How our adventurous and cautious investment trust tips have fared so far in 2017

Our European selections were the biggest contributors to the good returns achieved by our two trust portfolios in the first quarter of 2017, with both TR European Growth (TREG) and Henderson European Focus (HEFT) achieving 20 per cent share price total returns. It is particularly good to see TREG doing well as it replaced European Assets at the start of the year.

Both portfolios are beating the FTSE All-Share index handsomely and the adventurous selections are doing particularly well, with a 10 per cent gain in the first quarter.

Click the table below for a larger version.

Temple Bar (TMPL), which joined the conservative portfolio at the same time as TREG, has made a slow start, but we hope manager Alastair Mundy’s value-oriented approach will prove its worth over the rest of the year.

- View our conservative and aggressive investment trust portfolio constituents and performance

Paci­fic Assets Trust (PAC) has been in the conservative portfolio since August 2012. It proved very rewarding for several years, but has been off the boil for the last two years. We are worried that this is at least partly due to extensive management changes at what is now called Stewart Investors, and that PAC’s tight discount will widen if its performance does not pick up soon.

We are therefore replacing it with Invesco Asia (IAT), which has the best three-year net asset value (NAV) total returns in the Asia Pacific ex Japan sector yet trades on a double-digit discount. Ian Hargreaves has been sole manager since January 2015 and takes a different approach from most in the sector by employing a macroeconomic overlay to identify countries and sectors that offer value.

This has led Hargreaves to be positive on Chinese internet stocks, South Korea and India. The trust is highly commended in this year’s investment trust awards due to its consistently above-average returns. An added attraction is that the board must tender for 15 per cent of the shares at a 2 per cent discount to NAV if the discount over the year to end April averages more than 10 per cent, which looks inevitable.

A further change to the conservative portfolio is the replacement of premium-rated RIT Capital Partners (RCP) with JPMorgan Global Income & Growth (JPGI). The former will almost certainly hold up better if there is a major market reverse, but the portfolio also includes Capital Gearing for those who are ultra-cautious, so we have decided to be a bit bolder with its global selection.

Formerly known as JPM Overseas Trust, JPGI has been managed since October 2008 by Jeroen Huysinga, who draws on the best ideas of 70 globally dispersed analysts. Its one, three and five-year returns are currently among the best of any globally diversified trust and much the best in the global equity income sector to which it moved in September 2016.

As part and parcel of that move, it is now committed to paying a dividend equal to at least 4 per cent of NAV in four equal quarterly instalments. This will be funded from a mix of income and capital, allowing the fundamental bottom-up investment process to remain entirely unchanged.

JPGI’s portfolio is well spread, with 36 per cent in North America, 31 per cent in Europe, and around 10 per cent each in Japan and the UK. Ongoing costs are competitive at 0.63 per cent and the board is committed to limiting the discount to 5 per cent through share buybacks.

Performance of the holdings in the tips portfolios can be monitored here


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