3 investment trusts thrashing the market

These three venerable investment trusts have risen up to three times faster than the UK stock market, says Harvey Jones.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Investment trusts are the unsung heroes of the stock market. Now rebranded as investment companies, they lack the marketing firepower of the major unit trusts and are more complex to understand, but the best of them have thrashed the market. 

The following three big names have been around for decades with a proven track record of success. All three are now numbered among the top five most traded investment trusts, according to Interactive Investor, and once you see how they’ve performed, you’ll understand why.

Scottish Mortgage Trust

And the winner is… Scottish Mortgage Trust (LSE: SMT). This £4.5bn mega trust, launched more than a century ago in 1909 when Edward VII was on the throne, has delivered stunning growth of 176% over the past five years, according to Trustnet.com. That’s three times the return on the iShares FTSE 100 exchange traded fund (ETF), which delivered 49% over the same timescale. Sometimes active management is worth paying for.

Not that Scottish Mortgage Trust is particularly expensive, with no initial fee and an ongoing charges figure (OCF) totalling just 0.51% a year (iShares FTSE 100 charges 0.07%). The trust invests in a global spread of equities, with 46% exposure to the booming US market. Top US holdings include Amazon, Tesla Motors and Facebook. It’s roughly 25% invested in Europe, including a stake in Ferrari, and 18% in China, where it holds Baidu and Alibaba. This top quartile fund trades at a premium of 2.3% to net asset value, but that’s the price you pay for success.

Witan Investment Trust

Scottish Mortgage Trust isn’t the only big beast out there. Witan Investment Trust (LSE: WTAN) was also launched in 1909 and now manages assets totalling nearly £1.6bn. Manager Andrew Bell has forced through a successful turnaround plan, adopting a multi-manager approach with 12 investment managers following six different mandates. The result: a whopping 120% return over five years.

Witan is 41% invested in the UK, with holdings such as the London Stock Exchange, spirits giant Diageo and, ahem, BT Group. It’s 25% invested in the US, 16% in Europe and the rest in international stocks. It’s slightly more expensive than Scottish Mortgage Trust, with a total expense ratio of 0.87% a year, but few will be complaining given recent performance, and it trades at a 4.63% discount. However, its UK focus could make it vulnerable to any Brexit slowdown.

Finsbury Growth & Income Trust

Finsbury Growth & Income Trust (LSE: FGT) is a relative minnow with £968m under management, and a parvenu upstart to boot, launched in 1926. While the first two trusts have a roaming international remit, Finsbury is 100% invested in UK stocks, and that has done it no harm at all, with a total blockbusting return of 116% over the past five years.

The fund is run by alpha manager Nick Train, the man behind the hugely popular CF Lindsell Train UK Equity fund (which is up 113% over five years). He has a proven track record in rising and falling markets. Top holdings include RELX, Diageo, Unilever, London Stock ExchangeBurberry and Schroders. Its OCF is 0.8% a year, the premium is 0.36%, yield is 2.02%. Again, it will take a hit if the UK market dips, but right now Train is on a roll.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon.com, Facebook, Tesla Inc, and Unilever. The Motley Fool UK has recommended Burberry and Diageo. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

1 Warren Buffett stock I’m buying now

Coca-Cola is the fourth-largest holding in Warren Buffett’s Berkshire Hathaway. I’ll explain why I’m following Buffett and buying more.

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

I bought 4,403 Lloyds shares in June and 4,856 in September. Here’s what they’re worth now

Harvey Jones thought he was bagging a FTSE 100 bargain when he bought Lloyds shares on two occasions last year.…

Read more »

Young woman holding up three fingers
Investing Articles

I’m itching to buy these 3 hidden FTSE gems in a Stocks and Shares ISA

Harvey Jones is keen to add these three FTSE 100 companies to his Stocks and Shares ISA before April. Only…

Read more »

Close up of a group of friends enjoying a movie in the cinema
Investing Articles

How I’d try and turn just £1 a day into a fabulous £54,485 passive income for life

By investing small, regular sums in FTSE 100 shares I can potentially generate a huge passive income stream. It won't…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

I’d aim for a million buying under a dozen shares

Christopher Ruane explains why less could be more when it comes to building a share portfolio if he wants to…

Read more »

Investing Articles

Rolls-Royce shares are up over 1,000% since 2020! Am I too late to buy?

Rolls-Royce shares now cost over tenfold what they did in the firm's 2020 rights issue. Our writer thinks they may…

Read more »

Investing Articles

1 top UK growth stock for my tech portfolio in 2024

Up 30% in just one year, this growth stock looks positioned to continue on the path of substantial gains, according…

Read more »

Buffett at the BRK AGM
Investing Articles

I’d follow Warren Buffett to target effortless passive income

Warren Buffett knows a thing or two about building passive income streams. By learning from the Sage of Omaha, so…

Read more »