Last year was a difficult one for investors with most asset classes losing ground over the course of the 12 months. This was reflected in the performance of the various investment trusts with only the mining and global equity income sectors making a positive overall return.
A lot of equity funds are tilted in favour of growth stocks, which had delivered the strongest gains for more than a decade, but the increase in interest rates saw the trend reverse in 2022 with value and income strategies leading the way. The biggest returns were reserved for the more narrowly focused portfolios, such as those that concentrate on energy companies or the commodity driven regions like Latin America.
When it comes to the alternative asset classes there was some decent performance from the renewable energy sector, where the benefit of higher power prices outweighed the concerns around the impact of rising interest rates. Many infrastructure trusts sold off to below their NAV, which is very unusual, while property and private equity experienced a major derating.
Top Performers
According to data from Numis, the best performing equity investment trusts were: BlackRock Energy and Resources Income (LON: BERI), CQS Natural Resources (LON: CYN) and BlackRock World Mining (LON: BRWM) with share price total returns of 36.6%, 30.2% and 26% respectively. Other commodity related winners included: BlackRock Latin American (LON: BRLA) and Aberdeen Latin America Income (LON: ALAI), while Murray Income (LON: MUT) deserves a special mention for delivering a 20% return from its global portfolio.
The fall in the value of the pound helped UK large cap trusts to outperform the more domestically focused mid cap specialists. This enabled several UK Equity Income funds to make it onto the leader board with City Of London (LON: CTY), Abrdn Equity Income (LON: AEI), Merchants (LON: MRCH) and Edinburgh (LON: EDIN) making annual gains of 9.4%, 6.2%, 5.5% and 5.5% respectively.
As you might expect, the best performing alternative asset trusts were a more idiosyncratic group with quite a few recovery plays including the various aircraft leasing trusts that had been hit hard the year before. The most significant trend was the strong performance from the renewable energy trusts such as Foresight Solar (LON: FSFL), NextEnergy Solar (LON: NESF), Bluefield Solar (LON: BSIF) and JLEN Environmental (LON: JLEN). It is also worth highlighting hedge fund BH Macro (LON: BHMG) that delivered an impressive 20.1% gain, showing what a good portfolio diversifier it is.
Bottom of the Pile
There were far more losers than winners last year with the growth-oriented mandates that had done so well in the low interest rate environment suffering some serious reversals. Baillie Gifford, which had led the way up also led the way down, with BG US Growth (LON: USA) losing 52.8%, Scottish Mortgage (LON: SMT) 45.7%, BG European Growth (LON: BGEU) 41.3% and Edinburgh Worldwide (LON: EWI) 39.8%.
Both the global technology funds, Allianz Tech (LON: ATT) and Polar Cap Tech (LON: PCT),suffered the same fate with falls of 40.4% and 36.8% respectively, with the discounts widening to 8.6% and 12.1% at year end. The UK mid and small caps trusts were similarly affected by the increase in interest rates, as well as the prospect of a recession, as Abrdn UK Smaller Companies Growth (LON: AUSC), BlackRock Throgmorton (LON: THRG) and River & Mercantile UK Micro Cap (LON: RMMC) saw share price falls of 38.4%, 38.3% and 37%.
Some of the alternative investment trusts fared even worse, especially the private equity mandates that invest in growth capital, with the likes of Chrysalis (LON: CHRY), Molten Ventures (LON: GROW), Seraphim Space (LON: SSIT) and Schiehallion (LON: MNTN) losing 68.6%, 65.2%, 64% and 62.8% of their value. Interest rate sensitive property trusts were another category to come unstuck with some of the most notable casualties including: Tritax Eurobox (LON: EBOX) down 44.8%, Tritax Big Box REIT (LON: BBOX) 42.2%, Abrdn European Logistics Income (LON: ASLI) 38.3% and Warehouse REIT (LON: WHR) 38.1%, while Home REIT (LON: HOME) was further undermined by a damaging short seller report losing 68.6% over the course of the year.