Financial advisers have been paying more attention to property, infrastructure and UK smaller companies trusts over the past year, FE data shows, although it’s an Asian equity portfolio that has benefitted from the biggest uptick in research.
The FE Analytics Market Intel Tool allows us to see what the financial advisers, wealth managers, multi-managers and other investment professionals have been researching on FE Analytics. Last week, we showed that Baillie Gifford American, Fundsmith Equity and CFP SDL UK Buffettology were some of the open-ended funds that were researched more in 2018.
In this article, we turn to the Association of Investment Companies universe to find out which investment trusts grew in popularity with investors in 2018.
To recap, we compared each trust sector’s total research activity in 2018 with its activity for the previous three full years; the change in research share can be seen in the below chart.
Source: FE Analytics Market Intel Tool
The IT Property Specialist sector is the peer group with the biggest change in how much research is being carried out into its members. In 2015 through to the end of 2017, it accounted for 1.60 per cent of the investment trust research activity on FE Analytics but this rose to 2.92 per cent in 2018.
GCP Student Living was the most-researched member of this sector last year, followed by Medicx and Target Healthcare REIT.
IT Infrastructure – Renewable Energy was also more popular with professional investors, with its research share moving from 0.99 per cent to 1.82 per cent. Despite the concerns created by Brexit, more research was conducted into IT UK Smaller Companies trusts, with its share going from 4.28 per cent to 5.09 per cent.
However, the IT Hedge Funds sector suffered the largest drop in research activity following continued lacklustre performance, with its share falling from 4.03 per cent to 2.34 per cent. Trusts in the IT UK Equity Income, IT Flexible Investment and IT UK All Companies sectors were also less researched than in previous years.
We also repeated the research for individual trusts and found that Fidelity Asian Values has witnessed the largest uptick in research. It was the 100th most researched trust between 2015 and 2017 but climbed to 17th last year.
Investor sentiment towards Asian equities was hit hard in 2018 by the trade spat between the US and China but Nitin Bajaj’s £306.9m trust held up well; FE Analytics shows it made a 5.95 per cent total return last year, compared with a 9.05 per cent fall in the MSCI AC Asia ex Japan index.
Fidelity Asian Values, which hold five FE Crowns, looks for Asian small- and mid-cap companies that Bajaj considers to be overlooked or undervalued. This value approach differentiates the trust from many of its peers, as does the extensive analyst research that Fidelity has on the ground in Asia.
Source: FE Analytics Market Intel Tool
In second place is Scottish Mortgage, which is run by Baillie Gifford’s James Anderson and Tom Slater. The fund is consistently the most-researched trust on FE Analytics but solidified its position last year by growing its share of research activity even more.
The £6.7bn trust holds five FE Crowns and has a strong long-term track record. It was in the IT Global sector’s top quartile in 2018 with a 4.63 per cent total return but FE Analytics shows it is first quartile over three, five and 10 years as well; over the past decade it has made a 646.69 per cent total return, compared with 195.59 per cent from its FTSE All World benchmark.
Kepler Trust Intelligence said: “The managers are not afraid to take punchy bets and the major drivers of performance boil down to the strong returns from their highest conviction investments.
“Scottish Mortgage remains one of the stand-out higher-risk options for equity investors, yet is among the cheapest in terms of ongoing charge figure. The trust is likely to generate higher levels of volatility than the index and peers.”
The data also shows the uptick in interest towards infrastructure assets. Greencoat UK Wind moved from being the 135th most-researched trust on FE Analytics to 40th place while 3I Infrastructure went from 47th to 10th.
In the UK smaller companies space, BlackRock Throgmorton, Aberforth Split Level Income and Downing Strategic Micro-Cap were being more heavily researched by financial advisers and other professionals last year. The IT UK Smaller Companies sector is currently trading on an average discount of 8.1 per cent to net asset value (NAV), given concerns about the impact of Brexit on the domestic economy.
Source: FE Analytics Market Intel Tool
Our data also shows the individual trusts have been getting researched less than in previous years and it should be little surprise that hedge funds feature prominently. DW Catalyst has the largest fall in research activity but this is down to the fact that the hedge fund went into voluntary liquidation at the start of the year.
BH Macro, which uses a combination of investment strategies focusing on economic change, monetary policy and market inefficiencies, also slid down the rankings, moving from 8th place to 30th. This is despite some strong performance – its 31.93 per cent total return in 2018 was the IT Hedge Fund sector’s highest.
Highbridge Multi-Strategy, BH Global and Third Point Offshore Investors are other hedge funds that saw some of the biggest falls in their research share over the course of 2018.