.co.uk for the past 11 months in a row.

The victory for pro-European centrist candidate Emmanuel Macron in the French Election sparked a strong rally among European assets and the euro. French equities unsurprisingly rallied, although the returns were in line with Germany and behind the peripheral members including Greece, Italy and Portugal, said Mark Preskett, senior investment consultant at Morningstar Investment Management.

The European Central Bank admitted euro zone prospects improved in last week’s press conference, despite the bank set the 2018 headline inflation forecast at 1.3%, way below the target of 2% and below the current reading.

The GDP of the 19-country euro area rose by 0.6% during the first quarter of 2017 compared with the previous quarter and 1.9% year-on-year, according to today’s estimate published by Eurostat, the statistical office of the European Union.

The Gold rated Jupiter European Opportunities Trust is trading at a 2.4% discount and has returned 26.6% year to date, according to Morningstar data. The objective of the investment trust is to invest in securities of European companies and in sectors or geographical areas which are considered by the investment manager to offer good prospects for capital growth, taking into account economic trends and business development, David Holder, Morningstar fund analyst said.

“Alexander Darwall has managed the trust’s assets since its inception in November 2000. This is a notable achievement for the company in modern day fund management and this stability and consistency of investment approach is an undoubted contributing factor to the fund's success. The fund has delivered strong returns over the long term,” said Holder.

Double-Digit Gains for Small and Mid-cap Trusts

Europe is not the only area with momentum. Last month the top 10 investment trusts list saw two new entries: Gold Rated BlackRock Smaller Companies Trust (BRSC) and Bronze Rated Henderson Smaller Companies Investment Trust (HSL), which came sixth and tenth on the top 10 list.

The index that tracks mid-caps in the UK FTSE 250 and FTSE small cap index are both up more than 8% year to date, while the FTSE 100 is up 4% year to date.

Gold Rated BlackRock Smaller Companies Trust is trading at a 14.1% discount to net asset value and the trust has gained an incredible 31% year to date. Th trust aims to achieve long-term capital growth for shareholders through investment mainly in smaller UK-quoted companies, said Holder. The fund manager Mike Prentis brings long-standing experience as head of the smaller company’s team at BlackRock, which sits within the extensive and broader UK equity desk, Holder added.

“The fund manager Prentis is an extremely capable pair of hands with a strong team to support him. His experience in smaller companies investing is arguably more important than might be the case in other parts of the market, given the potential pitfalls for investors and is a driving factor for our continued conviction here. Performance has been robust over all time frames, which, together with a solid process,” said Holder.

The Bronze Rated Henderson Smaller Companies Investment Trust (HSL) is trading at a 15.1% discount and it has gained 21.7% year to date. The trust offers investors a growth-biased approach to investment in UK small and mid-sized companies, said Holder.

The fund benefits from the very experienced duo of Neil Hermon and Colin Hughes, said Holder. Hermon has been manager of the trust since 2002 and has invested in UK smaller companies since 1993. His accountancy background is very pertinent for smaller company’s investment whilst Hughes has 43 years investment experience. Indriatti van Hien, who also has an accountancy background, was appointed deputy fund manager in June 2016, completes the team.

However, Holders thinks the team could benefit from additional resources due to the onerous nature of smaller companies investment, which necessitates around 400 company contacts a year.

The Gold Rated Finsbury Growth & Income trust (FGT) that invests in UK flex-cap equity came fifth on the top 10 list. The trust is trading at 0.94% premium. The Gold Rated City of London Investment Trust (CTY) came seventh on the top list and it is trading at 1.3% premium.

Rating Upgrade Piques Interest

The Foreign & Colonial Investment Trust (FRCL) was upgraded to Silver Rated from Bronze by Morningstar analysts in April. Therefore it comes as no surprise the trust came third on the top 10 investment trust list in May.

Foreign & Colonial Investment Trust is the oldest investment trust having been launched in 1868 and aims to grow capital income over the longer term. Indeed, it has a recent record of 46 years of dividend increases which is particularly impressive. The Trust is managed by Paul Niven since July 2014. He looks at strategies, he looks at the underlying stocks that they hold and the manager is proven in what he does. There's a very long and extensive track record that he can provide,” said Holder.

Another popular global-equity fund on Morningstar.co.uk is the Gold Rated Murray International trust (MYI), which came forth on the most popular investment trusts list. The trust is trading at a 1.4% premium.

Other popular trusts on the top 10 list in May are the Silver Rated Biotech Growth (BIOG) and Woodford Patient Capital Trust (WPCT), which is not rated by Morningstar analysts. 

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 Ord875.80 GBX0.09
BlackRock Smaller Companies Ord1,276.00 GBX-0.78
City of London Ord430.30 GBX-1.10
Finsbury Growth & Income Ord756.37 GBX-0.48
Foreign & Colonial Investment Trust Ord622.55 GBX-0.31
Henderson Smaller Companies Ord830.51 GBX0.30
Jupiter European Opportunities Ord715.90 GBX0.20
Murray International Ord1,295.45 GBX0.34
Scottish Mortgage Ord438.00 GBX0.00
Woodford Patient Capital Trust90.99 GBX-0.18-
About Author Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk