In focus
The IT UK All Companies sector is
a mixed bag. As Peel Hunt’s head of
investment trust research Anthony
Leatham points out, of the 12 trusts
in the sector, dividend yields range
from 3.6 to 1.5 per cent, gearing from
11 to 0 per cent, discounts from 18
per cent to a 1 per cent premium and
total assets from £2.4bn to £51m.
Performance is similarly variable –
five-year annualised total returns
range from 18 per cent to 2 per cent.
“The dispersion across these
metrics makes sector averages
almost meaningless and potentially
misleading,” he says. “We break the
sector into bitesize groups, the most
obvious being the mid-cap strategies
run by JPMorgan (Mercantile and
JPMorgan Mid Cap) and Schroders
(Schroder UK Mid Cap).”
“The dispersion across
these metrics makes
sector averages almost
meaningless and
potentially misleading”
If the cap fits
“Another grouping could be all-cap
unconstrained, including Fidelity
Special Values, Baillie Gifford UK
Growth, Aurora, Artemis Alpha and
Keystone,” Leatham adds. “Similarly
unconstrained, but with a more
distinctive all cap-bias, would be trusts
such as Henderson Opportunities and
Independent Investment Trust. From
a style perspective, there are a number
of value/contrarian stockpickers,
including Wright, James Henderson
of Henderson Opportunities and Gary
Channon at Aurora.”
by the trust’s ability to
All cap:
Fidelity Special Values outperform the FTSE All
Leatham’s top pick in the
sector is Fidelity Special
Values. He likes the trust’s
differentiated portfolio,
which is currently overweight
financials and industrials,
and says Wright has the
ability to take advantage
of dislocations caused by
macro uncertainty. “We
are particularly impressed
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Share in a variety of different
market environments, in
spite of its value style,” he
says. “Analysis of the trust’s
monthly NAV total returns
versus the market over the
manager’s tenure shows that
he has been able to capture
115 per cent of the upside
and only 71 per cent of the
downside.”
Mid cap:
JPMorgan Mid Cap
Gavin Haynes, investment
consultant at Fairview
Investing, picks the JPMorgan
Mid Cap trust: “If an investor
is paying for an actively
managed UK trust, then I
believe that some of the best
opportunities for stockpickers
are in mid and smaller
caps. Georgina Brittain
has managed this trust
PERFORMANCE OF TRUSTS VS SECTOR AND INDEX
Name
1yr (%)
3yr (%)
BlackRock Throgmorton Trust 43.98
104.2
5yr (%)
169.47
10yr (%)
591.7
JPMorgan Mid Cap 29.7 60.39 93.66 394.6
Fidelity Special Values 9.25 24.19 71.71 208.07
IT UK All Companies 16.44 31.05 50.29 156.14
FTSE All Share 10.67 18.44 35.61 119.02
Source: FE Analytics
Leatham’s view is that trusts with a
higher exposure to mid- and small-
caps are well-placed to benefit from a
continuing improvement in sentiment
towards UK-orientated businesses.
Another option is a more focused
play in the IT UK Smaller Companies
sector. Some UK small cap trusts
have bounced significantly in the
past three months and discounts
have narrowed. That said, small-cap
trusts will be more exposed to the
since 2012 and has a good
record of outperforming the
benchmark FTSE Mid 250
index.” JPMorgan Mid Cap is
a top-quartile performer over
one, three and five years. It
is firmly ahead of the other
mid-cap specialist trusts in
the sector and even after its
recent strong performance, it
remains on a discount of 2.9
per cent. The trust is up 394.6
per cent over 10 years.
volatility associated with the Brexit
negotiations, while larger or multi-
cap trusts can flex their exposure.
The dilemma for UK investors
hasn’t changed much. They still
need to decide whether they want
to hold UK domestic exposure – and
therefore mid and small caps – or
hedge their bets with a more mixed
fund. The right answer will depend
on the Brexit negotiations.
Sound familiar?
Small cap:
BlackRock
Throgmorton
that are masters of their
own destiny and disrupters,
creating change within their
For a UK smaller companies industries. The trust also
alternative, Haynes has gone has a short portfolio, which
for BlackRock Throgmorton. focuses on “disruptees” –
companies losing out to
He says fund manager Dan
newer, nimbler incumbents.
Whitestone has proved to
It is the second-best
be an adept stockpicker
performer in its sector over
and the fund has a strong
10 years, up 591.7 per cent.
long-term track record.
The trust is on a premium of
Whitestone focuses on
2.33 per cent.
differentiated companies
trustnet.com