Our 2015/16 investment trust tips look undervalued

The average discount across the investment trust sector widened from 5.4 to 9.4 per cent over the first half of 2016, leaving it higher than the 7.4 per cent average over 10 years.

This was a headwind for almost all our tips. Those focused on UK smaller companies, Europe and private equity were hard hit, leaving the latter looking particularly undervalued.

On a positive note, the majority of our selections continued to perform well at the net asset value (NAV) level. Also, wider discounts are good news for trust purchasers as they enhance the yields on offer and provide scope for accelerated gains when investor confidence recovers.

And since we began to monitor the performance of our tips in a portfolio format in August 2014, both sets have handsomely outperformed the FTSE All-Share total return of 6 per cent.


The adventurous choices are up 19 per cent and the conservative selections have gained 13.6 per cent.

Our Japan, Asia ex Japan and global emerging market tips were all among the top performers in their sectors in share price as well as NAV terms.

adventurous-investment-trust-tips-review-performanceBaillie Gifford Shin Nippon was again outstanding and JPMorgan Japanese has performed exceptionally well since joining the conservative portfolio in January.

Pacific Assets had another good year and Schroder Asia Pacific also did well, although in this annual review it makes way for a smaller company specialist.

BlackRock Frontiers once again topped the global emerging markets sector. Our UK and European selections, however, were disappointing.


Lowland Investments struggled due to its high weighting to smaller companies. In these uncertain times it has been replaced by a trust with a higher large-company weighting, as has Perpetual Income & Growth.

conservative-investment-trust-tips-review-performanceIn Europe, European Assets and Henderson European Focus both had painful setbacks, with disappointing NAV returns compounded by a loss of their premium ratings.

Our experts' selections had mixed fortunes over the year. Infrastructure specialist HICL did well for Canaccord Genuity's Alan Brierley, with a 16 per cent share price total return (SPTR), and a late surge meant Edinburgh Dragon achieved a 4.5 per cent SPTR, to the relief of Simon Elliott at Winterflood Securities.

But Fidelity Special Values, the choice of Charles Cade at Numis, suffered similar problems to Lowland, leaving its SPTR 8.7 per cent adrift.

JPMorgan Japanese and BlackRock Throgmorton joined the conservative portfolio in January 2016, replacing Aberdeen Japan and Aberforth Smaller Companies. Pantheon International R replaced F&C Private Equity in the adventurous portfolio at last April's review.

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