Investors have been spending less time researching hedge funds and UK equity trusts during 2018, analysis by FE Trustnet suggests, while turning their attention towards property, smaller companies and renewable energy strategies.
As has been discussed in several FE Trustnet articles, 2018 has not be the best year for investors with markets being hit by two significant sell-offs on the back concerns over the US/China trade spat, the Federal Reserve’s quantitative tightening programme and higher bond yields. Markets are still reeling from the correction that struck in October.
Against this backdrop, many of the investment trust sectors struggled to make positive returns in the first 10 months of the year. FE Analytics shows the average trust in half of the Association of Investment Companies’ sectors has posted a loss in 2018 so far.
IT Insurance & Reinsurance Strategies came off worse as its average member was down 20 per cent, followed by IT VCT Specialist: Media, Leisure & Events (down 19.31 per cent), IT Country Specialists: Asia Pacific (down 16.34 per cent), IT European Smaller Companies (down 12.89 per cent) and IT Global Emerging Markets (down 12.32 per cent).
At the top of the table are more niche peer groups from the investment trust universe, with IT Forestry & Timber, IT Utilities, IT Country Specialists: Other and IT VCT Specialist: Technology all seeing their average member make a total return of more than 20 per cent.
Source: FE Analytics Market Intel Tool
In this article, we wanted to find out which investment trusts the financial advisers, discretionary fund managers and other professionals who use FE Analytics were researching more heavily in 2018 when compared with the previous three full calendar years. To do this, we examined the share of total research on the platform that each trust attracted in both periods.
The chart about shows how this looks on a sector level. As can be seen, there has been a large shift towards the IT Property Specialist sector this year; the most researched members of this peer group have been GCP Student Living, Medicx, Target Healthcare REIT, Empiric Student Property and Tritax Big Box Reit.
Within the UK equities, there has been an uptick in research on the IT UK Smaller Companies sector; Aberforth Smaller Companies, BlackRock Throgmorton, Standard Life UK Smaller Companies, BlackRock Smaller Companies and Henderson Smaller Companies have proved popular here. However, like in the open-ended space, investors are paying less attention to mainstream UK equity strategies and UK equity income funds at the moment.
It is the IT Hedge Funds peer group that has witnessed the biggest fall in interest from professional investors. That said, more research has been carried out into the likes of Boussard & Gavaudan Holding, Gabelli Merger Plus, Pershing Square Holdings and Alternative Liquidity.
When it comes to individual trusts, Fidelity Asian Values is the one that has seen the largest uptick in research. It has accounted for 0.713 per cent of the investment trust research carried out on FE Analytics in 2018, up from 0.327 per cent between 2015 and 2017; this saw the trust move from being the 100th most-researched to the 18th.
Of course, investors could have been looking at Asian equity trusts because these have suffered in 2018 as the region bore the brunt of worries about a trade war between the US and China. That said, Fidelity Asian Values – which is managed by Nitin Bajaj and focuses on unloved Asian small- and mid-caps – has performed relatively strongly this year, posting a 2.08 per cent loss against an 11.52 per cent drop in the benchmark and a 9.37 per cent decline by its average peer.
Fidelity Asian Values has ongoing charges of 1.18 per cent, is trading on a premium to net asset value (NAV) of 0.6 per cent and is yielding 1.4 per cent, according to data from the Association of Investment Companies (AIC). It is not geared.
Source: FE Analytics Market Intel Tool
Scottish Mortgage is routinely the most heavily viewed investment trust on FE Analytics but has managed to grow its share of research throughout 2018. Between 2015 and 2017 it was responsible for 2.174 per cent of investment trust research activity; this climbed to 2.537 per cent in the first 10 months of 2018 and cemented the trust’s place at the top of the table.
With assets of £7bn, the trust is one of the largest in the investment trust universe. It is managed by James Anderson with Tom Slater as deputy and has built up a strong track record on the back of a high-octane approach that sees it try to identify the winners of tomorrow then hold them for the long term.
Scottish Mortgage has ongoing charges of 0.37 per cent, is trading on a 1.4 per cent premium, yields 0.6 per cent and is 9 per cent geared.
The trust with the third-highest rise in research share this year is 3i Infrastructure. Over the three years to the end of 2017, this was the 47th most researched trust on FE Analytics but it has climbed to 10th place in 2018.
The £2bn trust owns economic infrastructure and greenfield projects in developed markets, with a focus on the UK and Europe. Areas of interest include transportation & logistics, utilities, communications, natural resources & energy and social infrastructure.
According to the AIC, 3i Infrastructure has ongoing charges of 1.70 per cent (which rises to 6.64 per cent when its latest performance fee is included), trades on a 17.3 per cent premium and is yielding 3.6 per cent. It is not geared.
Source: FE Analytics Market Intel Tool
The table above shows the 30 investment trusts that were hit with the biggest falls in their share of research carried out on FE Analytics.
Two hedge funds have come off the worst – DW Catalyst and BH Macro – in keeping with the fact that the peer group as a whole appears to have been less of a draw for professional investors this year.
Some well-known trusts have also been looked at less in 2018, including Personal Assets, Aberdeen Asian Income, City of London, HICL Infrastructure and Ruffer Investment Company.