A recent research report by the broker Numis has revealed which investment trusts retail investors have been buying in the first nine months of the year. In order to do this they looked at the monthly ‘most bought’ rankings from the three large online platforms that provide the data, namely: AJ Bell, Interactive Investor and Fidelity.
People who use these sorts of services are an increasingly significant feature on the registers of many investment trusts. This means that the buying trends can provide an interesting indicator of recent retail demand.
The broker looked at which trusts have appeared on the ‘most bought’ lists each month and found that in the period to the end of September there was a significant degree of consistency across the different platforms and over time. They then combined the data to produce an overall assessment of the level of interest in each fund.
Most Popular Trusts
Top of the list was Baillie Gifford’s £12bn flagship fund, Scottish Mortgage (LON: SMT), which aims to own and support the world’s most exceptional growth companies. For years it was the best performing investment trust, but the sharp rise in interest rates has seen its shares fall more than 50% from their all-time high, so investors may see it as a potential bargain, especially in view of the 17% discount to NAV.
In second place was another perennial favourite, City of London (LON: CTY) that has been conservatively managed by Job Curtis since 1991. The £2bn fund mainly invests in London-listed shares and places a huge emphasis on its dividends, which have successfully been increased for 57 consecutive years.
This sort of reliability is exactly what you want if you are looking for income and when you factor in the high yield of 5.4% you can see why it is popular. Unlike many of its peers, City has not slipped to a discount, with the Board actively having to issue new shares to meet the demand and stop them moving to a premium.
Moving further down the list there are some less obvious choices including several global trusts, such as the £5.2bn F&C (LON: FCIT). This is one of the oldest and largest closed-ended funds on the market, but the recent performance has been pretty lacklustre with the shares underperforming their FTSE All-World benchmark over the last five years.
Another popular option is the £2bn JPM Global Growth & Income (LON: JGGI), which is cementing its place on the ‘most bought’ lists following a number of mergers and a period of strong performance. It is heavily skewed towards the US with almost two-thirds of the assets invested in the country, including some big positions in tech giants like Microsoft, Amazon and Nvidia.
Also making it onto the list is the £3.2bn Alliance Trust (LON: ATST) that is designed to be a core holding for investors. It has a multi-manager approach that results in a portfolio of around 200 high conviction stocks selected by people who use different investment styles and that are benchmark agnostic.
More Specialist Selections
One of the more specialist mandates that has proved popular is the £5bn Greencoat UK Wind (LON: UKW) that owns a portfolio of UK wind farms. The trust has recently increased its annual dividend target to 10p giving a prospective yield of 7.3% and committed to a £100m share buyback scheme in an effort to close the 20% discount to NAV.
Also on the bestseller list is the £1.2bn mining specialist BlackRock World Mining (LON: BRWM), whose shares have struggled year-to-date and are currently trading at a five percent discount. It has benefitted from the fact that there aren’t many closed-ended funds operating in this area, but is cyclical and highly volatile.
A more predictable favourite is the £3bn Polar Capital Technology (LON: PCT) that has built up an excellent long-term track record by investing in the tech sector. The increase in interest rates has created a significant headwind with the shares slipping to an unusual 14% discount, which could offer an attractive buying opportunity to risk tolerant investors.