Keep These 3 Trusts on Your Radar

Once investment trusts hit a certain size, that's when private wealth management money could start flowing in...

Jackie Beard, FCSI 7 March, 2013 | 5:34PM
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Some private wealth managers, who are long-standing investors in investment trusts, tend to prefer investing in trusts that have assets exceeding £100 million. Availability is key: when trusts are smaller than £100 million, it makes it hard for private wealth managers to buy sufficient stock for their clients. On top of that, most of these investors don't want to find themselves owning 25% of a trust, since that brings its own risks and problems.

But once the private wealth managers start piling into a trust, it could become harder for the average individual investor to get in on the action. That's why it can be important for individuals to be ahead of the curve and anticipate potential upcoming wealth manager interest.

At present, there are a number of funds that have assets that are hovering around this critical £100 million milestone, which means that they are probably on the radars of various wealth managers. This article will take a look at three funds that are rated by Morningstar analysts and are near the £100 million mark.

Montanaro European Smaller Companies Trust (MTE) (Rating: Silver) 
This trust launched as a European small-cap fund with sub-£60 million in 2006 and it got to around £90m in net assets in early 2011. But concerns over the eurozone dragged European markets down that year and that hit the trust. Now this Montanaro trust is likely to be on the radars of some wealth managers since the fund’s assets have hit a new all-time high. 

Charles Montanaro isn’t a new name in European small-cap investing. Indeed, the team’s track record at the Silver-rated, open-ended Montanaro European Smaller Companies Fund (Analyst Research) is a contributory factor in our conviction in the trust. Montanaro has built a stable team that’s dedicated to the management of pan-European small-cap funds. Their investment process is thorough, robust and focused towards the long term. The staff are encouraged to own shares or units in the funds and Montanaro himself is a fan of the closed-end structure, hence he is personally invested in both the trust and the open-end fund.

BlackRock Frontiers (BRFI) (Rating: Bronze)
This trust only launched in December 2010 with approximately £92 million in net assets. It’s a short history thus far and, having lost a fair amount of value early on in its life, it is now creeping back towards the £100 million mark. Granted, shareholders who bought in at launch are most likely underwhelmed with returns thus far, but this type of fund is very much a long-term play. Just months after its launch we saw the uprising in Tunisia, which started on a small scale but rapidly spread across the Middle East, ultimately toppling non-elected leaders out of power. This reinforces the need for extreme caution and robust due diligence when investing in these markets.

Fund manager Sam Vecht combines both top-down and bottom-up views and the team’s political analysis play a central role in portfolio construction. It’s a team that knows the region well and makes regular visits to get a thorough on-the-ground understanding of each country’s economy.

BlackRock New Energy (BRNE) (Rating: Bronze)
This fund has had its fair shares of woes.  It was launched as the tech bubble was unwinding, and not long after, US wind and Japanese solar subsidies were cut, which caused innovation in the sector to dry up. Alternative energy is driven to a great extent by technological development, but after the tech collapse, companies slashed their research budgets until they could see some stabilisation in the economic outlook.

Having raised close to £200 million in this fund at launch, the value of those assets quickly fell and just one year on it was worth sub-£100 million. The fund staged a recovery ahead of the financial crisis in 2008 but any uncertainty in markets seemed to have a knock-on effect at this fund; politics also played their part in fund performance. Furthermore, disasters such as the nuclear tragedy in Fukushima, Japan, in 2011 did little to endear the sector to investors.

In 2012 the board gained shareholder approval to hold a continuation vote in 2014, while also offering them a cash exit at that time. Without a doubt, this is a high-risk fund by virtue of its investment universe. But it's also worth noting that we think managers Robin Batchelor and Poppy Allonby offer depth of expertise in this sector and they are one of the longest-standing teams to specialise in this industry. They also run the BlackRock Global Funds New Energy SICAV fund (Analyst Research), which also boasts a Bronze rating.


All three funds will likely be coming under close scrutiny by some established supporters of investment trusts over the next few months. There’s no telling what conclusions they’ll draw, but it's comforting to know that Morningstar analysts have already done our homework, which will help you work to stay ahead of the curve and ahead of the wealth managers.


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.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
BGF Sustainable Energy A217.07 USD-0.49Rating
BlackRock Frontiers Ord144.70 GBX-1.56Rating
Montanaro European Smaller Ord141.62 GBX-0.27Rating
Montanaro European Smlr Comp £6.52 GBP-0.41Rating

About Author

Jackie Beard, FCSI

Jackie Beard, FCSI  is Director of Manager Research Services, Morningstar EMEA

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