Are you looking for some top-performing buy-and-forget funds to power your portfolio? If so, the investment trust sector is a great place to start.
Vote of confidence
Online platform Interactive Investor has just announced the most popular trusts among its investors, and it’s an impressive bunch. The top two are stellar performers Scottish Mortgage Investment Trust and City of London Investment Trust.
I’m a long-standing admirer of Scottish Mortgage, a global fund that has delivered 180% growth over the past five years, against just 88% on its benchmark IT global sector. However, Rupert Hargreaves covered this beauty yesterday, saying he’d buy this FTSE 100 investment trust right now.
I’m also a fan of City of London, fabled for increasing its dividend every year for more than 50 years, but I sung its praises less than a month ago. That’s okay, though, because the next two also merit close attention.
Tech hero
The third most popular investment trust in the UK is Allianz Technology Trust (LSE: ATT), which aims to deliver long-term capital growth by investing in technology companies around the world. Incredibly, it has even outperformed Scottish Mortgage, returning a simply massive 253% over the last five years.
The trust has clearly benefited from being in the most buoyant sector of all, as its benchmark IT Tech, Media & Telecomm sector grew a storming 213% on average over the same period. Obviously, the trust is a goodie but you cannot expect it to deliver a repeat performance, as sectoral performance tends to be cyclical.
It can’t go on
Top 10 holdings include Amazon and Facebook, while its biggest single position at 5.20% is Google owner Alphabet. The trust is almost 90% invested in the US, whose tech sector has smashed allcomers over the past five years. Hence its performance, and popularity.
Allianz Technology now trades at a discount of just 0.1 and my concern is obvious. US tech has been on such an amazing run, but nothing lasts forever. You risk jumping on the bandwagon just as it hits a wall. On the other hand, US tech has defied the doubters before. It’s your call.
Train of thought
The UK’s fourth most loved investment trust is Finsbury Growth & Income Trust (LSE: FGT), which invests primarily in UK-listed companies. It has outshone its rivals, growing almost 95% over the past five years, against just 30% across the UK equity income sector. It’s up 18% over last year, against just 2% for its benchmark.
All becomes clear when you discover this £1.65bn fund is run by ace manager Nick Train, whose joint venture with Michael Lindsell, Lindsell Train Global Equity, is the UK’s second most popular unit trust (after FundSmith Equity).
Man of conviction
Top holdings include familiar names such as Diageo, Relx and Unilever. The fact that these three stocks each make up around 10% of the fund shows this is a conviction play, rather than a safety-first closet tracker.
Finsbury Growth & Income also trades at a slight premium, in this case 0.8, which is a vote of confidence from investors. You’re unlikely to find it much cheaper given that the long-term average premium is 0.5. These two trusts may not always be the best in the world, but they’ll take some beating.
