The biggest investment trust winners and losers of 2017

4 mins. to read
The biggest investment trust winners and losers of 2017

It has been a decent start to the year on the markets with the FTSE 100 index up about 100 points (1.4%) year-to-date and the Dow climbing above 20,000 for the first time with a gain of over 600 points, or 3.1%.

The indices provide a good idea of the direction and speed of travel, but there is always a lot more turbulence in the market than the headline numbers suggest. Over any given period there will inevitably be a handful of securities that experience extreme up or down movements and this is likely to include some of the more unusual investment trusts.

It can sometimes be useful to look at the biggest movers to help get an idea of where the momentum is strongest and also where you might be able to pick up a few bargains. When doing this you need to look at the underlying details to try and understand why the funds have performed the way they have.

The following analysis is based on calculations by Numis Securities that identified the top and bottom 15 investment trusts with the best and worst share price returns over the period from 2 January to 13 February. As you would expect, they are mainly the more specialist and least diversified funds.

Everyone’s a winner

Five of the fifteen biggest winners in the year-to-date were commodity-related investment trusts. These included Global Resources (LON:GRIT) and Geiger Counter (LON:GCL) with gains of 53.1% and 52.6% respectively, as well as Baker Steel Resources (LON:BSRT), Golden Prospect Precious Metals (LON:GPM) and BlackRock World Mining (LON:BRWN) with returns of 29.6%, 27.6% and 19.8%.

GCL invests in companies involved in the exploration, development and production of energy, predominantly within the uranium industry, which is obviously a highly focused mandate, and the same goes for GPM, which concentrates on the precious metals sector. BRWN and BSRT are more mainstream natural resources funds, while GRIT is a special situation.

The natural resources funds have clearly benefited from an improvement in sentiment across the sector, but that is not the case with Prospect Japan (LON:PJF), which is the only Japanese fund in the top 15 with a gain of 30.9%. This fantastic return was partly due to a narrowing of the discount that closed from 26.7% to 7.5% over the same period.

Five of the fifteen biggest winners in the year-to-date were commodity-related investment trusts.

PJF is very unusual as it provides exposure to small cap Japanese stocks. The £109m fund has a really concentrated portfolio of just 14 companies with Daito Bank and Fukushima Bank each making up about a quarter of the assets. It has a value approach with the manager looking to play a reasonably active role in instigating change in the various businesses.

Another sole sector representative is River & Mercantile UK Micro Cap Investment (LON:RMMC) with a gain of 22.7%. The £101m fund invests in small cap UK stocks with a free float market valuation of less than £100m at the time of purchase. This is an area that is often under-researched and offers a lot of potential. RMMC had a concentrated portfolio of 45 holdings at the end of September and is one of the Winterflood investment trust team’s picks for 2017.

The more unusual funds amongst the top 15 include The Tiso Blackstar Group (LON:TBGR), which invests mainly in southern Africa; Macau Property Opportunities (LON:MPO), with its portfolio of properties in the Special Administrative Region of Macau on the south coast of China; and the Kubera Cross-Border fund (LON:KUBC) that makes private equity investments in cross-border companies that primarily operate in the US-India corridor.

Bargain basement

Inevitably there were also a few investment trusts that lost value over the period and that might represent a buying opportunity. I have already written about a couple of them – Lindsell Train (LON:LTI) and CATco Reinsurance Opportunities (LON:CATC) − in the last two weeks.

The biggest loser with a fall of 24.7% over the period was Trinity Capital (LON:TRC), which was created in 2006 to invest in property and property-related entities across India, with a particular focus on the office, retail, hospitality and residential sectors. In 2009 it decided to sell all the assets and return the capital to investors, but progress has been slow and it is now a penny share.

Another major casualty, also currently undergoing a significant change, was LMS Capital (LON:LMS), whose shares were down 18.7% year-to-date. The fund is transitioning to an external manager and changing its mandate to focus on direct private equity investment in small UK, European and US companies. The shares have moved onto a discount to NAV of 35%.

One fund that is not affected by these sorts of issues is Menhaden Capital (LON:MHN), which invests in businesses that are delivering or benefiting from the efficient use of energy and resources. It has total net assets of £69.7m and provides exposure to a 25-stock portfolio of public and private companies from around the world.

MHN was launched in July 2015 but the performance has been poor with the result that the discount has widened to 30%. The main problem in January was that one of their largest holdings, Terraform Power, received a disappointing offer from its largest shareholder to buy the rest of the company. This contributed to a fall in the share price of 8.1% over the period.

Another out-of-favour fund is the NewRiver REIT (NRR), which has lost 6.2% of its value year-to-date. NRR invests in convenience-led shopping centres, as well as other retail and leisure assets in the UK. The £770m fund aims to generate sustainable income returns and has successfully been increasing its dividend with the latest quarterly pay-out being 5 pence per share. It is now yielding 5.6%, although the shares trade at a significant premium to the latest available NAV of 290p as announced at the end of September.

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