Over the last year, Monks Investment Trust (LSE: MNKS) has risen more than 25%. I recently discussed how I am still keen on the Scottish Mortgage Investment Trust, another offering by investment manager Baillie Gifford, despite its recent volatility. Unlike SMT, Monks is more under-the-radar, but I believe it still offers large opportunities. Currently trading at 1,320p, with just over £3bn in assets, let’s take a closer look at why I like what the investment trust has to offer.
Looking at the holdings as of April 2021, it is clear the trust ran by Spencer Adair has a diversified portfolio. Top holdings included companies such as Amazon, Ryanair, and Prudential. This offsets risk, as it allows the trust to maintain a balanced position in multiple sectors. Comparing this to SMT shows the benefits this can provide, as at times this year SMT has suffered due to the tech sell-off.
The idea of diversification also applies to the sector analysis of the investment trust. With technology at the top with over 23%, further down sits health care (13.5%) and other sectors such as real estate (2.9%). Again, this shows the opportunities Monks provides through its diversification. Add to this the ongoing charges of just 0.48%, and I see plenty of potential here to access an array of sectors for a cheap price.
Another factor I really like about Monks is its investing strategy. The trust is focused on long-term capital growth, taking a priority over income. A patient approach suits my investment style, and as such I see real opportunities in this investment trust. I only must look at the 205% return over the past five years to see this in action. Of course, past performance is not an indication of future returns.
With all that said, there are risks to consider. First, the trust has a large weight in US stocks. As of April, this was nearly 50%. This could cause issues, because if the US market underperforms, the investment trust may also underperform.
The trust also has nearly 15% of its holdings in emerging markets, a factor that could cause problems due to ongoing Covid-19 struggles in countries such as India and Brazil. With this said, a long-term outlook should not be affected by potential short-term volatility – and as such, I do not see this as a major issue.
Why I’m buying Monks
Although the trust does come with risks, I believe the opportunities outweigh these potential problems. A long-term outlook is something I look for when investing.
I also like the diversification the trust can add to my portfolio. It offsets risk by allowing me to access a wide variety of sectors and countries. I also am a fan of its relatively large proportion of holdings in emerging markets. The pandemic has had a major impact on these countries, but I think, long-term, these markets can provide great opportunities for capital growth.