Tips update: how our 2018-19 investment trust tips are faring

Solid trust quartet up sharply in the first quarter.

Both our trust portfolios recovered well over the three months to 1 April: the conservative portfolio matched the rise in the FTSE AllShare index and the adventurous portfolio pulled ahead of it slightly.

Longstanding holdings Allianz Technology (ATT) and Schroder AsiaPacific (SDP) picked up strongly after an unusually difficult run in late 2018, while BlackRock Thogmorton (THRG) and Monks (MNKS) were star performers in their sectors.

Changes to the portfolio in January have worked out well so far. Troy Income & Growth (TIGT) achieved much better returns than Lowland (LWI), which it replaced in our adventurous portfolio.

However, its manager’s caution and aversion to gearing makes it better a better match for our conservative portfolio, so we are swapping it with Temple Bar (TMPL), which looks better suited to our adventurous portfolio, following manager Alastair Mundy’s decision to invest the trust’s cash pile. He has been backing firms that were significantly marked down in last year’s stockmarket slump. As a result, TMPL had moved from net cash to 9% geared by the start of 2019 and has been rewarded with exceptional returns in the year to date.

Mundy believes there is an unsustainable difference between the valuations of ‘quality stocks’ and those of shares in companies that have been having a dull or difficult time but still have reasonable balance sheets and managers willing to embrace problems and offer new perspectives. This has encouraged him to introduce or increase trust stakes in a number of unloved companies, including firms engaged in food and clothing retailing, and housing repair and improvement.

Mundy says: “Expectations are so low for these firms that it would take little in the way of good news to impress the market.”

Fidelity European Values (FEV), another January addition to the portfolio, achieved among the best net asset value and share price total returns in its sector over the quarter, well ahead of Henderson European Focus (HEFT), which it replaced.

FEV’s manager, Sam Morse, believes his focus on firms he expects to be able to grow dividends consistently, irrespective of the economic backdrop, will serve investors well through what could prove a bumpy year. FEV’s discount has widened to double figures, but it should not enlarge much further, as the board is committed to limiting it to around 10% through share buybacks.

JPMorgan European Smaller Companies (JESC) suffered as our adventurous Europe selection, failing to reach first or second quartile in its sector over three years. We are replacing it with Montanaro European Smaller Companies (MTE). It trades on a similar discount to JESC, but held up much better last year and has outperformed its benchmark in each of the past four years. It won this year’s Best European Trust award.

Portfolios regain vitality as investors appetite for risk rises

Conservative choices

  % total return
(income reinvested)
  3 mths 6 mths 1 yr 3 yrs Since 1 Aug 2014*
BlackRock Throgmorton 17.5 -6.3 7.7 70.1 103.2
Temple Bar 16.0 5.8 11.6 44.1 28.3
Fidelity European Values 10.3 -2.6 9.0 45.4 70.4
Standard Life Private Equity 10.1 4.1 12.7 91.8 95.4
F&C 9.8 -3.6 12.1 67.3 100.7
Utilico Emerging Markets 7.4 13.1 5.5 34.9 39.7
Edinburgh Dragon Trust 6.7 6.7 6.7 61.0 53.2
JPMorgan Japanese 6.4 -12.0 -8.8 49.2 91.8
Capital Gearing 2.2 1.2 7.4 23.0 37.1
Conservative portfolio 9.4 0.6 6.3 43.2 60.9


Adventurous choices

  % total return
(income reinvested)
  3 mths 6 mths 1 yr 3 yrs Since 1 Aug 2014*
Allianz Technology 25.4 -1.9 26.5 160.7 209.1
Monks 15.4 0.0 10.0 103.6 126.9
Schroder AsiaPacific 11.3 6.0 2.4 72.1 85.9
Baillie Gifford Shin Nippon 9.8 -12.9 -5.0 75.8 176.7
Troy Income & Growth 9.4 2.8 9.5 20.2 44.9
JPMorgan Emerging Markets 7.7 9.2 9.9 67.3 75.1
Pantheon International 7.1 -2.3 11.1 70.9 85.1
JPMorgan European Smaller Cos 6.4 -12.9 -12.6 31.6 84.6
Rights & Issues 3.8 -12.0 -1.9 80.4 96.6
Adventurous portfolio 10.8 -3.3 3.6 60.6 86.3
FTSE All-Share index 9.4 -1.8 6.4 31.3 32.9
FTSE World ex UK index 9.6 -2.5 11.3 52.9 80.0

Notes: Constituents ranked by three-month performance. Not all constituents were members of the portfolios over the time periods stated. Trusts in italics are being switched or removed, see text for details.*Portfolio inception date. Source: FE Analytics, as at 1 April 2019

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