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JPMorgan European Smaller Cos Trust
JPMorgan European Smaller Companies - Overview

JPMorgan European Smaller Companies (JESC) aims to provide capital growth from a portfolio of smaller companies in developed Europe, excluding the UK. The £700m trust (in net asset terms), is managed by Francesco Conte and Edward Greaves who have a unique approach to narrowing down their 1000+ universe of companies, using a combination of qualitative and quantitative methods. The managers’ analysis helps them recognise and compare three key characteristics for new investment ideas: quality, momentum and value. Companies they select do not need to score perfectly on all three characteristics, but the resulting portfolio is expected to have a positive tilt to all three. The managers believe that their approach improves risk-adjusted returns, and enables them to outperform through the different stages of cycles (e.g. during growth rallies but also at times when value comes back into favour). JESC has a strong track record of outperforming the benchmark EMIX Smaller European Companies, and has done so in three out of the past five calendar years. Performance over the past year has been slightly more subdued, largely due to the continued political uncertainty in Europe. This has resulted in the trust spending most of the last year trading at a double-digit discount (12.5% as at 2 January 2020), which offers a potentially attractive entry point for investors looking to access some of the unique smaller companies in developed Europe.

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  • 08 Jan 20
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Full house

This time last year the team at Kepler Trust Intelligence (KTI) chose their personal ‘top picks’ within the investment trust universe for 2019. The aim was for each member of the team to choose the trust they believed would perform best from an investor’s point of view; i.e. in share price terms rather than NAV. Any trust could be selected, regardless of whether it was equity-focused or not. Overall the year was a prosperous one for those brave enough to hang on throughout. The MSCI World Index (in sterling terms) rose by 22.4%, with the US the best-performing major market. The S&P 500 rose by 26.4%, while the FTSE 100 and FTSE 250 were up by 17.3% and 28.9% respectively. The DAX and MSCI Emerging and EURO STOXX 50 also increased. In terms of currencies the pound sterling ended the year roughly where it started relative to the dollar. This has masked what has actually been quite a volatile period for both currencies. The same pattern has been seen with sterling versus the yen, which started the year at around 140 and has ended at a similar level, around 143. What may surprise some investors is that sterling has appreciated relative to the euro by 5.9%; once more not without volatility, and with much of the gain coming in the second half of the year.

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  • 08 Jan 20
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Troy Income & Growth Trust
Troy Income & Growth - Overview

Troy Income & Growth Trust (TIGT) invests predominantly in UK equities. Managed by Francis Brooke and Hugo Ure of Troy Asset Management, the trust reflects Troy’s emphasis on capital preservation over the cycle, and owns a highly liquid portfolio of between 35-50 stocks matching Troy’s preferred investment characteristics. Whilst income generation is a goal of the trust, the managers of TIGT also seek to ensure this income is growing in real (inflation-adjusted) terms and is accompanied by capital growth as discussed in the ‘Dividend’ section. Revenue reserves could help support the dividend in the near future. Within TIGT the focus is very much on bottom-up stock selection and seeking ‘quality’ companies, though they are cognisant of the wider market and economic dynamics. Whilst they prefer companies which exhibit non-cyclical characteristics with low capital intensity, they can be pragmatic in certain instances where only one of these criteria is met. Net Asset Value (NAV) and share price volatility have typically been below that of the wider market. The latter is partially a function of the discount control mechanism (DCM) intended to improve liquidity and ensure the trust trades near to NAV with relatively low discount volatility detailed in the ‘Discount’ section. In recent years this has generally led to the trust issuing shares, helping to grow assets without diluting existing shareholders. Troy recently celebrated the 10th anniversary of managing the trust, and over this period returns from TIGT have substantially outstripped those of the FTSE All Share Index. This has been achieved without the use of gearing. Recent returns have remained strong, with TIGT outperforming the index, having largely kept pace in rising markets whilst exhibiting lower drawdowns than the wider market.

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  • 07 Jan 20
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Blackrock North American Income
BlackRock North American Income Trust - Overview

BlackRock North American Income Trust (BRNA) offers investors a portfolio of high-quality US companies at attractive valuations, with a track record of strong dividend growth. The trust is overseen by Tony DeSpirito (lead manager), Franco Tapia (co-manager) and David Zhao (co-manager). Last year, in an attempt to attract new investors, the board announced a shift in strategy, increasing the dividend by 62% and allowing a proportion to be funded from capital. At the current share price the trust offers investors a yield of 4.3%. The move has paid off and the trust now trades at a premium of 1.2%. BRNA believes that companies which pay dividends have stronger management teams, and that those that can grow their dividends offer attractive long-term returns at lower levels of volatility. To find these companies, the team uses a bottom-up, stock-specific approach, starting with a universe of the 500 largest US companies by market cap and breaking it down by fundamental analysis. Since the current managers took over in 2014, there has been a marked improvement in the trust’s performance: it has now outperformed the benchmark Russell 1000 Value index in four of the past five calendar years, and this has been achieved at low levels of beta.

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  • 30 Dec 19
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Crystal Balls

Last year the five-strong team at Kepler Trust Intelligence – including analysts and mere mortals – chose a trust each as our personal ‘top pick’ for 2019 and we will be reporting back on the performance of those trusts in early January, once the final numbers are in for this tumultuous year. In the meantime I can reveal that an investment of £5,000 spread equally across our selections, made on 1st January 2019, would at the time of writing be worth a cool £6,349 today and that performance puts us comfortably ahead of an equivalent investment in a passive fund; the iShares MSCI World ETF being our example, £5,000 invested there being worth £6,280 today. And so, buoyed by that success and a surfeit of mince pies and Babycham, the team at KTI – our ranks now swelled to seven – are back with more predictions for 2020, like lucky first-timers, staggering drunk on glory to the next roulette table with a pocket full of chips, confident in our mastery of the great game. For the benefit of those who take life too literally, it should be noted that this is a light-hearted article and these selections do not represent advice or any form of prediction. Don’t buy these trusts and then blame us if they don’t perform well – we aren’t telling you that they will and this isn’t ‘proper’ research.

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  • 30 Dec 19
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Blackrock Frontiers Inv Tst
BlackRock Frontiers Investment Trust - overview

BlackRock Frontiers (BRFI) offers access to the fast-growing, least developed markets in the world to which most investors have little or no exposure. BRFI aims to identify those companies which can benefit from faster GDP growth than developed markets and deliver long-term capital returns. Thanks to the nature of the market and healthy earnings growth in the portfolio companies, the trust is yielding 4.5%, despite the focus on capital growth. We consider the yield and dividend cover further in the Dividend section. Managers Sam Vecht and Emily Fletcher use a mixture of both top-down macroeconomic analysis and bottom-up fundamental stock research to build their portfolio, and they estimate that over the long term around 50% of the alpha they have generated has come from each. The process is highly flexible, with the managers able to short stocks and use cheaper derivative contracts rather than buying the equities themselves (useful in markets which have lower liquidity than the more developed ones). This can lead to considerable gearing on a net and gross basis. In themselves, the markets BRFI invests in tend to display relatively low correlation to developed and emerging market indices. Given the diversification that the managers are able to achieve, the trust has tended to display relatively low volatility in the past, which may be surprising given that less developed markets are regarded as riskier. The trust has tended to trade on a premium in recent years, but is currently trading at par.

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  • 27 Dec 19
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