Investment trusts, also known as closed-end funds, are actively managed investment funds listed on stock exchanges. They allow investors to gain exposure to a diversified portfolio of assets. In recent years, global investment trusts have become increasingly popular among investors looking for stable returns. This article provides a comprehensive review and analysis of major global investment trusts in terms of fund size, geographical focus, asset allocation, performance track record, fees, and risks.
Largest global investment trusts by assets under management
According to data from the Association of Investment Companies, some of the largest global investment trusts by assets under management (AUM) include:
– Scottish Mortgage Investment Trust – £13.1 billion AUM. Managed by Baillie Gifford, it invests globally across various sectors. Top holdings include Tesla, Amazon, and ASML.
– Foreign & Colonial Investment Trust – £4.1 billion AUM. Managed by BMO Global Asset Management, it invests in global equities with a value bias. Top holdings include Microsoft, Unilever, and Roche.
– Witan Investment Trust – £2.3 billion AUM. It provides exposure to global equities through appointment of different underlying managers. Top holdings include Microsoft, UnitedHealth, and Roche.
– Monks Investment Trust – £1.5 billion AUM. Another Baillie Gifford offering investing in global growth companies. Top holdings include Amazon, Microsoft, and UnitedHealth.
– F&C Investment Trust – £4.6 billion AUM. Managed by BMO GAM, it invests in global stocks across sectors and geographies. Top holdings include Microsoft, UnitedHealth, and Nestle.
Geographic allocation of major global investment trusts
In terms of geographic asset allocation, some observations for major global investment trusts are:
– Scottish Mortgage and Monks have over 50% exposure to North America, given the presence of US technology giants like Apple, Amazon, Microsoft, and Alphabet in their top holdings.
– Foreign & Colonial and Witan Investment Trust have their top regional exposure to North America, followed by Europe and Asia Pacific in the 15-25% range each.
– F&C Investment Trust is more diversified geographically, with 34% North America, 31% Europe, 16% Asia Pacific, and 11% Emerging Markets exposure.
– Regional equity mandates also exist like JPMorgan Global Emerging Markets Income Trust, BMO Asia Pacific Growth & Income Trust, Aberdeen New India Investment Trust.
– Some global trusts also take concentrated bets on single countries like JPMorgan American Investment Trust, Bankers Investment Trust for UK exposure.
Sectoral allocation and asset class exposure
Regarding sectoral exposure and asset class mix, key observations include:
– Most large global investment trusts take a diversified, multi-asset approach spanning geographies and sectors. Exposure to each sector is usually limited to 15-20% to ensure diversification.
– Within equities, popular sectors are technology, financials, healthcare, consumer, and industrials. Many tech-focused trusts like Allianz Technology Trust overweight technology stocks.
– Some trusts take more concentrated bets on sectors like Biotech Growth Trust in healthcare, TR Property Investment Trust in real estate.
– In terms of assets, majority of large trusts focus on global equities. Some like RIT Capital Partners and Ruffer Investment Company adopt an absolute return approach across equities, bonds, gold and derivatives.
Historical returns and performance of major investment trusts
Analyzing the past performance of investment trusts provides insights into their return potential and volatility:
– Over the past 10 years, Scottish Mortgage has delivered phenomenal NAV returns of 560% in GBP terms, owing to its concentrated bets on high growth US technology stocks.
– But such outsized returns have come with higher volatility as evidenced by its maximum drawdowns of over 25% during market corrections.
– Other more diversified global equity trusts like F&C Investment Trust, Witan Investment Trust have posted 10-year NAV returns in the 125-150% range with relatively lower drawdowns.
– On a total return basis, trusts like City of London Investment Trust, Bankers Investment Trust have demonstrated consistent dividend growth history over the past decade.
– Specialist sector funds unsurprisingly tend to show higher returns but also greater volatility – examples being Worldwide Healthcare Trust, Biotech Growth Trust, and Pacific Assets Trust.
In summary, while higher concentrations can boost returns in bull markets, diversified global equity trusts generally offer a better risk-return profile over full market cycles.
Fee structure and costs of major investment trusts
When evaluating investment trusts, it is important to analyze their fee structure and costs:
– Most trusts have a management fee in the 0.5% to 1% range per annum, charged on net assets. Larger trusts enjoy economies of scale.
– Performance fees may be charged by some managers if NAV returns exceed hurdle rates like 50% of the index.
– Ongoing charges figure(OCF) includes management fees and other operational costs. Scottish Mortgage has a low OCF of 0.37%.
– Being listed vehicles, investment trusts also have stockbroker fees for buying/selling on exchanges. Typical brokerage charges are 0.1-0.2% per trade.
– Spreads between bid and offer prices need to be considered while trading. Larger trusts tend to have lower spreads of 1-2%.
– Some trusts trade at significant discounts or premiums to NAV depending on market sentiment. Discounts can enhance investor returns if valued at deeper than historic levels.
– So while costs are higher than passive index funds, active management by investment trusts may justify the higher expenses through potential for market outperformance.
In conclusion, global investment trusts offer actively managed exposure to diverse asset classes and geographies. While historical returns have proven to be mixed, prudent selection of well-managed trusts with reasonable costs can provide investors with an alternative to gain access to global investment opportunities.