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Some of the investment trusts that have come to market during 2018 differ in style from many of those launched in the past decade. But although these new entrants invest in equities, as opposed to high-yielding alternative assets, they are not traditional equity funds.
Mobius Investment Trust, for example, focuses on companies with potential for operational, financial, and environmental, social and governance improvements. And Baillie Gifford US Growth Trust can invest up to 50 per cent of its net asset value in unquoted investments. A number of existing equity sector investment trusts are also exposed to unquoted investments, such as Woodford Patient Capital Trust and F&C Investment Trust.
All this underscores the evolving nature of the sector. Although it is no bad thing to have increasing options, a downside to the increasing complication of investment trusts is that — more than ever before — you cannot afford to invest without first doing very thorough due diligence.
Every year the Investors Chronicle puts together an investment trust special issue. This is not a substitute for doing your own research on a trust, carefully examining attributes such as the discount or premium to NAV, its level of gearing and asset allocation. But it can also be helpful to see what professional investors think. Our special issue includes suggestions from fund of investment trust managers on the best options for growth, income, wealth preservation and diversification. These range from core portfolio holdings such as Edinburgh Investment Trust to esoteric additions such as Life Settlement Assets.
We also have surveyed platforms and brokers to see which investment trusts they have awarded with the most recommendations, and asked independent analysts if these trusts are worthy of their ratings.
Plus, we have had a look at how our two investment trust income portfolios are doing. These have been specially put together for Investors Chronicle by two experienced analysts. While both generate an attractive income, they have fairly different profiles. One is focused on core UK equity funds while the other has a large weighting in high yielding alternatives. We also find out what changes their creators have made for the year ahead.
Meanwhile Algy Hall, associate editor of the Investors Chronicle, has run value and momentum screens over the investment trust universe to come up with what currently look like the best options for a range of regions. These range from trusts run by big names such as Woodford Patient Capital Trust to the lesser known Tetragon Financial.
But you don’t have to look far for a controversial market which could offer value — the UK. Brexit uncertainty has been weighing on investors, but UK shares are on historically low valuations, in particular smaller companies. So we highlight what look like the best trusts in this space.
Last, but not least, don’t forget to enter our competition to win £5,000 to invest in the investment trust of your choice.
The Investors Chronicle Investment Trusts special issue is on sale now in all good newsagents. Leonora Walters is the personal finance editor of the Investors Chronicle
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