Trustnet Magazine Issue 24 December 2016 | Page 12

YOUR PORTFOLIO

/ INVESTMENT TRUSTS /

UPPER TRUSTS
Cherry Reynard finds out how some of the biggest names in the AIC
universe have performed over the past 12 months

T

HE INVESTMENT
TRUST UNIVERSE IN
2016 HAS
REFLECTED THE
MOOD OF MARKETS,
in a year with significant political
and economic upheaval. The
top-performing names have
included steady, long-term
performers such as the Lindsell
Train Investment Trust, alongside
high octane emerging market and
commodities names from
Templeton and BlackRock. At the
same time, it has been a tough year
for well-respected managers such as
Neil Woodford at Woodford
Investment Management and
Thomas Moore at Standard Life.
This is partly because 2016 has
been dominated by macroeconomic
considerations which have not
always favoured stockpickers.
At the start of the year, investors
were troubled about the apparent
“hard landing” in China, until
policymakers in Beijing announced
a further loosening of monetary
policy. The vote for Brexit dominated
the spring and summer months,
before markets became consumed
by the potential impact of a Donald
Trump victory in the US election.

CONSIDERABLE CHANGE

This has resulted in swift and
considerable changes in market
direction: in the first quarter of 2016,
emerging market and commodityfocused trusts were still unloved,
but had rallied to the top of the
performance tables by the middle of
the year, driven by a rise in net asset
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Boards have
become more
willing to tackle
problems
related to
performance
values and a narrowing of discounts,
built up through a long period of
unpopularity. The rise in emerging
markets stalled with the result of the
US presidential election, but most
trusts are still showing significant
gains for the year. The prospect
of rising inflation has become
important, with value stocks finding
their feet and fixed income and
bond proxies struggling.

IN THE DOLDRUMS

Notable top performers this
year include two trusts that had
previously spent a lengthy period
in the doldrums. Templeton
Emerging Markets has made
41.89 per cent in 2016 under the
management of Carlos Hardenberg,
who took the reins in October 2015
from Mark Mobius.
“He has restructured the
portfolio and introduced more
growth themes,” said Peter
Walls, manager of the Unicorn
Mastertrust (a fund of investment
trusts). “It has worked very well.”
The other notable trust is
BlackRock World Mining, which
according to Walls saw “everything

go against it” in the years leading up
to 2016. It experienced a strong rally
along with many other commodityfocused trusts, such as City Natural
Resources and Riverstone Energy.
Unlike emerging markets, however,
natural resources trusts did not see
a meaningful sell-off in the wake
of Trump’s victory, because of the
expectation that commodities will
benefit from the higher-inflation
environment that is likely to
accompany his presidency.

GOOD FOR CONTRARIANS

The strength of value-focused
stocks was also felt in more
generalist trusts. Murray
International, for example, saw a
significant rebound with gains of
41.62 per cent as manager Bruce
Stout’s emerging markets focus
came good once again.
“It was a good year for contrarians
with a number of sectors
recovering,” Walls added. “In
contrast, those trusts that didn’t
have a great deal of exposure
in more cyclical areas largely
underperformed.”
A number of highly specialised
trusts found their way into the topperformers list, including private
equity trusts Better Capital 2009
and Northern Investors Company,
with gains of 63.95 per cent and
57.01 per cent respectively. Phoenix
Spree Deutschland, which invests
directly in the German property
market, is the eighth best performer
in 2016 with gains 59.58 per cent.
Small cap trusts, which so often
top the table in rising markets,
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