Bounceback that proves it pays to stay invested
SOME of the country’s biggest and most shareholder-friendly investment funds have enjoyed a strong lockdown despite continued stock market volatility and widespread company dividend cuts.
Data compiled by The Association of Investment Companies for The Mail on Sunday shows that some global investment trusts have delivered total returns – income plus share price gains – of more than 25 per cent since the country went into lockdown on March 23.
It means investors in a number of these London stock market-listed funds now have holdings worth more than at the beginning of the year and also at this time last year.
In some cases, investors have benefited from a number of factors working in their favour, including the exposure of their funds to international companies – especially US technology stocks – that have continued to perform strongly despite a weakening world economy.
In addition, some global trusts have attracted strong buying from retail investors, driving their share prices ever higher.
Annabel Brodie-Smith, director of communications at The Association of Investment Companies, says: ‘It’s been a rollercoaster ride for many global investment trust investors. The market plunged in March in response to the coronavirus pandemic and has since bounced back. Brave investors who stayed invested through these turbulent times have been rewarded.’
AIC data shows the average global investment trust – investing primarily for growth rather than income – has generated a total return of 35 per cent since lockdown. Since the start of the year, the average fund return is a positive 4.5 per cent. Over the past year, the equivalent figure is 16 per cent.
Over the same three respective time periods, the FTSE All-Share Index generated a return of 22 per cent and losses of 17 per cent and 10 per cent.
Global trusts with portfolios invested in smaller firms have fared even better, bouncing back since lockdown with average returns of 42 per cent. Global funds with an emphasis on income have not performed as well – a reflection of poor corporate dividends.
The strongest performing global trusts since March 23 are shown in the table. Leading the way is Edinburgh
Worldwide, a £786million trust managed by Edinburgh-based Baillie Gifford, with a return of nearly 54 per cent. Its portfolio is 60 per cent invested in the US.
Among its top holdings are stakes in US financial tech firm MarketAxess, electric car manufacturer Tesla and online retailer Ocado.
Scottish Mortgage, also managed by Baillie Gifford, has achieved a total return of 42 per cent since lockdown. This £11.2 billion fund is the UK’s biggest investment trust and is a constituent of the FTSE 100 Index. Strong investor demand means its shares are now trading at a premium to the value of the trust’s underlying assets.
Data from wealth manager Interactive Investor shows that both Edinburgh Worldwide and Scottish Mortgage have been among the ten most popular investment trusts bought by clients this month. Other global trusts preferred by investors include Fundsmith’s Smithson – investing in smaller companies – and Alliance. Technology oriented trusts such as Polar Capital Technology and Allianz Technology, along with those with a healthcare focus including Worldwide Healthcare, have also been in demand.
Brodie-Smith says: ‘Some investment trusts have been around for more than 150 years and their staying power is reassuring.’
Unlike unit trusts, investment trusts do not have to sell holdings when investors want out. Investors can always trade their investment trust shares although they may not like the price especially if sellers outweigh buyers.