Investment trusts can be a great way to invest in the stock market. Not only do trusts provide an investor with exposure to a range of different companies, but they’re also very cost-effective.
Here, I’m going to highlight five investment trusts I like for 2021. These are my preferred plays for exposure to global equities and UK shares.
Global investment trusts for 2021
In the past, Baillie Gifford’s Scottish Mortgage was one of my favourite investment trusts. However, right now, I’ve concerns over the valuations of many of its holdings. Tesla and NIO, for example, which made up nearly 20% of the trust at 30 November, are very much in bubble territory, in my view.
For this reason, my preferred play in the global equity space for 2021 is Monks Investment Trust, Baillie Gifford’s more under-the-radar offering. Like SMT, this trust focuses on growth companies. However, it doesn’t make the same kind of large bets on higher-risk companies in the way that SMT does.
Tesla, for example, is a much smaller holding at less than 2% of the portfolio. It also offers exposure to more stable growth companies such as Microsoft, Mastercard, and Estée Lauder. Long-term performance here has still been very good. Over the last five years, it has returned about 220%, according to Trustnet. All things considered, I think it offers an attractive risk-reward proposition.
Also in the global equities space, I like Smithson. This investment trust, which is Fundsmith’s mid-cap/small-cap offering, is run with a similar approach to that of Fundsmith Equity. Smithson has performed well since its launch in October 2018, returning 23% per year (to 30 November). Currently, its top holdings include the likes of Rightmove, data company Equifax, and machine reading specialist Cognex.
Finally, for a pure technology play, I like the Allianz Technology Trust. To my mind, this trust is a good way to play the technology boom. Its top holdings include Alphabet (Google), Amazon, and Apple. It has returned about 370% over the last five years, which is a very impressive performance.
UK investment trusts for 2021
In the UK equities space, one of my preferred plays is Murray Income. This is an equity income investment trust that has a focus on higher quality companies. Its top holdings currently include Diageo, Unilever, and AstraZeneca. It’s been a pretty solid investment over the last five years, returning nearly 50%, and comfortably beating the FTSE All-Share index (22%). It also has a five-star rating from Morningstar.
Finally, in the UK smaller companies area, I like Blackrock Throgmorton. This is a high-conviction, growth-focused investment trust that aims to invest in the UK’s most differentiated and exciting emerging companies.
It looks for businesses with strong and dominant market positions and strong management teams. Top holdings at 31 October were Games Workshop, YouGov, and Gamma Communications. This trust has been a strong performer, returning nearly 120% over the last five years. It’s worth noting it does have a performance fee. That’s one downside. However, overall, I see it as a good way to get small-cap exposure.
