Investors appeared little concerned about fears of a recession or the trade war, heavily opting for trusts with heavy weightings towards global growth and tech stocks.
Global equity and technology trusts remain popular with investors, despite fears over global growth and the trade war, according to data from interactive investor, the parent company of Money Observer.
Scottish Mortgage remained the most popular trust, as it has done for almost every month over the past two years. The trust is largely a play on both large US tech companies (Amazon and Netflix) and large Chinese tech companies (Tencent and Alibaba). This potentially makes the trust more exposed to some of the largest risks in the market right now.
For example, with the yield curve in US debt touching negative, there is growing fears of a US recession. That would have the potential to hurt large US tech stocks. Meanwhile, the potential for an escalation in the US and China trade war and any subsequent slowdown in Chinese economic growth could hurt companies such as Alibaba and Tencent.
Investors, however, appear little concerned, heavily opting for both Scottish Mortgage and a number of other trusts with similar holdings exposed to the same risks.
For example, Allianz Technology trust rose further up the rankings to third place. Managed by Walter Price, the trust invests in US technology shares with its largest holdings being heavyweights such as Microsoft, Alphabet and Facebook.
At the same time, Polar Capital Technology remained in the top 10 rankings. Polar Capital Technology, as the name suggests, invests primarily in technology stocks. It also has exposure to large cap tech stocks, both US and Chinese.
Meanwhile, Monks kept its place. While the trust is less tech focused than the others mentioned (its largest sector weighting is financial services), it still has a heavy exposure to large cap growth stocks that have performed well. Its largest holding is Naspers, followed by Amazon. It also has a large position in Alibaba.
However, that’s not to say that some investors are feeling a bit more bearish. City of London returned to its usual spot of second place, up from tenth in July. Seen as a defensive trust with a portfolio that can hold up in rockier market conditions, this could be seen as reflective of some investors growing increasingly nervous.
Meanwhile, Woodford Patient Capital has kept its place in the most-bought table, albeit one space below the previous month. The trust had shot up the rankings for June, following the suspension of Woodford’s open-ended fund. The crossover between the fund and trust led Money Observer to remove Woodford Patient Capital as a Rated Fund.
For others, the widespread selling of Woodford Patient Capital presented a buying opportunity. On a discount of around 44%, there is a strong case for the trust being cheap. However, with the trust invested largely in unlisted companies without regular valuation, discount/premium figures may be less reliable than for trusts invested in stocks listed on major exchanges.
Meanwhile, Smithson, Terry Smith’s small cap trust launched in October, has fallen to fifth place, its lowest spot since its launch in October last year. While the trust is clearly still popular among investors, the shine may be wearing off. Performance however, has been strong, with the trust returning 14.5% over the past six months.
|Rank||Investment trust||AIC sector||Rank change from July||1-year return (as at 4 September)||3-year return|
|1||Scottish Mortgage||Global||no change||-6.80%||72.00%|
|2||City of London||UK equity income||8||2.80%||14.10%|
|3||Allianz Technology||Technology & Media||3||3.20%||129.50%|
|4||Finsbury Growth & Income||UK equity income||no change||15.10%||52.40%|
|5||Smithson||Global smaller companies||-2|
|6||Woodford Patient Capital||Growth Capital||-1||-47.60%||-53.90%|
|7||Murray International||Global Equity Income||new entry||8.30%||17.70%|
|9||F&C Investment trust||Global||new entry||-1.00%||49.80%|
|10||Polar Capital Technology trust||Technology & Media||-1||1.90%||93.10%|
Top 10 Investment trusts No 6 = Woodford Patient Capital
Those people buying Woodford Patient Capital are not investors they are gamblers and may learn that what goes down often keeps going down to 0.