Due to market volatility, the best-performing investment trusts of 2018 were not the big name equity trusts that topped the table last year.
It has been a tough year for equity markets as a whole. After a solid start to the year, US equities have been under heavy selling pressure since November. At the same time, Chinese shares were hit hard by slowed domestic growth and trade war fears, while emerging markets came under pressure from a strengthening US dollar.
Meanwhile, both European and Japanese shares continued to disappoint, while Brexit and the prospect of a Corbyn-led Labour government has driven investors out of UK markets.
It should be no surprise then that the best-performing investment trusts of 2018 were not the big name equity trusts that topped the table last year. Many of those trusts will in all likelihood end the year in the red. Instead, the table of the top 15 performers for 2018 had more of a niche or alternative asset focus.
For example, occupying three spaces in the top 15 are the Doric Nimrod Air trusts. Each trust owns just a single aircraft, which it then leases in order to provide returns for shareholders. The best-performing Doric Nimrod Air trust provided investors with returns of 20.7%.
Another niche trust in the list was EJF Investments, returning 22.6%. The trust looks to invest in assets set to benefit from regulatory and structural change in the financial services sector.
The healthcare theme also seemed to pay off in 2018. Second on the list was Sycona, a trust with over one and half billion worth of assets, which provided investors with a return of 32.1%.
At the same time, BB Healthcare trust has found itself in the list, giving investors a return of 17.2%. The trust invests in companies it sees as benefitting from certain healthcare related themes, ignoring benchmarks and geography.
Topping the list was Lindsell Train Investment trust. The trust was able to provide investors with a whopping 44.8%. However, those returns should be understood in context.
As Laura Suter, of AJ Bell, notes: “This is a case where you need to look under the bonnet to see where the performance has come from.” She notes that the trust is currently trading on a 45% premium, up from around 13% at the start of the year. However, despite the huge surge in share prices, the net asset value of the company saw a more modest increase of 10%.
Almost half of the trust’s holdings are in the unlisted investment company Lindsell Train.
According to Suter: “Investors feel the management company is undervalued by the trust’s board. The board clearly disagrees, and anyone buying in at this price needs to seriously consider whether they want to pay almost half as much again for the value of the assets.”