Professional investors have been spending less time in 2017 researching investment trusts with a focus on the UK in favour of those holding global equities and alternative assets, research by FE Trustnet shows.

Investor sentiment towards the UK has dipped in the year since the country voted to leave the EU as concerns remain over the long-term health of the economy after its departure. Meanwhile, a climate of political confusion has led to short-term jitters for UK equities.

In the open-ended fund space, investors have been wary of the domestic market for some time with the latest figures from the Investment Association showing that UK equity funds have seen significant outflows over the past year while money has been pouring into global equity products.

It appears that professional investors have been doing something similar in the investment trust space. We used the FE Analytics Market Intel tool to look at the research behaviour of the financial advisers, wealth managers, paraplanners and other professionals using FE Analytics.

Change in AIC sectors’ share of total investment trust research

Source: FE Analytics Market Intel tool

The above chart shows the change in research behaviour for the various investment trust sectors (excluding VCTs). We looked at the share of total research activity that each sector captured across 2016, their shares over the first eight months of 2017 and worked out the difference between them.

As can be seen, it’s the Association of Investment Companies’ Global sector that has witnessed the biggest uptick in professional research, followed by Infrastructure and Private Equity. Trusts in the Property – Specialist, Infrastructure – Renewable Energy, Asia Pacific excluding Japan Equities, European Smaller Companies and Flexible Investment sectors have also been getting proportionally more attention than they did in 2016.

In contrast, trusts that concentrate on the UK have been hit with a fall in professional research. The AIC’s UK Equity Income sector sits at the bottom of the table but the Property – Direct UK and UK All Companies have also seen falls in research activity; Hedge Funds and Unclassified trusts complete the bottom five.

With this in mind, we took a closer look at the three sectors that have captured the most research activity on FE Analytics – Global, Infrastructure and Private Equity – to find out which trusts within them are proving the most popular.

Global

The AIC’s Global sector was the second most heavily researched peer group in 2016 but moved into the top spot in 2017 to date. In doing this, its share of total investment trust research has moved from 9.73 per cent last year to 11.01 per cent this year, making it the sector with the biggest increase in research.

The most popular member of the sector is Scottish Mortgage (which accounted for 21.85 per cent of Global sector research in the first eight months of 2017), followed by Monks, Foreign & Colonial, The Bankers Investment Trust and Witan.

However, when looking at which trusts have seen the biggest uptick in professional research activity it’s Monks that jumps into the top spot. This £1.4bn trust, which is managed by Baillie Gifford's Charles Plowden, has seen its share of Global sector research climb from 6.42 per cent last year to 8.19 per cent in 2017 to date.

Change in Global trusts’ share of total sector research

Source: FE Analytics Market Intel tool

Plowden, along with deputy managers Malcolm MacColl and Spencer Adair, took over the portfolio in March 2015 and since then have delivered a 64.12 per cent total return. This ranks it in the top quartile of the sector, where the average return was 40.95 per cent, and it’s ahead of the 34.53 per cent made by the FTSE World benchmark.

The team has a highly-disciplined, bottom-up stockpicking approach that seeks companies with long-term growth prospects and reasonable valuations, with the portfolio split into four buckets of ‘growth stalwarts’, ‘rapid growth’, ‘cyclical growth and ‘latent growth’.

Top holdings include Amazon.com, Naspers, Prudential, Royal Caribbean Cruises and Alibaba. The largest geographical allocation is to North American equities at 43.3 per cent of assets, followed by emerging markets (22.2 per cent) and Europe (17.2 per cent).

Monks Investment Trust has ongoing charges of 0.59 per cent, is trading on a 1.4 per cent discount to net asset value (NAV) and yields 0.2 per cent. It is 2 per cent geared, according to AIC data.

Infrastructure

The sector with the second largest uptick in professional investor research activity is Infrastructure, with its share rising from 5.06 per cent to 5.61 per cent. This makes the sector the fifth most researched investment trust peer group on FE Analytics.

HICL Infrastructure is the most popular member of the sector after taking close to 30 per cent of the research activity in 2017. International Public Partnership and GCP Infrastructure Investments hold second and third places respectively.

However, the £2bn 3i Infrastructure trust has made the biggest gains in adviser attention this year, with its share of research activity moving from 9.39 per cent to 12.74 per cent. This is by far the biggest jump in the sector – GCP Infrastructure Investments is in second place with a 65 basis points improvement while International Public Partnership was hit with a 2.76 percentage point fall.

Change in Infrastructure trusts’ share of total sector research

Source: FE Analytics Market Intel tool

The five FE Crown-rated trust has the aim of making a total return of between 8 per cent and 10 per cent a year over the medium term. Since launch in March 2007 it has returned 247.33 per cent compared with 76.7 per cent from its average peer, making it the best performer in the sector; since launch it has made a total shareholder return of 11.6 per cent per annum.

It concentrates on infrastructure projects in the UK and Europe, although there are some holdings in Singapore and India. As of the end of March 2017, the portfolio had 28 investments with the largest being Finnish electricity distribution and heating company Elenia, Anglian Water Group and oil storage firm Oystercatcher.

In its most recent annual report, 3i Infrastructure chairman Richard Laing said: “The infrastructure market continues to offer attractive investment opportunities. The portfolio is now larger and more diversified, by number, country, sector and currency. This underpins a steady return profile for investors, with a good balance of dividend income and capital growth.”

3i Infrastructure has ongoing charges of 1.29 per cent (which rises to 1.51 per cent when its performance fee is included), is trading on a 17.3 per cent premium to NAV and is yielding 4 per cent, AIC data shows.

Private Equity

In third place is the AIC’s Private Equity sector. It has been the eighth most researched trust sector in 2017, advancing from 10th place last year; the share of total investment trust research has moved from 3.43 per cent to 3.90 per cent.

Pantheon International is the most popular member of the sector, taking 18.61 per cent of its research activity on FE Analytics. HgCapital Trust is in second place with a 12.67 per cent share and F&C Private Equity Trust is in third with 8.81 per cent.

But it is HarbourVest Global Private Equity that has made the biggest increase this year, with its share of the sector’s research climbing from 2.49 per cent in 2016 to 6.71 per cent in 2017 to date.

Change in Private Equity trusts’ share of total sector research

Source: FE Analytics Market Intel tool

The $982.3m trust targets long-term capital appreciation by investing in a portfolio of private equity investments, diversified by geography, stage of investment, vintage year, and industry.

It invests in and alongside HarbourVest’s 38 managed private equity funds and two secondary co-investments. This approach means that it offers exposure to more than 7,000 private companies, ranging from technology start-ups to mature, established businesses looking for their next phase of growth.

Over the past five years, the trust has made a 162.02 per cent total return. This makes it the third best performer in the 22-strong Private Equity sector, where the average return has been 88.99 per cent. It drops into the second quartile over three years and into the third quartile over one year, however.

HarbourVest Global Private Equity has ongoing charges of 0.34 per cent and is trading on an 18.7 per cent discount to NAV, according to the AIC.