Top Investment Trusts of Q1

The first quarter of the year saw a rally in unloved stocks, helping value trusts to the top of the table. But which investment trusts lagged in the first quarter of the year? 

Holly Black 6 April, 2021 | 12:36AM
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Contrarian investment trusts thrived in the first three months of the year as unloved stocks enjoyed a long-awaited bounceback. The top performing investment trusts list for the first quarter of 2021 is dominated by value-focused trusts, which focus on out-of-favour companies that the managers believe are underrated by the market. To make it on to our list of leaders and laggards, the investment trust needs to have a Morningstar Analyst Rating of Negative and Above.

Top Performing Investments Trusts of Q1

With the outlook for UK dividends starting to seem more positive, Temple Bar (TMPL) investment trust was top of the leaderboard in Q1. Residing in the UK Equity Income sector, the trust focuses on British dividend-paying stocks, many of which were hit hard in 2020’s volatility, when many firms cut their payouts. With the UK lockdown now starting to ease, however, many of these businesses have reinstated their payouts to shareholders. Among the trust’s top holdings are Royal Mail (RMG) and oil giants Royal Dutch Shell (RDSB) and BP (BP.).

The trust returned 15.3% in the first three months of the year and gained 6.85% in March alone. Morningstar analysts downgraded the trust from a Silver to Neutral rating last year following turnover in its analyst team and the announcement that lead manager Alastair Mundy would be taking a leave of absence due to health reasons.

After a period of lacklustre performance, the Fidelity Special Values (FSV) trust also finds itself in the top performers list, enjoying the return to favour of value stocks. Up more than 70% over 12 months, the trust also returns 13.61% in the first quarter of the year and gained 9.57% in March alone.

Manager Alex Wright thinks there is more to come, too. “I am finding a lot of opportunities and of better quality than usual,” he says. “Investors have been very keen to play the re-opening trade but the stocks benefiting from that trends are still not valued accordingly.”
Other value trusts which made a comeback include James Henderson’s Lowland (LWI), up 8.12% over the quarter, and Edinburgh Investment Trust (EDIN), formerly run by Mark Barnett, which returned 7.32% in the quarter.

Top performing investment trusts

JPMorgan Russian Securities (JRS) also features among the top performers, gaining 6.69% in the first three months of the year. Morningstar analyst Lena Tsymbaluk upgraded the trust from a Bronze to Silver rating in January, praising the trust’s experienced manager, Oleg Biryulyov and structured approach to investing. Tsymbaluk says: “He creates a high-conviction, concentrated portfolio of 20-50 stocks and is willing to take large bets at the stock and sector levels.” In December, for example, the trust has significantly underweight to energy stocks compared to its benchmark and overweight to technology.

Worst Performing Investment Trusts of Q1

At the other end of the spectrum, the list of weakest performing trusts in the first three months of the year is a mixed bag. JPMorgan Japanese (JFJ) tops the list, down 9.37% in the quarter. Japan’s stock market has had a strong start to the year, hitting a record high even after the country’s economy was reported to have contracted by 4.8% in 2020. Many businesses in the region are well-placed to capitalise on two of investors’ current favourite trends: ESG and tech.

The JPM trust has been a star performer of recent years, up 75% over 12 months with annualised returns of 20.31% over five years. Morningstar analysts upgraded its rating from Bronze to Silver last year, praising manager Nicholas Weindling for his “consistent and successful” investment process. A recent update to investors from the trust pointed out the rally in value stocks along with an underweight position in the pharmaceutical sector had contributed to its underperformance.

Worst Performing Investment Trusts

Finsbury Growth & Income (FGT), run by veteran investor Nick Train, was also on the laggards list for the quarter, down 1.85% over the period. In a recent update to investors the manager said four of the trust’s holdings – Hargreaves Lansdown (HL.), Heineken (HEIA), RELX (REL) and Unilever (ULVR) – which account for around 30% of the trust’s assets, had all suffered share price falls. Train told investors, however, that there had been encouraging aspects to the results of all four stocks and that they would need to be patient. “I dislike having to recommend patience to investors, who have had to exercise this virtue for many months already; but I do recommend it still,” he wrote.

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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About Author

Holly Black  is Senior Editor, Morningstar.co.uk